Lower Final Tax Rate on Construction Service with relevant qualification
- March 9, 2022
- Posted by: Administrator
- Category: Tax News
In order to provide legal certainty and ease in the imposition of income tax on income from construction service business and keep the business climate of the construction services sector conducive, it is necessary to adjust the arrangement regarding income tax on income from construction service business. The Government of Indonesia has issued Government Regulation No. 9 of 2022 regarding Income Tax on Construction Service Business (“GR-9/2022”) as the second amendment of Government Regulation No. 51 of 2008 (“GR-51/2008”).
The Construction Service Business Activities regulated in GR-9/2022 are :
- Construction Consultation
includes the overall or partial service of activities such as the assessment, planning, design, supervision, and management of the construction of a building. Construction consulting activities can have a general or specialist nature. - Construction Work
Activities include the construction, operation, maintenance, demolition, and rebuilding of a building. Construction work activities can have a general or specialist nature. - Integrated Construction Work
Combined construction work and construction consulting services, including the incorporation of service functions in the planning, procurement, and development incorporation model and the planning and development incorporation model.
The final income tax rates applicable on construction services are as follows:
| Type of Services | GR-9/2022 | GR-51/2008 | ||||
| Classification | Rate | Classification | Rate | |||
| Construction Work
|
a. | Service Providers that have a small qualified business entity certificate or a certificate of work competence for the business of an individual; | 1.75% | a. | small business | 2% |
| b. | Service Providers that do not have a business entity certificate or certificate of work competence for the business of an individual; | 4% | b. | without business qualification | 4% | |
| c. | Service Providers other than service providers as referred to in letters a and letter b; | 2.65% | c. | other than a and b | 2.65% | |
| Integrated Construction Work
previously in GR-51/2008: part of construction work
|
d. | Service Providers that have a business entity certificate | 2.65% | d. | other | 3% |
| e. | Service Providers that do not have a business entity certificate | 4% | e. | without business qualification | 4% | |
| -empty- | – | small business | 2% | |||
| Construction Consulting Services
previously in GR-51/2008: planning or supervision |
f. | Service providers that have a business entity certificate or certificate of work competence for the business of an individual | 3.5% | f. | with business qualification | 4% |
| g. | Service providers that do not have a business entity certificate or certificate of work competence for the business of an individual. | 6% | g. | without business qualification | 6% | |
Transitional provision
For contracts signed before this Government regulation is promulgated, the following provisions apply:
- for the payment of contracts or parts of contracts prior to the entry into force of this Government Regulation, the imposition of Income Tax is carried out under Government Regulation No. 51 of 2008 as amended by Government Regulation No. 40 of 2009 on Amendment of Government Regulation No. 51 of 2008 on Income Tax on Income from Construction Services Business;
- for the payment of contracts or parts of contracts from the time this Government Regulations comes into force, the imposition of income tax is carried out under this Government Regulation.
GR/9-2022 became effective on 21 February 2022.