Harmonization of Tax Regulations Draft Law Officially Ratified

s Denny Vissaro
s Awwaliatul Mukarromah
By Denny Vissaro, Awwaliatul Mukarromah
Denny Vissaro
Awwaliatul Mukarromah
The Harmonization of Tax Regulations (Harmonisasi Peraturan Perpajakan/HPP) Draft Law (Rancangan Undang-Undang/RUU) has been officially ratified by the House of Representatives (Dewan Perwakilan Rakyat/DPR) into law. Consisting of 228 pages, the HPP Draft Law covers 9 chapters and 19 articles. The draft law revises 6 tax laws, namely the General Provisions and Tax Procedures (KUP) Law, the Income Tax Law, the Value Added Tax Law (VAT) (Pajak Pertambahan Nilai/PPN) and Sales Tax on Luxury Goods (STLGs) (Pajak Penjualan atas Barang Mewah/PPnBM), the Excise Law, the State Financial Policy and Financial System Stability to Control Corona Virus Disease 2019 (Covid-19) Pandemic and/or in Response to Dangerous Threats to the National Economy and/or the Stability of the Financial System, and the Job Creation Law. Below is the detailed description.
  1. General Provisions and Tax Procedures Law
Article 2 of the HPP Law contains changes to several provisions under Law No. 6 of 1983 concerning General Provisions and Tax Procedures as amended by Law No. 11 of 2020 concerning Job Creation (Ketentuan Umum dan Tata Cara Perpajakan/KUP Law). Through the HPP Law, the government revises and adds a number of provisions in the KUP Law.
 
The amended provisions are found in a number of articles, including Article 2, Article 8, Article 13, Article 14, Article 25, Article 27, Article 32, Article 34, Article 40, Article 43A, Article 44, and Article 44A. Moreover, the government adds a number of new articles, including Article 20A, Article 27C, Article 32A, Article 44C, Article 44D, and Article 44E. Important and significant points of changes of the KUP Law in the HPP Law are as follows:
 
First, the use of Single Identity Number (Nomor Induk Kependudukan/NIK) as the Taxpayer Identification Number (TIN) (Nomor Pokok Wajib Pajak/NPWP) of Indonesian individual residents. This provision is stated in Article 2 paragraph (1a) of the KUP Law as amended by HPP Law. Article 2 paragraph (1a) constitutes a new paragraph that did not exist in the former provisions. With respect to the use of NIK as individual TINs, the government has also added Article 2 paragraph (10) which stipulates the integration of the population database with the tax administration system.
 
Second, changes in administrative penalties on taxpayers related to Article 13 paragraph (3) of the KUP Law. In further detail, the penalties are imposed on three things: (i) not filing tax returns (Surat Pemberitahuan/SPT) despite having received a warning ketter (Article 13 paragraph (1) subparagraph b); (ii) VAT or STLGs that should not be carried forward or should not be 0% (Article 13 paragraph (1) subparagraph c; (iii) not maintaining bookkeeping or not fulfilling obligations during audits (Article 13 paragraph (1) subparagraph d). Changes in the amount of penalties related to Article 13 paragraph (3) are indicated in Table 1.
 
Table 1 Changes in the Amount of Penalties in Article 13 paragraph (3) of the KUP Law under the HPP Law
Source: General Provisions and Tax Procedures Law and HPP Law
 
Third, the additional provisions on intercountry cooperation in tax collection. These additional provisions are outlined in Article 20A. The new article authorizes the Minister of Finance to cooperate in the implementation of assistance in tax collection with partner countries or jurisdictions. Assistance in tax collection is implemented by the Director General of Taxes. In this case, the Director General of Taxes may provide assistance in tax collection and request assistance in tax collection from partner countries or jurisdictions.
 
