Indonesia revises upstream oil and gas taxation guidelines

On September 15 2023, the Indonesian Minister of Finance (MoF) published MoF Regulation No. 94 of Year 2023 (MoF-94/2023). The regulation includes several amendments to MoF Regulation No. 34/PMK.03/2018 concerning Guidelines for Implementing Joint Audits on the Implementation of Cooperation Contracts in the Form of Production Sharing Contracts with Refund of Operational Costs in the Upstream Oil and Gas Business Sector.

The new provisions include the following:

• Profit sharing is non-tax state revenue for cooperation contracts in the upstream oil and gas business sector;

• Oil and gas income tax is part of tax state revenue owed by the contractor, consisting of income tax on revenue earned under production sharing contracts (PSCs) and/or income tax on taxable income for PSCs after deducting income tax on income under the PSC structure, with calculations in accordance with the conditions of the cooperation contract for upstream oil and gas business activities;

• The final financial quarterly report (FQR) for the fourth quarter is recognised and used by the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) or the Aceh Oil and Gas Management Agency (BPMA) to complete the calculation of profit sharing, and adjustments are made to include information on all changes in the contractor's rights and obligations on a certain date after the financial year of the termination of the contract from the completion of the work area, which is recognised and used by SKK Migas or BPMA; and

• Contractors’ income tax reporting obligations – the amount of oil and gas income tax in the annual income tax return must be in accordance with the amount of oil and gas income tax based on the final FQR for the fourth quarter, the final FQR for the last fiscal year, or the final settlement rights and FQR obligations.

With regard to a joint audit finding, if the contractor agrees with the audit findings after the current year, the contractor shall adjust the profit sharing of oil and gas revenues or pay the non-tax state revenue to the oil and gas account and pay the oil and gas income tax payable to the state treasury account as a payment for the current year's oil and gas income tax, as regulated in this MoF regulation.

Furthermore, if there is an underpayment of tax, the contractor is required to pay it before submitting the annual income tax return. Otherwise, if there is a payment of oil and gas income tax greater than what should have been payable in the final FQR for the previous fiscal year, the overpayment of oil and gas income tax will be refunded based on the appropriate amount.

MoF-94/2023 came into force on the date of its promulgation, September 18 2023.

The Indonesian tax office (ITO) has issued Announcement No. PENG-2/PJ/PJ.09/2023 regarding the Obligation to Fulfil Taxpayer Repatriation and/or Investment Commitments under the Voluntary Disclosure Programme (PPS). This announcement became effective on September 8 2023.

The announcement contains:

• Advice on fulfilling repatriation and/or investment commitments;

• The conditions for fulfilling reporting commitments; and

• The consequences of failing to fulfil these commitments promptly.

It also includes instructions for filling out, and frequently asked questions regarding, repatriation and/or investment realisation reports, and monthly final income tax returns for the PPS, which can be accessed via this website.