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(December 11, 2020) The Indonesian government recently passed a law
No. 11 of 2020 on job creation (the "omnibus
Law"). The stated aim of the Omnibus Act is
Strengthen investment and create jobs by streamlining regulations and
Simplify the licensing process to improve usability
Business in indonesia.
Among other things, the Omnibus Act introduces and changes a
Number of regulations on tax issues in Indonesia.
In particular, provisions are changed by:
- Law No. 7 of 1983 on Income
Tax as amended several times, most recently by Law No. 36 of 2008
(the "Income Tax Act"); - Law No. 8 of 1983 on VAT
("VAT") for services and goods and sales
Tax on luxury goods, changed several times, most recently by
Law No. 42 of 2009 (the "Value Added Tax Act");
and - Law No. 6 of 1983 on General
Tax regulations and guidelines as amended several times
recently by Law No. 16 of 2009 (the "SRC
Law").
We highlight some of the key changes as follows:
Income Tax Act
1. Determination of the individual taxpayers:
- Indonesian citizens outside of
Indonesia can become a foreign taxpayer for more than 183 days –
Under the Omnibus Act, Indonesian citizens are outside of
Indonesia for more than 183 days within a 12 month period and
meet certain other requirements is determined as foreign tax
Subjects.
- Foreigners in Indonesia for more than
183 days will be domestic tax boxes – foreigners who
are more than 183 days in Indonesia within a period of 12
Months automatically become Indonesian Domestic Tax Subjects.
The Omnibus Act continues to provide this for this existing provision
Foreigners who become Indonesian domestic taxpayers will only be
taxed on the income they receive or receive in Indonesia. These
Regulations are intended for foreigners who have specific
Expertise, and such treatment will be valid for four years thereafter
They are designated as domestic tax subjects. This treatment,
does not apply to foreigners who a
Double taxation agreement.
2. Abolition of income tax on domestic and foreign dividends
domestically reinvested dividends:
- Dividends from domestic companies –
According to the Omnibus Act, if dividends are to be reinvested
Indonesia The tax rules on dividends will be changed as follows
follows: (i) for individual taxpayers the final income tax of 10%
becomes 0%; (ii) for resident corporate taxpayers, the final income
Tax of 15% becomes 0%; and (iii) for foreign taxpayers, the final
Subject to the applicable tax treaty, income tax remains at 20%.
- Dividends from foreign companies –
Similar to dividends from domestic companies under the Omnibus Act
if dividends from foreign companies are to be reinvested
Indonesia and meet the specified conditions and requirements, them
becomes 0% taxable or non-taxable. When the dividend
stays abroad and is taxed according to the applicable taxes
Regulations.
3. Adjustments to Article 26 Income Tax Rates on Interest for
Income tax rates
According to the Omnibus Act, the introduction of a 20% tariff of the gross
Amount in accordance with Article 26 paragraph 1 letter b of the Income Tax Act
the payment of interest, including premium, discount and
Fee related to a debt repayment guarantee can be
lowered by a government regulation.
Value Added Tax Act
1. The transfer of taxable goods in a transaction
Merger, consolidation, expansion, division or acquisition or for the
Purpose of the capital replacement for shares, provided that the
Parties who make and receive the transfer are taxable
Entrepreneur, is not included in the definition of supply of
Taxable goods.
2. Mining products or drilling products according to the Omnibus Act
taken directly from their source, excluding coal mining products,
are included in the types of goods that are not subject to VAT.
3. The Omnibus Act also contains several provisions too
VAT credit, namely:
- Input tax that cannot be
credited:
a. Must be repaid by the taxpayer to the treasury
Entrepreneur in the event that the taxable entrepreneur: (i) has
has received a refund of the overpayment on input tax;
and / or (ii) has credited the input tax designated as output tax
payable in one tax period; and or
b. In the event that the taxable entrepreneur is compensated for the
The taxable entrepreneur cannot be compensated for over-tax payments
in the next tax period and a request for a refund cannot be
submitted after the three-year period or at the time of
Business dissolution or revocation of the taxpayer
Entrepreneur.
- The credit requirements for entry
Tax on taxable goods and / or taxable services received
and / or imported taxable goods and use of
intangible taxable goods and / or taxable services from outside the
Customs area within the customs area according to the
The omnibus law reads as follows:
a. Before an entrepreneur is confirmed as a taxable entrepreneur
It can use the 80% input tax credit guidelines
Output tax that should be charged;
b. Taxable goods and / or services that are not included in VAT
Periodic report notified and / or discovered at the time of
The taxable entrepreneur can credit the examination for as long as this is the case
meets Omnibus credit requirements
Law; and
c. Can be invoiced with the issuance of a tax assessment
credited by the taxable entrepreneur in the amount of the main amount of VAT
included in the tax assessment, provided this tax assessment
was paid in full and no appeal was made and it
corresponds to the corresponding credit regulations
Law.
SRC law
1. The sentence for administrative penalties for rectification or
Tax payment
The administrative penalty was set at an interest rate of 2%.
The omnibus law now states that the amount will be further regulated by
the finance minister ("MOF").
The rate set by the MOF for the taxpayer case
correct the tax returns yourself, which leads to a greater tax liability,
is calculated on the basis of the reference interest rate plus 5%
and divided by 12 from the date of calculation
the sanction begins. However, if the director general for taxes
("DGT") takes an exam on
Condition that DGT has not issued a tax assessment based on a
separate report by the taxpayer on the incorrect filling of
The tax return leads to a larger tax liability, the interest rate
The conditions set by the MOF are based on their preferred interests
Rate added by 10% and divided by 12.
2. Return on interest for excess return on payment of taxes
(Overpayment)
The omnibus law provides that the interest rate should be
determined by the MOF and is calculated based on preferred interest
Rate divided by 12, applicable on the day the calculation of the
The interest adjustment begins.
3. Ending the investigation of criminal offenses in the area
taxation
Under the Omnibus Act, the attorney has at the request of the MOF
The general office can stop an investigation into a criminal
Offense in tax matters within six months from the date of
the letter of request. Cancellation is only possible after the taxpayer
has paid off the tax liability. The Omnibus Act states that this will be the case
further regulated by the MOF.
Conclusion
The above changes to Indonesian tax laws and regulations
according to the omnibus law have a special focus on the rights and
Obligations of domestic and foreign economic actors
Taxpayer. They also increase the attractiveness of Indonesia as a
Investment goal by lowering corporate tax and
Provide incentives as discussed above. Though technically
Rules still need to be put in place to implement these changes
Changes proposed by the Omnibus Act would have significant effects
Effects on Indonesian tax law, especially for companies
Actor.
Originally published by SSEK, December 2020
The content of this article is intended to provide a general overview
Guide to the subject. Expert advice should be obtained
about your particular circumstances.
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