TAX INCENTIVES FOR BUSINESSES WHICH ARE AFFECTED BY THE COVID-19
On 23rd of March 2020, the Ministry of Finance of the Republic of Indonesia (the "MOF") has enacted a MOF regulation number 23/PMK.03/2020 ("PMK 23") concerning Tax Incentives for Industries who are affected by the Covid-19. Generally, there are four key provisions on this regulation, which give the businesses/employees relaxation in paying their income tax (Pph 21), import tax (Pph 22), and tax installment (Pph 25). Further, this regulation also provides a new provision that aims to accelerate the VAT (PPN) restitution for taxable employers (pengusaha kena pajak).
INCOME TAX (PPH 21)
The Government of the Republic of Indonesia will cover 100% (a hundred percent) of employee's income tax obligations due under Article 21 of the Indonesia Income Tax Act. However, please be noted that this provision only applies to specific business sectors and particular employees who met the following criteria:
- the business sectors are listed on the attachment A of PMK 23;
- the employer is classified as a KITE business (KITE business is a business that focuses on importing products for export purposes); and
- the gross income of the employees does not exceed Rp200.000.000 (two hundred million rupiahs) annually;
The relaxation of Income Tax, as mentioned above, is applied for the tax period starting from April 2020 to September 2020. The employer, however, should submit a report to the Indonesia Tax Authority concerning the implementation of such an incentive. This report shall be submitted twice, first in 20th of July 2020, and second in 20th of October 2020.
IMPORT TAX (PPH 22)
PMK 23 provides an exemption of import tax due under Article 22 of the Indonesia Income Tax Act, for particular business sectors which are:
- listed on the attachment F of PMK 23; and
- the company is classified as a KITE business.
A company that wants to implement import tax incentives should apply an import tax exemption letter to the Indonesia Tax Authority by using a Form G of PMK 23. Unlike the Income Tax incentive that only applies for a tax period from April 2020 to September 2020, import tax incentive will come into effect indefinitely starting from April 2020, unless the MoF amend/revoke this incentive.
TAX INSTALLMENT (PPH 25)
PMK 23 provides a 30% (thirty percent) cut from the tax installment that is expected to be due and payable under Article 25 of the Indonesia Income Tax Act.
PMK 23 provides that taxable employers (pengusaha kena pajak) may obtain an initial tax return due to the over-paying of the VAT as a low-risk taxable employer. This incentive only applies to a particular taxable employer who met the following criteria:
a. the business sectors are listed in the attachment F of PMK 23;
b. the taxable employer is classified as a KITE business;
c. the taxable employer has submitted an over-payment VAT annual report with the maximum limit of over-payment is Rp5.000.000.000 (five billion rupiahs).
This incentive applies for a tax period starting from April 2020 to September 2020.