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A Guide to Navigating the Local Tax System
The Covid-19 pandemic brought about a lot of change for businesses and countries in 2020. These changes include changes to the tax incentives in Indonesia.
An Incentive in Response to the Pandemic
Tax incentives were introduced in Indonesia by the government in response to the Covid-19. The Government issued it under Regulation No. 29 of 2020 (GR-29). Under this regulation, those who qualify will have access to income tax facilities. This is applicable to qualified parties that assisted the Government while they handed the pandemic.
The incentives include the following:
- An extra 30% deductions for the taxpayers that produce household health supplies or medical devices. These must be to help handle the Covid-19 crisis. The percentage is deductible from the total costs incurred until 30 September 2020.
- Any donations that could reduce your gross income. These donations can be in the form of services, goods, assets utilisation or money, provided you did not receive any compensation. Donations should be made to a designated collection organiser such as:
- Regional Disaster Management Agency (BPBD)
- Ministry of Social Affairs
- Ministry of Health
- Any other donation collector institutions
- Any extra income that an individual gets from the Government for working in a health-related sector that handles the Covid-19 will be subject to 0% tax. This is valid until 20 September 2020.
- If you are a share issuer that buys back a company’s shares, you could be eligible for 3% lower income tax rates. This is applicable if your buyback is in line with the Central Government’s policy.
Tax Reductions for Companies Listed Publicly
Publicly listed companies will also enjoy tax reductions under Regulation No. 30 of 2020 (GR-30). Under this new regulation, companies that are listed publicly must be companies with a minimum of 40% of paid-in shares that are listed on the Indonesia Stock Exchange. If you meet this requirement, you will enjoy an extra 3% reduction in your current corporate income tax rate.
The current corporate tax rates in Indonesia are 22% for the financial period between 2020-2021. The rates are 20% for the fiscal year starting in 2022.