Law Number 11 of 2020

EASE OF DOING BUSINESS

In Taxation
 COVID-19 CRISIS and Its DOMINO EFFECT

HEALTH SOCIAL ECONOMY FINANCE

The rapid and Social restrictions has Investor confidence is

Economic
widespread spread of caused on the declining, NPL is
performance has
Covid-19 created a cessation of economic increasing, company
declined sharply
Health crisis activities and in turn solvency is depressed
caused layoffs

 This pandemic puts pressure on the national economy, therefore we need the extra-
ordinary effort from the Government to immediately recover the national economy,
during the Covid-19 Pandemic
Source: Press Conference APBN Kita
TAX POLICY IN RESPONSE TO COVID-19 CRISIS (Time Line)

PMK PERPPU PMK PER PMK UU PP PMK PMK PMK

23 1 28 08 44 2 29 86 110 143

21 March 2020 6 April 2020 27 April 2020 10 June 2020 14 August 2020
31 March 2020 21 April 2020 16 May 2020 16 July 2020 1 October 2020

G.R in lieu of Law No. 1 of 2020 / Law No. 2 of 2020

01 a. Corporate Income Tax Rate Reduction (22% for 2020 & 2021 and 20% for 2022 and
subsequent years).
b. VAT collection on e-commerce trade into Indonesia.
Tax Incentives
02 a. PMK-28/PMK.03/2020 jo. PMK-143/PMK.03/2020
For the availability of drugs, vaccines and medical devices.
b. PMK-23/PMK.03/2020 jo. PMK-110/PMK.03/2020
Income Tax Borne by Government (DTP) for workers, MSME, Reduction of Income Tax
Article 25 Installment, Exemption of Income Tax Art.22 on import, VAT Preliminary
Refund for low risk Entrepreneur up to Rp5 billion.
 Law Number 11 of 2020
EASE OF DOING BUSINESS IN TAXATION

One of the efforts to strengthen the economy of Indonesia

Investment boost amid global economic downturn, targeted at the labour market
and the workforce absorption.

Amendments to various statutory provisions are vital to be finalized in the near

future, particularly the 3 most fundamental tax laws (the Taxation General
Provisions and Procedures (KUP) Law, the Income Tax Law, and the VAT Law).

It is necessary to maintain & increase tax revenue through increased investment,

voluntary compliance, legal certainty, and business climate fairness
EASE OF DOING BUSINESS IN TAXATION

NATIONAL
DEVELOPMENT

EODB

INCREASING ENCOURAGING IMPROVING LEGAL PROVIDING

INVESTMENT TAXPAYER CERTAINTY FAIRNESS OF
FUNDING COMPLIANCE & BUSINESS CLIMATE
VOLUNTARY IN DOMESTIC LEVEL
PAYMENT
 INCREASING
INVESTMENT
FUNDING
1. Gradual reduction of corporate
income tax rates 22% (2020 &
2021) and 20% (2022 and so on).
2. Reduction of corporate income tax
rates for Go Public Taxpayer
(general rate– 3%).
*has been regulated in UU No. 2/2020
3. Dividend from within the
country are non-taxable.
4. Certain income (including dividend)
from offshore are not taxed as
long as it is invested in Indonesia.
5. Non-taxable:
a. Distribution of profit/distribution
of net income by a cooperative,
b. Hajj funds managed by BPKH
6. Room for Income Tax Art. 26
rates adjustment for interest.
7. Equity participation in the form of
assets (inbreng) are not taxed
under VAT Law.
ENCOURAGING
TAXPAYER
COMPLIANCE &
VOLUNTARY
PAYMENT
8. Relaxation of crediting
Input VAT for Taxable
Entrepreneur for VAT
purpose (PKP).
9. Regulation reset on:
a. Tax administrative penalty,
b. The interest compensation.
IMPROVING LEGAL PROVIDING
CERTAINTY FAIRNESS OF
BUSINESS CLIMATE
IN DOMESTIC LEVEL
10.Determination of Individual Tax Subject: 17. Taxing Electronic
a. Indonesian and foreign citizen who has Transaction:
been present in Indonesia >183 days is a
a. Designation of VAT
resident taxpayer,
b. For 4 years since being regarded as a collection platform,
Resident Taxpayer, foreign expatriate with b. Tax imposition to a non-
certain skills is taxable only on income resident taxpayer for
derived from Indonesia, electronic transaction in
c. Indonesian citizen who is outside of Indonesia.
Indonesia > 183 days in 12 months may
*has been regulated in UU No. 2/2020
become non-resident taxpayer after
qualifying certain conditions. 18. Inclusion of ID number
11. The delivery of coal is classified as the data for buyers without TIN
delivery of taxable goods (BKP). (not registered as taxpayer)
12. Consignment is not classified as delivery of in Tax Invoice.
taxable goods (BKP).
13. Excess funds from Social & Religious
Agencies (as well as Educational Institutions)
are Non-Taxable Income.
14. Tax penalties that have been decided are no
longer issued tax assessments.
15.Issuance of STP expire in 5 years.
16. STP can be issued to collect the interest
compensation that shouldn't be given.
01
SUMMARY OF THE PROVISION

INCREASING INVESTMENT FUNDING

 Non-taxable domestic dividend (received from within the
country).

 Certain income (including dividend) derived from offshore are not

taxed as long as it is invested in Indonesia.

 Income Tax Art. 26 rates adjustment for interest.

