Indonesia sets out incentives for taxpayers affected by the COVID-19 outbreak

In light of the COVID-19 pandemic, the Minister of Finance has issued Regulation No. 23/PMK.03/2020 (PMK-23) stipulating a series of tax incentives in order to maintain the stability of economic growth, people's purchasing power, and productivity of certain sectors. Effective from April 1 2020, the salient points of the regulations are as follows:

Article 21 withholding tax return (Article 21 tax return)

The incentive for Article 21 tax from the MoF is in the form of ‘tax borne by the government” effective from the tax period of April to September 2020. This is for employees working in certain corporate areas, who are receiving an annualised gross fixed and regular employment income in this relevant period amounting to IDR 200,000,000 ($13,110) and have a tax identification number (NPWP). 

The eligible employers are the taxpayers in the business group code (KLU) listed in the attachment integrated in the regulation (KLU from 10110 to 33200, including manufacturing industries, repair and maintenance service and assembly service). They have been designated for import facility for export - Kemudahan Impor Tujuan Ekspor (KITE) - by the Directorate General of Custom and Excise (DJBC). This relevant KLU has been stated and reported in the 2018 corporate income tax return.

Article 21 tax borne by the government shall be given in cash to the employee and not counted as taxable income for the employee. To get this, the qualified employer should:

• Submit the notification letter in the specified format; 

• Issue the tax payment slip stamped with "Article 21 tax return suspended by the government Eks [PMK NUMBER ... / PMK.03 / 2020]";

• Submit the notification realisation letter of Article 21 tax borne by the government in the required format as stated in the attachment, with the tax payment slip, at the latest on July 20 2020 for the period of April to June 2020 and on October 20 2020 for the period of July to September 2020.

Article 22 withholding tax return (Article 22 tax return)

Similar to the Article 21 tax borne by the government facility, the Article 22 import tax exemption is provided for certain taxpayers doing stipulated business and/or a KITE company. The exemption of Article 22 import tax facilities is granted through the Article 22 import tax exemption letter for taxpayers (KLU 10432 to 31004 as listed in the attachment), and/or taxpayers who have been designated as a KITE company. These companies should have stated and reported their KLU in the 2018 corporate income tax returns and submit a written application for a tax exemption letter of Article 22 import tax as referred to in the required letter format as stipulated in the attachment. 

The exemption letter is effective from the issuance date of exemption certificate until September 30 2020. Taxpayers who have obtained a tax exemption letter are required to submit a realisation notification every 3 months as in the format on its appendix, together with the tax payment slip, to be delivered at the latest by July 20 2020 for the period of April to June 2020 and October 20 2020 for the period of July to September 2020.

Article 25 income tax instalments (Article 25)

Article 25 provides for a 30% reduction effective from the period of April to September 2020. The eligible taxpayers are similar with those eligible for the Article 22 import tax facility, i.e. whose KLU listed in attachment (10432 to 31004) and/or who have been designated as KITE company. To obtain this, the taxpayers should submit a notification letter in the required format as stated in the attachment. The KLU should have been stated and reported in their 2018 corporate income tax returns. A detailed calculation on the 30% reduction of Article 25 is provided in the related attachment. 

The taxpayers who want to utilise this facility should submit the realisation notification in the required format, attached with the tax payment slip, to be delivered by July 20 2020 for the period of April to June 2020 and by October 20 2020, for the period of July to September 2020.

Preliminary refund for VAT

A preliminary refund for VAT is available for taxpayers who are doing business as listed in KLU 10432 to 31004 or have been designated as a KITE company, and have filed monthly VAT returns with the tax overpayment at a maximum of IDR 5,000,000,000. These taxpayers are categorised as low-risk VAT-able entrepreneurs (as per Article 9 (4c) of the VAT law) and shall be granted with the option of a preliminary VAT refund. Additionally, the KITE designation letter issued by the MoF should be attached to the monthly VAT return that has applied for a preliminary VAT refund, from the effective date of this regulation (April 1 2020) up to the September 2020 period (submitted the latest by October 31 2020).

The procedure for a preliminary VAT refund is in accordance with the prevailing MoF regulation regarding preliminary refunds (PMK-39).

Charles Oetomo

T: +62 816 786 811

E: charles.oetomo@gnv.id

Irma Batubara

T: +62 21 2988 0681

E: irma.batubara@gnv.id