Fourth, changes in the amount of penalties following legal remedies but the objection or court decision confirms the DGT’s assessments under Article 25 and Article 27 of the KUP Law. Changes in the amount of penalties pertain to to objections and appeals submitted by taxpayers that are rejected or partially granted as well as judicial review decisions resulting in increased tax payable. Details of the changes in the amount of penalties are indicated in Table 2.
 
Table 2 Changes in the Amount of Penalties in Article 25 and 27 of the KUP Law under the HPP Law
Source: General Provisions and Tax Procedures Law and HPP Law
 
Fifth, additional provisions related to Mutual Agreement Procedure (MAP). These provisions are outlined under Article 27C. The new article stipulates the parties that may apply for MAP. This article also stipulates that MAP may be applied for in conjuction with an objection or appeal.
 
Sixth, provisions related to parties that may serve as taxpayers’ power of attorneys. The HPP Law amends the provisions under Article 32 paragraph (3a) which currently requires power of attorneys appointed by taxpayers to have certain competencies in taxation aspects. Th certain competency requirements, however, do not apply if the taxpayers’ power of attorney is their husband, wife, or family related by blood or marriage up to the second degree of lineage.
 
Seventh, the appointment of other parties as tax withholding agents. The government also adds Article 32A which authorizes the Minister of Finance to appoint other parties to withhold, collect, remit, and/or file taxes as per statutory provisions. The other parties are those that are directly involved or facilitate transactions between the transacting parties.
 
Eighth, changes related to the provisions on the termination of criminal investigations in the taxation sector for the sake of state recovery in Article 44B paragraph (2). In further detail, changes in the amount of the penalties are indicated in Table 3.
 
Table 3 Changes in Penalties in Article 44B of the KUP Law under the HPP Law
Source: General Provisions and Tax Procedures Law and HPP Law
  1. Income Tax Law
Article 3 of the Harmonization of Tax Regulations (Harmonisasi Peraturan Perpajakan/HPP) Law contains amendments to several provisions under Law No. 7 of 1983 concerning Income Tax as amended by Law No. 11 of 2020 concerning Job Creation (Income Tax Law). Amended articles of the Income Tax Law in the HPP Law include, among others, Article 4 concerning taxable objects, Article 6 concerning deductible expenses of gross income, Article 7 concerning the stipulation of personal allowance (Penghasilan Tidak Kena Pajak/PTKP), Article 9 concerning non-deductible expenses of gross income.
 
Article 11 concerning provisions on depreciation, Article 11A concerning provisions on amortization, Article 17 concerning income tax rates, Article 18 concerning affiliations, Article 32A concerning international agreements have been amended and Article 32C has been added. In further detail, Article 3 of the HPP Law also revises provisions under Article 4 paragraph (1), paragraph (1a), paragraph (2), paragraph (3), and deletes paragraph (1d) of the Income Tax Law. Under Article 4 paragraph (1) subparagraph e of the Income Tax Law, refunds of tax payments that have been charged as expenses and additional payments of tax refunds constitute income objects.
 
With respect to Article 4 paragraph (1a) of the Income Tax Law, the provision that foreign citizens (Warga Negara Asing/WNA) who have become resident taxpayers (Wajib Pajak Dalam Negeri) are subject to income tax only on income received or accrued from Indonesia has been revised. The amended provisions include the requirement of foreign citizens having certain skills as stipulated by statutory provisions.
 
Article 3 of the HPP Law also revises Article 4 paragraph (2) of the Income Tax Law concerning interests or discounts on short-term securities traded on the money market and business income received or accrued by taxpayers with a certain gross turnover including certain other income. Both now constitute taxable objects of the final tax.
 
In addition, Article 3 of the HPP Law revises the provisions concerning benefits in kind under Article 4 paragraph (3), Article 6 paragraph (1) subparagraph n, and deletes Article 9 paragraph (1) subparagraph e of the Income Tax Law. The prominent point of the amendments is that benefits in kind provided to employees may be charged as an expense by the employer and constitute income for employees. Certain benefits in kinds do not constitute income for recipients, namely the provision of food/beverages for all employees, benefits in kind in certain regions, benefits in kind due to work requirements, benefits in kind sourced from the State Budget (Anggaran Penerimaan dan Belanja Negara/APBN)/Local Budget (Anggaran Penerimaan dan Belanja Daerah/APBD), or benefits in kinds of certain types and thresholds.
 
