Indonesia

Welcome to the high-level summary of Covid-19 related actions by the Indonesian Government. The details and links below have been split between “Tax Filings Affected”, “Government Employee Wages Benefits Programs” and “Government Loan and Support Programs”; and are simply extracts from the more detailed information available on the websites of the Indonesian Praxity Participant firms’ websites, links to which are available at the bottom of this page. Praxity Participant Firms in Indonesia are Mazars, Moores-Rowland, PT. AJA Sertifikasi Indonesia, and ShineWing CPA.

Tax Filing Affected

Corporate Tax Measures Reduction of Corporate Income Tax (“CIT”) rate:

  • The CIT rate will be reduced from 25% to 22% for fiscal years 2020 and 2021 and to 20% for fiscal year 2022.
  • The CIT rate for limited liability companies with at least 40% of their paid-in shares listed on the Indonesia Stock Exchange and which meet certain requirements will be further reduced by 3% (i.e. the CIT rate will become 19% for fiscal years 2020 and 2021 and 17% for fiscal year 2022).
  • As specified in Tax Office Press Release No. SP-13/2020 on April 3, 2020, a reduced amount of tax installment due to the reduced CIT rate in subsequent year, is applicable upon the lodgment of FY2019 corporate income tax return.

Other Taxes Individual Taxpayers Annual Reporting Deadline Extension:

  • The Indonesia Tax Office will extend the deadline for the submission and payment of personal income tax return for Fiscal Year 2019 which is to be carried out by individual taxpayers up to 30 April 2020 (no administrative sanction).
  • Tax Amnesty annual reporting for individuals (set to be submitted by 31 March 2020) can be submitted by 30 April 2020 at the latest.

Tax Incentive for certain taxpayers:

  • The Minister of Finance (MoF) has issued Regulation PMK23/2020, which will be effective from 1 April 2020 and provides tax incentives mostly to industry/manufacturing activities.
  • Tax on employees' wages will be borne 100% by Government for 6 months (April to September 2020).
  • There will be exemption for 6 months of tax on imports (April to September 2020).
  • There will be 30% reduction on installment of corporate income tax for 6 months (April to September 2020).
  • Accelerated VAT refunds are granted for period of 6 months (April to September 2020).

Customs Measures Customs facility for certain goods:

  • Government Regulation in Lieu of Law No. 1 Year 2020 (Perpu1/2020) issued on March 31, 2002 states that the Indonesian Government will change the list of goods under the prevailing Customs Law that are provided with import duty exemption or reduction. This aims to avoid any threat to the economy in the context of the COVID-19 outbreak. This will be further governed by Ministry of Finances regulations.

Exemption of ethyl alcohol excise for the prevention and control of COVID-19 based on orders from government agencies and non-governmental organizations. Relax the provisions on the import of medical devices for the purpose of handling COVID-19 in the form of exemption from the obligation to issue a distribution permit or Special Access Scheme (SAS).

Tax Audits and Controversies

  • The Tax Court Circular Letter No. SE-03/PP/2020 dated 2 April 2020 outlines deferment of tax court hearing session and lodgment of tax appeal letter and lawsuit for the period of 17 March up to 21 April 2020. The due date for direct submission of tax appeal letter is deferred for 36 days upon the due date, whilst lawsuit submission is deferred for 14 days upon the last day of the force majeure period or 14 days after 21 April 2020.

Other Measures

  • Tax court proceedings will be conducted in accordance with health protocol on COVID-19. Other Measures
  • The Tax Authorities will waive the administrative sanctions for late reporting of the Monthly Withholding Tax Return for the February 2020 period that is carried out between 21 March 2020 up to 30 April 2020. The payment, however, still needs to be completed on time.
  • Tax payers who apply legal effort in relation to second requests for reduction or waiver of administrative sanction, or second requests for reduction or cancellation of tax assessment letter or tax collection letter, for which the application submission due date ends within the period 15 March 2020 up to 30 April 2020, will be given an application submission extension up to 31 May 2020.
  • Deadline for submission of tax objection letter has been extended for 6 months.
  • The issuance of certain Indonesian Tax Authorities decisions (overpayment tax assessment letter, tax objection decision letter, request for reduction/elimination of administrative sanctions, request for reduction/elimination of incorrect tax assessment letter, request for cancellation of tax audit result) has been extended for 6 months maximum.
  • Payment of tax refunds has been extended for one month.