CORE CHANGES
Dividends received by:
a. Individual taxpayer, as long as they are invested in Indonesia, or
b. Corporate taxpayer,
are not taxed.
Current regulation

Dividends received by:

 Corporate taxpayer whose ownership ≥ 25%, are non-taxable
 Corporate taxpayer whose ownership < 25%, are taxable under the effective Income Tax rate
 Individual taxpayer, are subject to 10% final Income Tax rate.

Offshore dividends are non-taxable if being invested or used for

business-purpose in Indonesia, and received from:
Regulation:
a. at least 30% of earning after tax are invested or used for business
purpose in Indonesia (this also applies to income after tax received
through PE located outside Indonesia)
GO PUBLIC PRIVATE b. if dividends are received by Private Companies, investment should be
COMPANIES COMPANIES made before Tax Assessment (Art. 18(2)) is issued by DGT
ABROAD ABROAD c. income after tax that is not received through PE may not be taxable
as long as they are invested in Indonesia, derived from business
activities, and not sourced from foreign subsidiary.
Current regulation

That income are taxable in Indonesia by foreign tax credit mechanism if it has been taxed abroad.
 CORE CHANGES FOREIGN DIVIDEND INCOME TAX FACILITY ILLUSTRATION

1 2 3
Profit After Profit After
Profit After
Tax $100 Tax $100
Tax $100

Dividend Dividend Dividend

payment payment
payment
$30 $25
$30 Dividend not Remaing
invested dividend
$10 threshold $5
X Sdn. Bhd. X Sdn. Bhd. X Sdn. Bhd.

PT A PT A PT A dividend
 Own Dividend  Own  Own $25
100% 100%
dividend 100%
$30 Subject to
shares of shares of $20 Subject to shares of Dividend
X Sdn. X Sdn. Dividend X Sdn. Invested in
Bhd Bhd Bhd
Income
Invested in Income Indonesia
Invested in Tax
Indonesia Tax
Indonesia

 $30  exempted from Dividend Income  $20  exempted from dividend Income Tax
Tax  $10 not invested in INA  subject to dividend
income tax  (30% x $100) – dividend invested in
INA $20
 $25  exempted from dividend Income Tax
 $5 (remaining amount of dividend threshold (30%
of profit after tax is subject to tax)  (30% x $100)
– dividend payment $25
 CORE CHANGES FOREIGN DIVIDEND INCOME TAX FACILITY ILLUSTRATION

4 Profit After 5 6
Profit After Profit After
Tax $100 Tax $100
Tax $100
$310%
Dividend 30% $6
Remaining
payment Remaining
Dividend dividend $14 dividend
$23 payment payment
dividend 70% threshold $7
$30 $27 $20
threshold $7 ($10 x 70%)
90%

Dividend not
Dividend not
invested $3
invested $4
X Sdn. Bhd. X Sdn. Bhd. X Sdn. Bhd.

dividend
PT A PT A PT A dividend
$20  Own
 Own Subject to  Own dividend $10
income tax 10% 70% Subject to
100% $3 Income Tax
shares of Invested in $10 shares of shares of
X Sdn. X Sdn. $11
X Sdn. Indonesia Invested in
Bhd Bhd Invested in Bhd
Indonesia
Indonesia

 If the $20 amount is invested in Indonesia 
exempted from dividend Income Tax
 The remaining $10 is subject to income tax
a. (30% x $100) – dividend payment $23
b. Dividend payment $23 – dividend invested in
INA $20
 If the $3 amount is invested in
Indonesia  exempted from dividend
Income Tax
 Because the total of dividend paid is ≥
30%
 If $10 amount is invested in Indonesia exempted from
dividend Income Tax
 The remaining $11 is subject to income tax 
a. (30% x $100 x 70%) - portion of dividend payment $14
b. Portion of dividend payment $14 (70% x $20) –
dividend invested in INA $10
CORE CHANGES

Income Tax (Art. 26) rates on interest received by non-resident

Taxpayer can be reduced to a rate lower than 20% by the
<20 Government Regulations.

% Current regulation
by Income Tax Art. 26 on domestic interest income received by non-resident
GR Taxpayer are taxable with 20% rates.
02
SUMMARY OF THE PROVISION

IMPROVING LEGAL CERTAINTY

 The classification of Individual Tax Subject:
a. Indonesian and foreign citizen who has been present in Indonesia >183 days
become resident taxpayer,
b. The amount subject-to-tax of a Resident Expatriate is limited to income
derived in Indonesia within the first 4 years, provided he/she has specific
qualification required
c. Indonesian citizens is abroad for >183 days could become non-resident
taxpayer after qualifying certain conditions.
 CORE CHANGES THE DETERMINATION OF INDIVIDUAL TAX SUBJECT

Treated as Resident Taxpayer, while foreign citizen with specific

skill/expertise is taxable only on income derived from
Indonesian sources (the territorial taxation applies for the first 4
>183 >183 years).
WNI DAYS WNA DAYS Current regulation
IN INDONESIA IN INDONESIA Treated as Resident Taxpayer,
Income Tax is imposed on income derived in Indonesia and foreign-sourced
income.

Treated as Resident Taxpayer, unless meeting certain conditions

(for example: place of residence, center of vital interests, habitual
>183 abode, etc) Can be classified as Non-resident Taxpayer
WNI DAYS (SPLN).
Current regulation
OUTSIDE
INDONESIA Treated as Resident Taxpayer by nationality,
Income Tax is imposed on income derived in Indonesia and foreign-sourced
income.