Next, Article 7 paragraph (1) of the Income Tax Law concerning the amount of PTKP has also been revised. PTKP stipulated under Article 3 of the HPP Law amounts to a minimum of IDR54,000,000 for individual taxpayers and an additional IDR4,500,000 is given for married taxpayers and another additional IDR4,500,000 for each dependent of a maximum of 3 people. With respect to PTKP, there is also an additional amount of IDR54,000,000 for a wife whose income is combined with that of her husband In addition, under Article 3 of the HPP Law, an additional paragraph is inserted in Article 7, namely paragraph (2a). The paragraph stipulates that individual entrepreneurs calculating income tax with a final rate of 0.5% with an annual gross turnover of up to IDR500 million are not subject to income tax.
 
Further, Article 3 of the HPP Law adds an additional paragraph to Article 11 of the Income Tax Law, namely paragraph (6a). The paragraph stipulates that the depreciation for permanent buildings with a useful life of more than 20 years shall comply with the useful life stipulated under Article 11 paragraph (6) or the actual useful life based on the taxpayer’s bookkeeping. A similar paragraph is also added to Article 11A of the Income Tax Law, namely paragraph (2a). The paragraph stipulates that the amortization of intangible assets with a useful life of more than 20 years shall comply with the useful life stipulated under Article 11A paragraph (2) or the actual useful life based on the taxpayer’s bookkeeping.
 
Article 3 of the HPP Law also revises Article 17 paragraph (1) subparagraph a of the Income Tax Law, namely the increase in personal income tax rates and brackets and changes in the income range in the first bracket. The personal income tax brackets stipulated under Article 3 of the HPP Law are indicated in Table 4.
 
Table 4 Taxable Income Brackets and Respective Tax Rates
Source: HPP Law
 
Further, the corporate income tax rate under Article 17 paragraph (1) subparagraph b of the Income Tax Law changes to 22% starting in 2022. Article 17 paragraph (2b) of the Income Tax Law is also subject to changes in that resident taxpayers in the form of public companies, having a minimum of 40% paid-up shares traded on the Indonesian stock exchange and meeting certain requirements are eligible for a 3% lower rate than the statutory corporate income tax rate.
 
Moreover, Article 3 of the HPP Law amends Article 18 paragraph (1), deletes Article 18 paragraph (3e), and revises and adds an elucidation of Article 18. An important point of change in Article 18 pertains to the determination of the amount of borrowing costs by the Minister of Finance, for which the method is currently not limited to the determination of debt-to-equity ratio.
 
On another note, Article 32A of the Income Tax Law is also revised as outlined under Article 3 of the HPP Law. The article now stipulates the government’s authority to establish and/or implement treaties and/or agreements in the field of taxation with the governments of partner countries or jurisdictions, both bilaterally and multilaterally in the context of avoiding double taxation and preventing tax evasion, preventing base erosion and profit shifting, exchange of tax information, assistance in tax collection, and other tax cooperation.
 
The final income-tax-related amendment in Article 3 of the HPP Law is the additional Article 32C of the Income Tax Law concerning the delegation of authority. This article regulates changes to the Income Tax Law related to the HPP Law and other amendment provisions will be further stipulated with or based on government regulations.
  1. VAT Law
Article 4 of the HPP Law contains changes to several provisions under Law No. 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods as amended by Law No. 11 of 2020 concerning Job Creation (VAT Law). Through the HPP Law, the government revises, deletes, and adds a number of provisions in the VAT Law.
 