Omnibus Law The Law is intended to attract investment and stimulate the economy by improving the ease and legal certainty of doing business in Indonesia including empowerment of cooperatives, SMEs as well as industries and national trades, thereby increasing job opportunities. The tax breakthrough under the Omnibus Law is income tax law, value added tax law and general tax provisions and procedures (“KUP”) law.

  1. Gradual reduction of corporate income tax rates by 22% (2020 & 2021) and 20% (2022 etc.).
  2. Reduction of income tax rates for “Go Public” Taxpayers (general rate -3%).
  3. Abolition of domestic income tax on dividends.
  4. Certain income (including dividends) from abroad is not subject to income tax as long as it is invested in Indonesia.
  5. Non-object of Income Tax on: a. Share of profit / SHU (SHU is a net amount of any remaining annual income/profits) of cooperative (Koperasi), b. Haj funds managed by BPKH
  6. Space for Adjustment of Article 26 Income Tax Rates on Interest.
  7. Equity participation in the form of assets is not subject to VAT.
  8. Relaxation of Input Tax Crediting Rights for Taxable Entrepreneurs.
  9. Reduce on: a. Tax Administrative Sanctions, b. Interest Rewards.
  10. Determination of Individual Tax Subjects: a. Indonesian citizens and foreigners living> 183 days in Indonesia become Domestic Tax Subjects, b. The imposition of income tax for foreigners who are domestic tax subjects with certain expertise only on income received from Indonesia, c. Indonesian citizens who are in Indonesia <183 days can become foreign tax subjects with certain conditions.
  11. Delivery of coal is subject to VAT.
  12. Consignment is not subject to VAT.
  13. Non-object income tax on the remaining excess funds from Social & Religious Bodies (as well as Educational Institutions).
  14. Tax Criminal Cases that have been decided by the Court are no longer issued tax assessments.
  15. Tax collection letters (STP) issuance will expire in 5 years.
  16. Electronic Transaction Taxation: a. VAT collecting platform designation, b. Imposing tax on foreign tax subjects on electronic transactions in Indonesia.
  17. Inclusion of national identification number of buyers who do not have Tax Registration Number in the tax invoice.
  18. Reducing the types of regional levies

Article 62 of Manpower Law (as revised under Job Creation Law) provides that should either one of the two sides in a PKWT terminate the employment prior to the expiry of the agreement, or should their work agreement have to be ended for reasons other than:

  1. The Employees passed away, or
  2. The work agreement expires, or
  3. The certain work determined has been completed, or
  4. A court ruling and/or a decision or a resolution of the institute for the settlement of industrial relations disputes, which has permanent legal force, ends the agreement, or
  5. There is a specific situation or incident prescribed in the Work Agreement, Company Regulations, and/or the Collective Work Agreement that may effectively result in the termination of employment; The side that terminates the relation is obliged to pay compensation to the other side. The compensation shall be the same as the wages that the employees in the work agreement are entitled to receive from the point of termination until the agreement's expiry.

Based on the foregoing provision, it may be concluded that under the Manpower Law, Employees under a PKWT shall receive compensation should the Employer terminate the agreement early. The Employees are entitled to receive the wages that they would have received from the point of termination until the agreement's expiration. Considering that there are no specific stipulations should the agreement expire on the date set forth, the Employees should not receive any compensation (unless specified in the Work Agreement, Company Regulations, and/or the Collective Work Agreement). However, the above stipulation has been updated with Job Creation Law and GR 35 of 2021. Job Creation Law provides Article 61A to the Manpower Law, regulating that should the work agreement end due to the work agreement expires or the certain work determined has been completed, the Employer shall be obliged to provide compensation for the employees. This provision is further regulated in GR 35 of 2021, whereas the amount of compensation to be given shall be as follows:

  • PKWT for twelve (12) consecutive months, the Employees shall be given 1 (one) month's wages;
  • PKWT for one (1) month or more but less than twelve (12) months, the Employees shall be given compensation with the following calculation: work period/12 x one (1) month's wages;
  • PKWT for more than twelve (12) months, the Employees shall be given compensation with the following calculation: work period/12 x one (1) month's wages.

