Implementation Regulation on Final Tax for Taxpayers with Certain Turnover

As the Government’s support for the development of small and medium enterprises, the Minister of Finance (“MoF”) issued Regulation No. 99/PMK.03/2018 (“PMK-99”) on 24 August 2018. PMK-99 is an implementation regulation of Government Regulation No. 23/2018 (“PP-23”) concerning Income Tax on Business Income Received or Earned by Taxpayers with Certain Gross Turnover.

Under PP-23, taxpayers are given an option to apply the normal tax regime although they are qualified under the new final tax rate. These taxpayers must submit a notification to the Tax Office where the taxpayer is registered. Such taxpayers then cannot utilize the final income tax regime under PP-23 for following years. The standard template for the aforementioned notification is provided in the attachment to PMK-99. The final tax under PP-23 can be paid using self-assessment or withholding tax method, with the details as follows:

  1. Self-Assessment
    The final income tax shall be paid no later than 15th of the following month and the payment should have a State Revenue Transaction Number. This tax payment is also considered as monthly tax reporting which is due on the 20th of the following month.
  2. Withholding Tax
    • The taxpayer has to apply for a Certificate to the Tax Office where the taxpayer is registered using the standard template provided in PMK-99.
    • The registered tax office must issue the Certificate to confirm that the taxpayer has fulfilled the criteria of PP-23 within three working days after the complete application is received; otherwise, the application is deemed as approved.
    • The certificate will no longer be valid if the taxpayer submits a notification to apply the normal tax regime or no longer qualifies under PP-23. The tax office may also revoke the Certificate if it is revealed that the taxpayer does not qualify under PP-23.
    • The taxpayer that obtained the Certificate should provide a copy to the tax withholder in order to obtain the o.5% final withholding tax rate instead of the common withholding tax rate.
    • For the tax withholder, the tax payment slip should be completed with the name of the taxpayer under PP-23 as withholdee, signed by the tax withholder, and the tax withheld should be remitted no later than the 10th of the following month after the withholding. Further, the tax withholder must report the withholding in the Monthly Article 4 (2) Income Tax Return no later than the 20th of the following month.
    • For a taxpayer that has a Tax Exemption Letter (“Surat Keterangan Bebas/SKB”) and provides the letter to the tax withholder, the tax withholder does not need to withhold the final income tax. The final tax payment will then be self-remitted by the taxpayer as explained above.

PMK-99 came into effect on 27 August 2018.

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