Amended articles of the VAT Law in the Job Creation Law include Article 4A, Article 7, Article 8A, Article 9, and Article 16B. In addition, additional provisions have been added to Article 8A paragraph (3), Article 9A and Article 16G. Additionally, the HPP Law also deletes several provisions in the VAT Law including Article 8A paragraph (2), Article 9 paragraph (4d), paragraph (7), paragraph (7a), paragraph (7b), paragraph (8) subparagraph c, and paragraph (13). Details of the changes are as follows.
 
Important changes in Article 4A paragraphs (2) and (3) pertain to the elimination of groups of goods and services not subject to VAT. In this regard, the HPP Law expands the taxable objects of VAT. Two types of goods are no longer included as objects that are not subject to VAT, namely goods from mining or drilling which are extracted directly from the source, excluding coal mining products and basic necessities that are highly essential for the people.
 
In addition, several types of services may now be subject to VAT. These services include medical health services, social services, postage services with stamps, financial services, insurance services, educational services, non-advertising broadcasting services, public land and water transportation services, as well as domestic air transportation services constituting an integral part of overseas air transportation services, labour services, coin-operated public telephone services, and money transfer services using postal money orders.
 
Next, Article 7 paragraph (1) of the VAT Law as amended in Article 4 of the HPP Law revises the VAT rate in stages. The VAT rate increases from 10% to 11% effective as of 1 April 2022 and subsequently increases to 12% taking effect no later than 1 January 2025.
 
Article 8A paragraph (2) of the VAT Law is deleted in Article 4 of the HPP Law and Article 8A paragraph (3) of the VAT Law is added. Article 8A paragraph (3) of the VAT Law in Article 4 of the HPP Law stipulates that input VAT on acquisitions of taxable goods (Barang Kena Pajak/BKP) and/or taxable services (Jasa Kena Pajak/JKP), imports of BKP, as well as utilization of intangible BKP and/or utilization of JKP from outside customs area within the customs area whose tax bases (Dasar Pengenaan Pajak/DPP) using other values, is creditable.
 
Additionally, Article 4 of the HPP Law substantially revises the formulation of Article 9 of the VAT Law. Article 9 paragraphs (5) and (6) restipulate the amount of creditable input VAT. Changes may also be found in Article 9 paragraph (8) subparagraphs f and g only in terms of the sentence phrases. On another note, the HPP Law deletes several provisions under the VAT Law, including Article 9 paragraph (4d), paragraph (7), paragraph (7a), paragraph (7b), paragraph (8) subparagraph c, and paragraph (13). Changes are also found in the elucidation of Article 9 paragraph (4). Changes in the elucidation of Article 9 paragraph (4) pertain to the sample calculation of input VAT overpayments that are carried forward to the next taxable period.
 
Next, Article 9A of the VAT Law has also been added to Article 4 of the HPP Law. The article stipulates that Taxable Persons for VAT Purposes (Pengusaha Kena Pajak/PKP) may collect and remit VAT payable on supplies of BKP and/or JKP of a certain amount. This applies if the PKP’s business turnover in one accounting year does not exceed a certain amount, conducts certain businesses, and/or supplies certain BKP and/or certain JKP. Input VAT on acquisitions of BKP and/or JKP, imports of BKP, as well as utilization of intangible BKP and/or utilization of JKP from outside the customs area within the customs area related to supplies by PKP cannot be credited.
 
Article 4 of the HPP Law also adds Article 16B paragraph (1a). Article 16B paragraph (1a) of the VAT Law, in essence, stipulates that tax payable shall not be collected in whole or in part or exempt from tax either temporarily or permanently, limited to certain purposes.
 
Furthermore, Article 16B paragraph (2) of the VAT Law is also amended in Article 4 of the HPP Law which stipulates that input VAT paid on acquisitions of BKP and/or JKP, imports of BKP, utilization of intangible BKP from outside the customs area within the customs area and/or the utilization of JKP from outside the customs area within the customs area on whose supplies VAT is not collected, is creditable.
 