Concerning early termination, GR 35 of 2021 provides that should either party terminate the employment agreement before the expiry of the period specified in the PKWT, the Employers shall provide compensation which amount shall be calculated based on the PKWT period that the Employees have implemented. GR 35 of 2021 also provides that should PKWT based on the completion of the work ends in a shorter period than the time specified in the PKWT, then the compensation shall be calculated up to the completion time. Upon the entry into force of GR 35 of 2021, compensation for PKWT whose term has not yet ended shall be given following the provisions under GR 35 of 2021; and the amount of compensation shall be calculated based on the work period of the Employees, which calculation starts from the date of promulgation of the Job Creation Law. Another provision in GR 35 of 2021 that is worth noting, is that compensation shall not apply to foreign workers. Based on the foregoing explanation, it may be concluded that the Government of Indonesia (with the issuance of GR 35 of 2021 and Job Creation Law) has obliged Employers to provide Employees with PKWT compensation after the PKWT has ended, with the calculation and criteria as explained in this article. Employees and Employer should be aware that the obligation may deem any provision under the Work Agreement, Company Regulations, and/or the Collective Work Agreement stating that Employees under PKWT are not entitled to compensation is null and void.

Government Employee Wages Benefits Programs

Policies for middle classes The State Budget aim to keep maintaining people's purchasing power amid the COVID-19 pandemic. Policy of the Ministry of Finance:

  • PPh 21 (income tax which is deducted deduction (Potongan / Subsidi pajak) from the sum of base salary (Gaji Pokok) and allowance (Tunjangan)) is borne by the Government for manufacturing industry workers with an income of up to 200 million per year;
  • The budget for the Pre-work Card (Kartu Prakerja) was raised from Rp10 trillion to Rp20 trillion for 5.6 million workers who were laid off or laid off with unpaid leave, informal workers, and micro and small businesses affected by COVID-19. The beneficiaries receive training costs of Rp1 million, post-training incentives of Rp600 thousand / month for 4 months, and employment survey incentives of Rp150 thousand for 3 surveys.

Policies for low-income classes The State Budget assists people whose income is reduced or lost and ensures the availability of necessities. Policy of the Ministry of Finance Policy:

  • The number of Beneficiary Families (Keluarga Penerima Manfaat/KPM) of the Family of Hope Program (Program Keluarga Harapan/ PKH) is increased from 9.2 million to 10 million families.
  • The previous distribution of PKH per 3 months, became per month from April to December 2020. From April to June, KPM receives PKH twice.
  • The number of beneficiaries of the nine-basic-necessity cards (Kartu Sembako/Sembako Card) is increased from 15.2 million to 20 million people.
  • The nominal value of the Sembako cards rise from Rp150,000 to Rp200,000 per KPM, given for nine months to December 2020.
  • Exemption of 3 months postpaid and prepaid electricity costs (April-June 2020) for 24 million 450 VA electricity customers and 50% discount for 7 million 900 VA customers.
  • The budget for the Pre-work Card is raised from IDR 10 trillion to IDR 20 trillion for 5.6 million for workers who are laid off or laid off with unpaid leave, informal workers, and micro and small businesses affected by COVID-19. The beneficiaries receive training costs of Rp1 million, post-training incentives of Rp600 thousand / month for 4 months, and employment survey incentives of Rp150 thousand for 3 surveys.
  • Logistics support for groceries and basic needs worth Rp25 trillion.
  • Additional housing incentives for the construction of low-income community housing up to 175,000 units.

