Taxation Treatment to Support Ease of Doing Business
- March 14, 2021
- Posted by: Administrator
- Category: Tax News
In connection with the implementation of Article 111 and Article 185 of Law Number 11 of 2020 concerning Job Creation, the Government has enacted a Government Regulation Number 9 of 2021 (“GR 9 of 2021”) on Taxation Treatment to Support Ease of Doing Business. GR 9 of 2021 covers the fields of Income Tax, Value Added Tax, and General Tax Procedures and Provisions.
The summary of Government Regulation Number 9 of 2021 concerning Tax Treatment to Support Ease of Business is as follows:
I.Taxation Treatment to Support Ease of Business in the Income Tax Sector
The Amended Points
|Material Provisions||Before GR 9 of 2021||After GR 9 of 2021|
|The reduction in income tax rates on bond interest income includes premiums, discounts, and benefits in connection with debt repayment guarantees||20% or according to the Tax Treaty rate||a)The withholding rate for Income Tax Article 26 on bond interest income (including Sharia) received/earned by a Foreign Taxpayer other than a Permanent Establishments is reduced to 10% or according to the Tax Treaty rate.|
- The Bond Interest income received or earned by foreign taxpayers other than a permanent establishment shall include:
- Interest on bond with coupons calculated based on the gross amount of interest under the period of the Bond’s ownership;
- Discount on bond with coupons at the excess value over the selling price or the nominal value above the acquisition cost of the Bond, not including the accrued interest;
- Discount on a bond without interest at the excess value over to the selling price or the nominal value above the Bond’s acquisition cost.
- The provisions of this Government Regulation shall apply mutatis mutandis (with the relevant changes made) to the Interest on Bonds issued based on sharia principles.
- These tax rate reduction provisions will apply after six (6) months from the enactment of GR 9 of 2021.
II.Adjustment of Arrangements of Income Tax for Ease of Business Regarding the Calculation of Taxable Income and Payment of Income Tax in the Current Year
The Newly Inserted Clause
- Dividends or other income received or earned by individual taxpayers and domestic entities are exempted as objects of Income Tax as referred to in Article 4 paragraph (3) letter f of the Income Tax Law.
- Other income as referred to above is income after tax from a permanent establishment abroad and active income from abroad that is not through a permanent establishment.
- Domestic dividends received or earned by individual domestic taxpayers or by corporate taxpayers are not subject to income tax.
III.Adjustment of Value Added Tax Regulations for Ease of Business
The Newly Inserted Clause
- Delivery of Tangible Taxable Goods in the form of movable goods, other than delivery by the owner of the goods (the consignor) to the goods recipient (the consignee) on a consignment basis, occurs at the time the following conditions are met:
- Delivered directly to the buyer or to a third party for and on behalf of the buyer;
- Delivered directly to the recipient of the goods for free gifts, self-usage, and delivery from the Head Office to a branch or vice versa and/or delivery between branches;
- Delivered to the courier or freight forwarding company; or
- Selling Price is recognized as a receivable or income, or when a taxable entrepreneur issues a sales invoice, under the generally accepted accounting principles which are applied consistently;
- Delivery of Tangible Taxable Goods in the form of immovable goods occurs at the time of transfer of the right to use or control the Tangible Taxable Goods, legally or in real-time, to the buyer;
- The provision stating “the obligation to issue a VAT Invoice does not apply to the self-usage of Taxable Goods and/or Taxable Services for productive purposes with its VAT Non Collected” has been removed.
- Additional provisions regarding content of a VAT Invoice; it must contain at least:
- name, address, and passport number for an individual foreign tax subject; or
- name and address for corporate foreign tax subjects or non-tax subjects.
- The Resident Identification Number (KTP) is treated as equivalent to the Taxpayer Identification Number (NPWP) in making a VAT Invoice and crediting the Input VAT.
