Indonesia introduces three business-friendly tax changes
Aditya Wicaksono and I Dewa Made Agung Nugraha of GNV Consulting Indonesia look at three recent tax law amendments that impact withholding tax, deductions for human resource investment and income tax for certain taxpayers.
On September 5 2019, the Government of Indonesia’s Directorate General of Taxes (DGT) issued DGT Decree KEP-599/PJ/2019 (KEP-599). This new decree relates to Article 23/26 under DGT Regulation PER-04/PJ/2019 and obliges income tax withholders to prepare withholding slips and submit monthly Article 23/26 withholding tax (WHT) returns.
KEP-599 stipulates that taxpayers that meet certain criteria and are registered under certain tax offices must prepare withholding slips and submit monthly Article 23/26 WHT returns in accordance with DGT Regulation PER-04/PJ/2019. Companies should check the attachment to KEP-599 to confirm whether or not they meet these criteria.
These requirements will still apply even if a taxpayer’s registered tax office has changed. If a taxpayer’s status as a VAT-able company (pengusaha kena pajak - PKP) is revoked, it should follow the requirements set out under DGT Regulation PER-53/PJ/2009 instead of DGT Regulation PER-04/PJ/2019.
At the same time (September 6), the Ministry of Finance (MoF) issued MoF Regulation 128/PMK.010/2019 (PMK-128). This new regulation contains provisions for the reduction of gross income on professional placements, internships and/or learning activities in the context of mentoring and the development of human resources in certain competencies.
PMK-128 provides that the reduction of gross income can be as high as 200% of total expenses incurred for professional placements, internships and/or learning activities, provided the requirements and competency criteria are satisfied. The regulation lists the types of deductible expenses and criteria for obtaining the additional gross income reduction, and includes example calculations.
To enjoy the facility, a taxpayer is required to submit a notification through the OSS system. The effectiveness of such programmes will be evaluated by the related ministry or local government office. If the programme is considered ineffective, the facility will not be provided in the subsequent fiscal years. PMK-128 came into effect on September 9 2019.
Most recently, on September 24 2019, the DGT issued Circular SE-25/PJ/2019 (SE-25). This latest circular provides a guideline for calculating the amount of Article 25 income tax instalments in the current fiscal year for taxpayers that are required to prepare periodic financial statements; these taxpayers include new taxpayers, banks, state-owned and local government-owned enterprises, public companies and certain individual entrepreneurs.
SE-25 introduced several changes that affect the amount of Article 25 instalments that certain taxpayers with periodic financial statement obligations must pay. This impacts any taxpayer that: has carried forward a fiscal tax loss; is a public company benefiting from the tariff reduction facility; obtains the net income reduction facility; and that obtains the 50% tariff reduction facility.
The circular also provided confirmation of the definition of ‘net fiscal profit’ for the above-mentioned companies. It confirmed the Article 25 instalment for the current tax year for taxpayers that no longer meet the criteria of taxpayers, as referred to in Government Regulation 23 of 2018, (final tax for taxpayers with certain maximum revenue). It also provided a calculation of Article 25 instalments for certain individual entrepreneurs.
SE-25 provided explanations regarding the overbooking procedures for Article 25 instalment overpayment. It explained the Article 25 Instalment obligation which is calculated based on MoF Regulation 215 215/PMK.03/2018, which is effective starting from the fiscal period January 2019. The final aspect is that during the transition period of January 2019 to March 2019, any administrative penalty incurred due to the incorrect calculation of Article 25 instalment is nullified by an official assessment, as it is considered to be not the taxpayer’s mistake.