Wage Protection for Workers related to the COVID-19 Pandemic

  • For workers who are categorized as People under the Monitoring related to COVID-19 based on the doctor's statement such that they cannot enter work for a maximum of 14 (fourteen) days or according to Ministry of Health standards, then the wages will be paid in full.
  • For workers who are categorized as COVID-19 suspected cases and are quarantined/isolated according to the doctor's statement, the wages will be paid in full during the quarantine/isolation period.
  • For workers/laborers who do not come to work due to illness COVID-19 and proven by a doctor's statement, the wages will be paid in accordance with statutory regulations.
  • For companies that restrict business activities due to government policies in their respective regions for the prevention and handling of COVID-19, thus causing some or all of their workers not to come to work, taking into account the continuity of the business thus changes in the amount and method of payment of wages of workers are to be carried out in accordance with the agreement between employers and workers.

Compensation for Employees Under PKWT with the Issuance of Job Creation Law and GR 35 of 2021 The Government of Indonesia has issued Government Regulation number 35 of 2021 concerning Fixed-Term Employment Agreement, Outsourcing, Work Period and Rest Period, and Termination of Employment ("GR 35 of 2021"). GR 35 of 2021 is one of the implementing regulations of Law Number 11 of 2020 concerning Job Creation ("Job Creation Law"). Both GR 35 of 2021 and Job Creation Law provide significant changes to Law number 13 of 2003 concerning Manpower ("Manpower Law"), namely concerning compensation on the Termination of Fixed-Term Employment Agreement ("PKWT").

Government Loan and Support Programs

Policies for UMKM (micro, small and medium enterprises) The State Budget protects people whose income is reduced or lost due to the COVID-19 pandemic, including the Micro, Small, and Medium Enterprises sector. Policies of Government with Bank Indonesia and OJK (Financial Services Authority):

  • Postponement of principal and interest payments for all KUR schemes that are affected by COVID-19 for 6 months.
  • Provision of relief and / or postponement of credit or leasing payments of up to Rp10 billion, including for MSMEs and informal workers, up to 1 year.
  • Loan restructuring through improving the quality of loans / financing, implemented by the Bank without credit ceiling limits.
  • Postponement of principal and interest installments for 6 months through credit restructuring for debtors of the Ultra Micro Financing (UMi) program affected by COVID-19.
  • Relaxation of administrative requirements and improvement of speed in giving UMi credit.
  • Ease and expansion of UMi lending.
  • The budget for the Pre-work Card (Kartu Prakerja) was raised from Rp10 trillion to Rp20 trillion for 5.6 million workers who were laid off or laid off with unpaid leave, informal workers, and micro and small businesses affected by COVID-19. The beneficiaries receive training costs of Rp1 million, post-training incentives of Rp600 thousand / month for 4 months, and employment survey incentives of Rp150 thousand for 3 surveys.

Tax Incentives Regulation No.44 / PMK.03 Ministry of Finances (“MoF”) has issued Regulation No.44/ PMK.03/2020 (PMK44/2020) dated April 27, 2020 which revokes Regulation No.23/ PMK.03/2020 (PMK23/2020) concerning the same subject. PMK23/2020 was providing tax incentives and tax reliefs mostly to companies and employees of the manufacturing sector. PMK44/2020 provides the same tax incentives/reliefs than PMK23/2020 for period of April to September 2020 (6 months) but makes those incentives available for large number of sectors (food industry, mining and coal, manufacturing, construction, trade, accommodation provider, logistics, information & communications, professional services, entertainment, etc.). Taxpayers with Business Classification Code/KLU (as per FY2018 CITR submitted) listed in the appendixes of PMK44/2020 are eligible to those incentives. PMK44/2020 lists 1,062 KLU for employee income tax reliefs, 431 KLU for import income tax and VAT reliefs, and 846 KLU for CIT instalment incentives, making those measures available to a large majority of sectors. The reliefs are also provided to taxpayers in bonded zone (Kawasan Berikat) in addition to those under the Import Facility for Export Oriented Business (KITE). Incentives obtained under PMK 23/2020 are still applicable therefore it is not necessarily for taxpayers to re-apply for the incentives under PMK 44/2020 except for final income tax exemption for MSME. Nevertheless, realisation reports are to be conducted under PMK 44/2020.

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The information contained herein on Covid-19 government measures within the G8, consists solely of information that can be found on the websites of one or more Praxity Participant firms, and has not been written, modified or verified by Praxity, it’s staff, officers or directors.