The final VAT-related changes may be found in Article 16B paragraph (3) of the VAT Law under Article 4 of the HPP Law. The article states that acquisitions of BKP and/or JKP, imports of BKP, utilization of intangible BKP from outside the customs area within the customs area, and/or utilization of JKP from outside the customs area within the customs area whose supplies are exempt from VAT cannot be credited.
  1. Taxpayer Voluntary Disclosure Program
Provisions related to taxpayer voluntary disclosure programs are stipulated under Article 5 to Article 12 of the HPP Law. The voluntary disclosure program, scheduled to run from 1 January to 30 June 2022, is divided into two schemes. The first scheme applies to taxpayers who have participated in the tax amnesty. As per Article 5 paragraph (1) of the HPP Law, taxpayers may declare net assets that have not been or insufficiently declared in a statement letter insofar as the Director General of Taxes has not found data and/or information regarding the assets in question.
 
Net assets refer to the difference between the value of assets minus the value of debt. Next, the statement letter refers to a letter used by the taxpayer to disclose assets, debts, net assets value, as well as the calculation and payment of the redemption money. The assets referred to in Article 5 paragraph (1), on the other hand, refer to assets accrued by taxpayers from 1 January 1985 to 31 December 2015.
 
Net assets are considered additional income and subject to final income tax. The final income tax is calculated by multiplying the rate by the tax base (Dasar Pengenaan Pajak/DPP). DPP is determined based on the amount of net assets that have not been or insufficiently declared in the statement letter.
 
There are five groups of rates with respect to taxpayer voluntary disclosure. First, a 6% rate on net assets located within Indonesia, provided that they are invested in businesses in the natural resource (Sumber Daya Alam/SDA) processing sector or renewable energy sector within the territory of the Unitary State of the Republic of Indonesia (Negara Kesatuan Republik Indonesia/NKRI) and/or state securities (Surat Berharga Negara/SBN).
 
Second, an 8% rate on net assets located within NKRI and not invested in businesses in the SDA processing sector or renewable energy sector within the territory of NKRI and/or SBN. Third, a 6% rate on net assets outside NKRI, provided that they are transferred to the territory of NKRI and invested. The investment platform remains the same, namely businesses in the SDA processing sector or renewable energy sector within the territory of NKRI and/or SBN.
 
Fourth, an 8% rate on net assets outside NKRI provided that they are transferred into NKRI and not invested in businesses in the SDA processing sector or renewable energy sector within NKRI and/or SBN. Fifth, an 11% rate on net assets outside NKRI that are not transferred into NKRI. The value of assets used as the reference in calculating the amount of net assets is determined based on the following five things:
  1. nominal value of assets in the form of cash or cash equivalents;
  2. the values determined by the government, namely the sales value of taxable objects (Nilai Jual Objek Pajak/NJOP) for land and/or buildings and the sales value of motor vehicles (Nilai Jual Kendaraan Bermotor/NJKP) for motor vehicles;
  3. the values ​​published by PT Aneka Tambang Tbk for gold and silver;
  4. the values published by the Indonesia Stock Exchange (PT Bursa Efek Indonesia) for shares and warrants traded on the Indonesia Stock Exchange; and/or
  5. the values published by Indonesia Bond Pricing Agency (PT Penilai Harga Efek Indonesia) for state securities and debt securities and/or sharia bonds (sukuk) issued by companies.
In the event that no value can be used as a reference, the values of assets are determined based on the values based on assessments results by a public appraiser office.
 
Taxpayers disclose their net assets through an asset declaration letter and submit it to the Director General of Taxes from 1 January 2022 to 30 June 2022. Taxpayers must declare transfers of net assets into Indonesian territory no later than 30 September 2022. Taxpayers investing their net assets in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN, on the other hand, must perform the declaration no later than 30 September 2023. Net assets must be invested for a minimum of five years from the time of investment.
 
