The Ministry of Finance has re-extended the validity period of income tax and Value Added Tax (VAT) facilities regulated under Government Regulation No. 29/2020 concerning Income Tax Facilities to Address Corona Virus Disease 2019 (Gov. Reg. 29/2020).

The extension of these tax incentives is stipulated by Minister of Finance Regulation No. 239/PMK.03/2020 concerning the Granting of Tax Facilities for Goods and Services in the Context of Addressing the Corona Virus Disease 2019 Pandemic and the Extension of the Implementation of Income Tax Facilities Based on Gov. Reg. 29/2020 (MoF Reg. 239/2020).

PMK 239/2020 came into effect on 1 January 2021. Upon the enactment of MoF Reg. 239/2020, the Minister of Finance Regulation No. 143/PMK.03/2020 concerning the Granting of Tax Facilities for Goods and Services Required to Address the Corona Virus Disease Pandemic 2019 and the Extension of the Implementation of Income Tax Facilities Based on Gov. Reg. 29/2020 (MoF Reg. 143/2020), has been revoked and declared invalid.

These incentives have been extended to support the availability of equipment for the implementation of the Covid-19 vaccination. On another note, the incentives have also been extended inasmuch as the stipulated emergency status due to the national nonnatural Covid-19 pandemic disaster has not ended. Broadly speaking, the incentives extended under MoF Reg. 239/2020 can be segmented into three parts as follows:

1.	Extension of Income Tax Incentives under Gov. Reg. 29/2020

	Having formerly been extended until 31 December 2020, the Ministry of Finance has again extended the period of the granting of income tax facilities under Gov. Reg. 29/2020 until the end of June 2021. The validity period of four income tax facilities in MoF Reg. 239/2020 has been extended. First, additional net income reduction for resident taxpayers that produce medical devices and/or household health supplies. As per the provisions under Gov. Reg. 29/2020, resident taxpayers that produce medical devices, antiseptic hand sanitizers, and disinfectants are entitled to an additional net income reduction of 30% of the production costs incurred. The medical devices include surgical masks and N95 respirators, personal protective clothing, surgical gloves, examination gloves, ventilators, and diagnostic test reagents for Covid-19. Second, donations that can be deducted from gross income. Taxpayers that make donations or aids in the context of addressing the Covid-19 outbreak may apply the donations or aids as a deduction from gross income. Donations that may be included in the calculation are donations in the form of money, goods, services, or the use of assets without compensation, which are donated to the National Disaster Management Agency (Badan Nasional Penanggulangan Bencana/BNPB), the Regional Disaster Management Agency (Badan Penanggulangan Bencana Daerah/BPBD), Ministry of Health, Ministry of Social Affairs, or other institutions that have obtained a permit to collect donations. Third, the imposition of a final income tax rate of 0% for additional income received by human resources in the health sector. As per the provisions under Gov. Reg. 29/2020, health workers and health support personnel who are tasked with providing health services to address Covid-19 and receiving honoraria or other compensation from the government, are entitled to the full additional income as it is subject to 0% income tax. Said health workers include doctors and nurses. Health support personnel, on the other hand, include health worker assistants, cleaning staff, ambulance drivers, administrative staff, undertakers, and university students in the health sector who are seconded to health service facilities. Fourth, the imposition of a final income tax rate of 0% on income in the form of compensation or replacement for the use of assets. Taxpayers that lease land, buildings, or other assets to the government in the context of handling Covid-19 shall obtain rental income from the government. These taxpayers are entitled to the full income as it is subject to a 0% income tax.

2.	Extension of VAT Incentives on Goods and Services Required to Address Covid-19

	In addition to the income tax incentives under Gov. Reg. 29/2020, the Ministry of Finance has also extended the granting of VAT incentives on the import or acquisition of taxable goods (Barang Kena Pajak/BKP), taxable services (Jasa Kena Pajak/JKP), and/or JKP utilization from outside the customs area inside the customs area to address the Covid-19 pandemic. The VAT incentives are given to certain parties, i.e. government bodies/agencies, hospitals, or other parties. Other parties refer to parties other than government bodies/agencies or hospitals appointed by government bodies/agencies or hospitals to assist in addressing the Covid-19 pandemic. VAT incentives are also granted to the pharmaceutical industry for the production of vaccines and/or medicine on the acquisition of raw materials of vaccines and/or medicine to address Covid-19. Moreover, the VAT incentives may also be utilized by taxpayers that procure vaccines and/or medicine to address Covid-19 from the pharmaceutical industry that produces vaccines and/or medicine. BKP entitled to VAT incentives include medicine, vaccines and vaccination equipment, laboratory equipment, detection equipment, personal protective equipment, equipment for patient care, and/or other supporting equipment declared for the purpose of addressing the Covid-19 pandemic by certain parties. The vaccination equipment includes at least syringes; alcohol swabs; personal protective equipment (face shields, hazmat suits, gloves, and surgical masks); cold chains; gensets; waste bins for hazardous and toxic waste (safety boxeses); and alcohol-based antiseptic solutions. Next, JKP entitled to these facilities include construction services; consulting, engineering and management services; rental services; and/or other supporting services. Other supporting services are services that are declared for the purpose of addressing the Covid-19 pandemic by certain parties, including the implementation of vaccinations. In further detail, five forms of VAT incentives are granted, including:
	i.	imports of BKP required to address Covid-19 by certain parties shall not be imposed with VAT as per statutory provisions;
	ii.	supplies of BKP and JKP required Covid-19 by Taxable Persons for VAT Purposes (Pengusaha Kena Pajak/PKP) to certain parties, are borne by the government;
	iii.	the use of JKP required to address Covid-19 from outside the customs area inside the customs area by certain parties, including gifts, shall be borne by the government;
	iv.	supplies of raw materials for the production of vaccines and/or medicine to address Covid-19 by PKP to the pharmaceutical industry for the production of vaccines and/or medicine shall be borne by the government; and
	v.	supplies of vaccines and/or medicine to address Covid-19 by the pharmaceutical industry for the production of vaccines and/or medicine shall be borne by the government.

