Indonesia Tax Development for 2021
January 2021
A new year: renewed hope, is probably one of the phrase we come across as news over the distribution of vaccines for COVID-19 has spread around the world. In Indonesia, Sinovac's COVID-19 vaccines was reported to have arrived at the cold room of the local health department in Palembang, South Sumatra province, on Monday (04/01/21). As the vaccines are being distributed around the country, mass inoculations is also scheduled to begin later this January.
If all goes well, there’s a great possibility that the country’s economy will get better in the near future. However, the exact time of when the economy will bounce back is still in question. Before COVID-19 happened, Indonesia is listed as one of the largest economy in Southeast Asia and is expected to be the seventh largest in the world by 2030, overtaking Germany and the UK. Its digital economy, only USD 8 billion in 2015, is expected to grow exponentially to USD 124 billion by 2025.
In short, Indonesia have a big opportunity for the future, most especially if the government manage to tackle the pandemic well. Most importantly, the government had started gearing up the Omnibus Law since last year. To tackle bureaucracy and red tape, excessive foreign ownership restrictions, onerous labor laws, and one of the most complex tax regimes in the world, Omnibus Law is needed as it will accommodate change to ease doing business in Indonesia.
On the latter part, which is on regulating tax in Indonesia, is deemed to be one of the most important part as it will boost the foreign direct investment, which is needed in the country after the economy downfall since the pandemic. Here are a few things about to note in terms of tax in the Omnibus Law:
- Gradual reduction of corporate income tax rates by 22% (2020 & 2021) and 20% (2022 etc.).
- Reduction of income tax rates for “Go Public” Taxpayers (general rate -3%).
- Abolition of domestic income tax on dividends.
- Certain income (including dividends) from abroad is not subject to income tax as long as it is invested in Indonesia.
- Non-object of Income Tax on:
a. Share of profit / SHU (SHU is a net amount of any remaining annual income/profits) of cooperative (Koperasi),
b. Haj funds managed by BPKH - Space for Adjustment of Article 26 Income Tax Rates on Interest.
- Equity participation in the form of assets is not subject to VAT.
- Relaxation of Input Tax Crediting Rights for Taxable Entrepreneurs.
- Reduce on:
a. Tax Administrative Sanctions,
b. Interest Rewards. - Determination of Individual Tax Subjects:
a. Indonesian citizens and foreigners living> 183 days in Indonesia become Domestic Tax Subjects,
b. The imposition of income tax for foreigners who are domestic tax subjects with certain expertise only on income received from Indonesia,
c. Indonesian citizens who are in Indonesia <183 days can become foreign tax subjects with certain conditions. - Delivery of coal is subject to VAT.
- Consignment is not subject to VAT.
- Non-object income tax on the remaining excess funds from Social & Religious Bodies (as well as Educational Institutions).
- Tax Criminal Cases that have been decided by the Court are no longer issued tax assessments.
- Tax collection letters (STP) issuance will expire in 5 years.
- Electronic Transaction Taxation:
a. VAT collecting platform designation,
b. Imposing tax on foreign tax subjects on electronic transactions in Indonesia. - Inclusion of national identification number of buyers who do not have Tax Registration Number in the tax invoice.
- Reducing the types of regional levies
Understanding Omnibus Law might not be easy as when it covers up to 74 laws that will amend the previous regulation. That’s why Moores Rowland is available to assist you by our range of services; audit, outsourcing, tax, legal and advisory services. We will be delighted to help you at all stages of your corporate development to understand and to do business in Indonesia.
Contact us for more info:
Tax: dicky.darmawi@moores-rowland.com
Moores Rowland: bella.rianda@moores-rowland.com
Written & edited by: Bella Rianda, Dicky Darmawi & Steve Crewe