In the event that net assets are not invested in accordance with the stipulated period, the portion of net assets that does not fulfill these provisions shall be treated as final income in the 2022 tax year and is subject to additional final income tax.
 
Additionally, the second scheme applies to individual taxpayers that have not filed net assets in the Annual Income Tax Return. Individual taxpayers may declare net assets accrued from 1 January 2016 to 31 December 2020, still held as of 31 December 2020, and not yet filed in the Annual Personal Income Tax Return for the tax year to the Director General of Taxes.
 
Such net assets are considered as additional income received or accrued by individual taxpayers in the 2020 tax year. The additional income is subject to final income tax. The final income tax is calculated by multiplying the rate by the DPP. The rates are divided into five groups.
 
First, a 12% rate on net assets located within the territory of Indonesia provided that they are invested in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN. Second, 14% of net assets located within the territory of Indonesia and not invested in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN.
 
Third, 12% of net assets located outside the territory of Indonesia, provided that they are transferred to the territory of Indonesia and invested in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN. Fourth, 14% of net assets located outside the territory of Indonesia provided that they are transferred to the territory of Indonesia and not invested in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN.
 
Fifth, 18% of net assets that are outside the territory of Indonesia and are not transferred to the territory of Indonesia. Individual taxpayers who may declare their net assets must fulfill the following five conditions:
  1. not currently under an audit for the 2016 tax year, 2017 tax year, 2018, tax year, 2019 tax year, and/or 2020 tax year;
  2. not currently under any preliminary investigation for the 2016 tax year, 2017 tax year, 2018, tax year, 2019 tax year, and/or 2020 tax year;
  3. not currently under any criminal investigation in the field of taxation;
  4. not currently under any judicial process for criminal offences in the field of taxation; and/or
  5. not currently serving a criminal sentence for a crime in the field of taxation.
DPP is determined based on the amount of net assets that have not been or insufficiently filed in the personal income tax return for the 2020 tax year. The value of the assets used as a reference in calculating the amount of net assets is determined based on the nominal value of assets in the form of cash or cash equivalent or the acquisition price for assets other than cash or cash equivalent. Individual taxpayers declare their net assets through asset declaration tax returns and submit them to the Director General of Taxes from 1 January 2022 to 30 June 2022.
 
Taxpayers filing tax returns of asset declaration must fulfill four requirements. These requirements include having a taxpayer identification number (Nomor Pokok Wajib Pajak/NPWP), paying final income tax, and filing income tax returns for the 2020 tax year. In addition, other conditions to be fulfilled include revocation of the application for tax refunds, reduction or abolition of administrative penalties, reduction or cancellation of incorrect notices of tax assessment; reduction or cancellation of incorrect notices of tax collection, objections, corrections, appeals, lawsuits, and/or judicial reviews.
 
Individual taxpayers must declare transfers of net assets to the territory of Indonesia no later than 30 September 2022. On the other hand, individual taxpayers declaring investments of net assets in businesses in the SDA processing sector or renewable energy sector within the territory of Indonesia and/or SBN, must invest their net assets no later than 30 September 2023.
 
Net assets must be invested for a minimum of five years from the time of investment. In the event that a taxpayer does not fulfill the deadline for the transfers or investment of net assets, the portion of net assets that does not fulfill these provisions shall be treated as final income in 2022 and subject to additional final income tax.
  1. Carbon Tax
Article 13 of the HPP Law stipulates the imposition of a carbon tax. The carbon tax is imposed on carbon emissions rendering negative impacts on the environment. The imposition of carbon tax takes into account the carbon tax roadmap and/or the carbon market roadmap. The carbon tax roadmap contains strategies for reducing carbon emissions, priority sector targets, alignment with the establishment of new and renewable energy; and/or alignment with various other policies. The carbon roadmap policy is set by the government subject to the approval of the House of Representatives (Dewan Perwakilan Rakyat/DPR).
 
