Taxation Policies during COVID-19
by Rafif Rizqullah (email@example.com) and Clara Viriya (firstname.lastname@example.org)
Responding to the national economic condition amidst the COVID-19, the government has issues a new tax policy that is wrapped into Government Regulation in Lieu of Law No. 1 of 2020 regarding State Financial Policy and Financial System Stability for the Management of the Coronavirus or COVID-19 Pandemic and/or in Facing Threats to the National Economy and/or Financial System Stability (March 31, 2020) (“GR 1/2020”) The Government adjusted the tax rates for Income Tax of domestic corporate and permanent establishment in the form of a rates reduction to 22% applicable for Fiscal Year 2020 and Fiscal Year 2021 and 20% applicable for Fiscal Year 2022, and the rate for the Public Company is 19% which is applicable for Fiscal Year 2020 and Fiscal Year 2021 and 17% applicable for Fiscal Year 2022 provided that the total number of shares traded on a stock exchange in Indonesia is at least 40% and meets certain requirements.
The Government also applies taxation in Electronic Trading activities in the form of imposition of Value Added Tax (“VAT”) and Income Tax. The imposition of VAT applies to transactions through the Electronic Trading inside the Customs Area for Intangible Taxable Goods and/or Taxable Services originating from outside the Customs Area, the provisions of which are in accordance with the Law on VAT of Goods and Services and Sales Tax on Luxury Goods. VAT is collected, deposited and reported by foreign traders, foreign service providers, foreign Electronic Trading Providers and/or domestic Electronic Trading Providers, that are appointed by the Minister of Finance.
Meanwhile, for the imposition of Income Tax or electronic transaction tax is imposed on transactions through the Electronic Trading conducted by foreign tax subjects that meet the provisions of significant economic presence. Significant economic presence is in the form of i) the gross circulation of the consolidated business groups up to a certain amount, ii) sales in Indonesia up to a certain amount, and/or iii) active users of digital media in Indonesia up to a certain amount.
Foreign traders, foreign service providers and/or foreign Electronic Trading Providers that meet the significant economic presence requirements as stipulated above can be determined as permanent establishments and imposed with the Income Tax. However, if there is an agreement with the government of another country in the context of avoiding double taxation and preventing tax evasion, the referred foreign traders, foreign service providers and foreign Electronic Trading Providers are imposed with the electronic transaction tax. Electronic transaction tax is levied on transactions for the sale of goods and/or services from outside Indonesia through the Electronic Trading conducted by foreign tax subjects to buyers or users in Indonesia. Income Tax or electronic transaction tax as referred above is paid and reported by foreign traders, foreign service providers and/or foreign Electronic Trading Providers. Collection, deposit and reporting of VAT and/or Income Tax or electronic transaction tax by foreign traders, foreign service providers and/or foreign Electronic Trading Providers can be represented by an entity domiciled in Indonesia. All rates and procedures for calculation and collection of VAT and/or Income Tax or electronic transaction tax above are regulated based on Government Regulation and Minister of Finance Regulation.
All of the above taxation implementations are inseparable from the provisions of Law No. 6 Year 1983 on Tax General Provisions and Procedures as amended several times, the latest by Law No. 16 Year 2009, and administrative sanctions are in the form of reprimands to the termination of access for those who violate the tax provisions above.
In addition, the Government also provides remission to taxpayers by extending the implementation of rights and fulfilling tax obligations in the form of:
For the submission of objections to taxpayers which its due date ends during the COVID-19 pandemic can be extended for a maximum of 6 months;
For returns on overpayment of taxes which its due date ends during the COVID-19 pandemic can be extended for a maximum of 1 month;
For requests for returning tax overpayments, submission of Taxpayer’s objection letters and requests for reduction or elimination of administrative sanctions, reduction or cancellation of incorrect tax assessments and cancellation of the results of audits which its due date of the decree issuance ends during the COVID-19 pandemic then the decree is extended for a maximum of 6 months.
The stipulation of the COVID-19 pandemic period above refers to the stipulation of the Government through the National Disaster Management Agency.
Furthermore, the Government also provides remission to business actors by giving authority to the Minister of Finance to facilitate the remission or amnesty of import duties on imported goods in connection with the management of the COVID-19 pandemic and/or facing threats that endanger the national economy and/or financial system stability. Changes to imported goods which are exempted from import duty and changes to imported goods that can be given exemption or remission of import duties based on Article 25 paragraph (1) jo. Article 26 paragraph (1) of Law No. 10 Year 1995 on Customs as amended by Law No. 17 Year 2006 is further regulated by Regulation of the Minister of Finance.
Moreover, through the Ministry of Finance Regulation Number 23/PMK.03/2020 dated 21st March 2020 regarding incentive for Taxpayer affected by the COVID-19. The Ministry of Finance is providing relaxation for taxpayer in paying fulfilling their Income Tax Article 21 with the criteria provided by the ministry. The ministry of finance also provides relaxation regarding the tax obligations Article 25 Income Tax is given an incentive to reduce installments of Article 25 Income Tax by 30% (thirty percent) of Article 25 Income Tax which is due and is valid until the September 2020 tax period. Furthermore, VAT is given an incentive in the form of a preliminary refund of overpayment of tax as a low-risk PKP for taxpayers who have a business classification as in the attachment or have been designated as a KITE (Kemudahan Impor Tujuan Ekspor) company and submit SPT Period. Rp. 5,000,000,000 (five billion Rupiah). The Tax Period is valid from April 1, 2020 to September 2020 and delivered no later than 31 October 2020.
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