	However, for certain parties that import BKP for JKP utilization activities that are required to address Covid-19 from outside the customs area within the customs area, the imports of BKP are not subject to VAT insofar as these certain parties have a Taxable Service Utilization Certificate (Surat Keterangan Pemanfaatan Jasa Kena Pajak/SKJLN) prior to performing imports. Conversely, the second and third points of VAT Borne by the Government (Pajak Pertambahan Nilai Ditanggung Pemerintah/PPN DTP) incentives for other parties shall be granted if BKP is acquired, JKP is acquired, and/or JKP is utilized from outside the customs area within the customs area. Next, it will be supplied to government bodies/agencies and/or hospitals to address the Covid-19 pandemic without receiving reward or compensation. The second and third points of PPN DTP incentives for other parties shall also be given if the BKP acquisition, JKP acquisition, and/or JKP utilization from outside the customs area within the customs area is not for own use. Next, the fourth point PPN DTP incentive shall be granted after the pharmaceutical industry producing vaccines and/or medicine obtains a recommendation letter from the Ministry of Health. The recommendation letter must at least contain four statements, among others: the identity of the pharmaceutical industry producing vaccines and/or medicine; the identity of the PKP performing the supply; name and quantity of goods; and a statement that the raw materials to be acquired constitute raw materials for the production of vaccines and/or medicine to address Covid-19. As per the provisions under Article 4 of MoF Reg. 239/2020, the implementation and accountability of PPN DTP subsidy spending are carried out as per the minister of finance regulation that stipulates the implementation and accountability mechanisms for DTP taxes. Moreover, when this ministerial regulation comes into force, tax invoices or certain documents equivalent to the tax invoice filed in the Periodic VAT Return for April 2020 to September 2020 tax periods are treated as a report on the realization of PPN DTP. The granting of VAT incentives is valid from the January 2021 Tax Period to the December 2021 Tax Period.

3.	Extension of Income Tax Incentives on Goods and Services Required to Address Covid-19

	Other than VAT incentives, the government has also extended income tax facilities related to goods and services required to address the Covid-19 pandemic. The income tax incentives consist of three types. First, exemptions from Article 22 Imports Income Tax and Article 22 Income Tax withholding on imports and/or purchases of goods required to address the Covid-19 pandemic. Article 22 Import Income Tax and Article 22 Income Tax facilities are granted to certain parties. Article 22 Income Tax incentives are also granted to third parties that sell goods required to address Covid-19 to certain parties. Moreover, the pharmaceutical industry producing vaccines and/or medicine that purchase raw materials to produce vaccines and/or medicine to address Covid-19 are also exempt from Article 22 Income Tax. In further detail, items entitled to these facilities include medicine, vaccines and vaccination equipment, laboratory equipment, detection equipment, personal protective equipment, equipment for patient care, and/or other supporting equipment declared for the purpose of handling the Covid-19 pandemic by certain parties. The vaccination equipment includes at least syringes; alcohol swabs; personal protective equipment (face shields, hazmat suits, gloves, and surgical masks); cold chain; genset; waste bins for hazardous and toxic waste (safety boxes); and alcohol-based antiseptic solutions. Second, exemptions from Article 21 Income Tax withholding. These incentives are given for any form of compensation from certain parties in connection with the services required to address Covid-19 from individual resident taxpayers, other than services on which Article 4 paragraph (2) Income Tax has been withheld. Third, exemptions from Article 23 Income Tax withholding. These incentives are given for compensation from certain parties in connection with technical services, management services, consulting services, and other services required to address the Covid-19 pandemic, in addition to services on which Article 21 Income Tax has been withheld, which are carried out by an entity or permanent establishment (PE). Certain parties referred to in the Article 22 Import Income Tax, Article 22 Income Tax, Article 21 and Article 23 Income Tax incentives include government bodies/agencies, hospitals, or other parties. Other parties refer to parties other than government bodies/agencies or hospitals appointed by government bodies/agencies or hospitals to assist in handling the Covid-19 pandemic. The exemptions from Article 22 Import Income Tax withholding and/or exemptions from Article 22 Tax withholding, exemptions from Article 21 Income Tax withholding, and exemptions from Article 23 Income Tax withholding are valid from the January 2021 tax period to the December 2021 tax period.

Extension of Tax Incentives Related to the Handling of Covid-19