IV.Adjustment of Regulations in the Field of General Provisions and Tax Procedures for Ease of Business
The Amended Points
|No||Material Provisions||Before GR 9 of 2021||After GR 9 of 2021|
|1.||Administrative penalty for disclosing incorrect of reporting tax return||50%||Interest calculation according to the reference interest rate from the Minister of Finance, maximum of 24 months|
|2.||Administrative penalty for disclosing incorrectness of acts||150%||100%|
|3.||Administrative penalty for terminating tax investigation||Four (4) times the amount of unpaid or underpaid tax, or refunded tax that was not valid||Three (3) times the amount of unpaid or underpaid tax, or refunded tax that was not valid|
|4.||Bookkeeping for individual taxpayers who carry out business activities||Not Required||Mandatory|
|5.||The amount of unpaid or underpaid tax plus administrative sanctions in the form of interest of 48%||2% interest per month for a maximum of 24 months||Interest calculation according to the reference interest rate from the Minister of Finance, maximum of 24 months|
|6.||Decisions or decrees in the framework of implementing statutory provisions in the taxation sector||Issued manually in a printed document||May be issued electronically|
- The provision stating “In the case that disclosure of inaccuracy in filling in a Tax Return is done for a Periodic VAT Return, the Input VAT on the acquisition of Taxable Goods or Services which was not reported in the Periodic VAT Return which was found during a tax audit event, cannot be taken into account as a tax credit“ has been removed.
- The scope of Tax Audit due to negligence in filing an incorrect Tax Return is eliminated. Meanwhile, a Taxpayer that has not yet made any delivery of Taxable Goods and/or Taxable Service and/or export of Taxable Goods and/or Taxable Service but has already received a preliminary VAT refund or credited Input VAT referring to Article 9 point (6e) of the VAT Law is added as a new scope of Tax Audit.
- Individual taxpayers who carry out business activities or independent employment and corporate taxpayers in Indonesia must maintain bookkeeping. Taxpayers with specific criteria are excluded from the obligation to maintain bookkeeping but are still obliged to record the transactions.
- Interest compensation is given based on the interest rate per month determined by the Minister of Finance based on the reference interest rate divided by 12 (twelve) and for a maximum of 24 (twenty-four) months, and a part of a month is calculated as 1 (one) full month.
- Withholding Tax on Bond Interest Income received or earned by foreign taxpayers other than a permanent establishment up to 6 (six) months since this Government Regulation comes into force shall follow the provisions stipulated in Government Regulation Number 16 of 2009 concerning Income Tax on Income in the form of Bond Interest as amended by Government Regulation Number 55 of 2019.
- Taxable Entrepreneurs other than Retailer Taxable Entrepreneurs that issue a VAT Invoice without including the identity of the buyer of the Taxable Goods or recipient of Taxable Services as referred to in Article 13 paragraph (5) letter b of the Law on Value Added Tax up to 30 (thirty) days after this Government Regulation comes into force shall not be subject to administrative sanctions under Article 14 paragraph (4) of the KUP Law.
- SKP (Tax Assessment Notices) or STP (Tax Collection Notices) issued since November 2, 2020, containing administrative sanctions in the form of interest, for which the calculation of administrative sanctions started before November 2, 2020;
- Disclosure of the incorrect filing of the Tax Return declared since November 2, 2020, for which the calculation of administrative sanctions started before November 2, 2020;
- Interest compensation awarded based on a decree, decision, or verdict issued since November 2, 2020, for which the calculation of the interest compensation started before November 2, 2020;
the calculation is done using the interest rate under the Minister of Finance Decree which regulates the calculation of interest rates as the basis for calculating administrative sanctions in the form of interest and the provision of interest compensation that is effective for November 2020.
- The administrative sanction for disclosure of negligence in reporting of tax returns and request to terminate tax investigation which is proposed starting November 2, 2020;
- Administrative sanction as referred to in Article 14 paragraph (4) of the Law on General Provisions and Tax Procedures which is imposed through a Tax Collection Letter issued starting November 2, 2020;
- The repayment of Input VAT which has been refunded or credited by a Taxable Entrepreneur that has not yet carried out any delivery of Taxable Goods and/or Taxable Service and/or export of Taxable Goods and/or Taxable Service referring to Article 9 point (6e) of the VAT Law which has not been paid back by the taxpayer up to November 2, 2020, will be charged through the issuance of a Tax Assessment Letter, which;
- Interest compensation that should not have been granted and has not been paid back by the taxpayer up to November 2, 2020, will be charged through the issuance of a Tax Collection letter, which;
is calculated based on the General Provisions and Tax Procedures Law.
GR 9 of 2021 became effective on February 2, 2021.