Carbon tax subjects include individuals or entities that purchase goods containing carbon and/or carry out activities producing carbon emissions. The carbon tax is payable on the purchase of goods containing carbon or activities producing a certain amount of carbon emissions within a certain period. Further, when the carbon tax becomes payable is determined based on the following three things alternatively. First, upon the purchase of carbon-containing goods. Second, at the end of the calendar year of activities that produce a certain amount of carbon emissions. Third, other times as stipulated by or based on government regulations.
 
Moreover, the carbon tax rate is set to be higher than or equal to the carbon price in the carbon market per kilogram of carbon dioxide equivalent (CO2e) or its equivalent unit. In the event that the carbon price in the carbon market is lower than IDR30 per kilogram of carbon dioxide equivalent (CO2e) or equivalent unit, the carbon tax rate is set at a minimum of IDR30 per kilogram of carbon dioxide equivalent (CO2e) or equivalent unit.
 
Provisions on the determination of the carbon tax rate, changes in the carbon tax rate, and/or the tax base (Dasar Pengenaan Pajak/DPP) shall be stipulated by minister of finance regulations after consultation with the DPR. Provisions on the addition of taxable objects subject to carbon tax shall be stipulated by or based on government regulations after being submitted to the DPR for discussions.
 
Revenues from carbon tax may subsequently be allocated for climate change control. Taxpayers participating in the trade of carbon emissions, offsetting carbon emissions, and/or other mechanisms as per regulations in the environmental sector may be eligible for a reduction in the carbon tax and/or other treatment for fulfilling their carbon tax obligations. The exercise of tax rights and fulfillment of tax obligations related to carbon tax shall be carried out as per statutory provisions in general provisions and tax procedures.
  1. Excise
Article 14 of the HPP Law contains changes to several provisions under Law No. 11 of 1995 concerning Excise as amended by Law No. 39 of 2007 concerning Amendments to Law No. 11 of 1995 concerning Excise (Excise Law). Amended articles of the Excise Law under the HPP Law include Article 4 concerning excise objects and Article 64 concerning the termination of investigations. Article 40B concerning the authority to verify has also been added.
 
An important change is found in Article 4 paragraph (1) subparagraph c of the Excise Law under Article 14 of the HPP Law which stipulates that electronic cigarettes are included in tobacco products constituting goods subject to excise (Barang Kena Cukai/BKC). On another note, Article 4 paragraph (2) of the Excise Law states that the addition or reduction of BKC shall be stipulated through agovernment regulations after being submitted to the DPR to be discussed and agreed upon in the preparation of the draft state budget (Rancangan Anggaran Pendapatan dan Belanja Negara/RAPBN).
 
Moreover, Article 14 of the HPP Law adds a new article to the Excise Law, namely Article 40B concerning the authority to verify by customs and excise officials on alleged violations in the excise sector. In the event that verification results of an alleged violation indicate an administrative violation in the excise sector, it shall be resolved administratively as per the provisions in the excise sector.
 
Verification results may not be investigated in the event of alleged violations in licensing, release of BKC, unpackaged BKC, BKC originating from criminal offences, and the purchase and sales of banderoles and the taxpayer must pay an administrative penalty in the form of a fine amounting to three times the excise value that should otherwise be paid. BKC related to alleged violations that are not investigated may be deemed as state property. With Article 40B, the principle of imposing criminal penalties as the last resort (ultimum remedium) applies in the event of criminal violations related to licensing, release of BKC, unpackaged BKC, BKC originating from criminal offences, and the purchase and sales of banderoles.
 
Further, Article 14 of the HPP Law also revises the provisions under Article 64 of the Excise Law. The important points of change are found in Article 64 paragraph (1) and paragraph (2). Article 64 paragraph (1) contains additional points regarding legal certainty for the period of termination of criminal investigations in the field of excise, which is no later than six months from the date of the request letter. In addition, Article 64 paragraph (2) provides for administrative penalties in the form of a fine of four times the excise value that should otherwise be paid during the investigation.