a.

that to provide legal certainty, simplify tax administration, convenience and fairness to taxpayers with a certain gross turnover within a certain period as well as to implement international agreements in the field of taxation while taking into account good governance, it is necessary to provide fiscal policies through adjustments to the regulation in the field of income tax;

b.

that with the promulgation of Law Number 7 of 2021 concerning Harmonisation of Tax Regulations, it is necessary to adjust the comprehensive and consolidative regulation of tax policies;

c.

that based on the considerations referred to in letter a and letter b as well as to implement the provisions under Article 4 paragraph (2) subparagraph e, Article 4 paragraph (3) subparagraph a number 1, Article 17 paragraph (2e) and Article 32C of Law Number 7 of 1983 concerning Income Tax as amended several times, last amended by Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations, it is necessary to enact a Government Regulation concerning Adjustments to the Regulation in the Field of Income Tax;

 

 

 

 

1.

Article 5 paragraph (2) of the 1945 Constitution of the Republic of Indonesia;

2.

Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, last amended by Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations (State Gazette of the Republic of Indonesia of 2021 Number 246, Supplement to the State Gazette of the Republic of Indonesia Number 6736);

 

 

 

 

GOVERNMENT REGULATION CONCERNING ADJUSTMENTS TO THE REGULATION IN THE FIELD OF INCOME TAX.

 

 

 

 

 

Referred to herein this Government Regulation:

1.

Income Tax Law is Law Number 7 of 1983 concerning Income Tax as amended several times, last amended by Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations.

2.

Income Tax is income tax referred to in the Income Tax Law.

3.

Taxpayer is any individual or entity, comprising a taxpayer, a withholding agent and a collecting agent having tax rights and obligations pursuant to statutory provisions in the field of taxation.

4.

Tax Year is a period of 1 (one) calendar year unless a Taxpayer adopts an accounting year that is different from the calendar year.

5.

Tax Return is a letter used by a Taxpayer to file the calculation and/or payment of taxes, taxable objects and/or non-taxable objects and/or assets and liabilities pursuant to statutory provisions in the field of taxation.

6.

Annual Tax Return is a Tax Return for a Tax Year or a fraction of a Tax Year.

7.

Hajj Financial Management Agency is an institution that carries out the financial management of hajj pursuant to statutory provisions on the financial management of hajj.

8.

Hajj Fees are an amount of funds that must be paid by a citizen who will carry out hajj.

9.

Special Hajj Fees are an amount of funds that must be paid by a citizen who will carry out special hajj.

10.

Arm's Length Principle is a principle that applies in sound business practices carried out as in uncontrolled transactions.

11.

Transfer Price is the price in an independent transaction influenced by a special relationship.

12.

Public Company is a public company or a company that conducts a public offering of shares pursuant to statutory provisions in the capital market sector.

13.

Public Company Taxpayer is a resident corporate Taxpayer in the form of a Public Company.

14.

Employee is an individual who works for an employer based on an agreement, contract or work agreement, either written or not written, to carry out a job in a certain position or activities obtaining remunerations paid based on a certain period, completion of work or other provisions determined by the employer, including individuals who work in the government sector.

15.

Minister is the minister who administers governmental affairs in the field of state finances.

 

 

 

 

 

A taxable object is income, which refers to any increase in economic capacity received by or accrued by a Taxpayer, either from Indonesia or from outside Indonesia, which may be utilised for consumption or increasing the Taxpayer’s wealth, in whatever name and form as referred to in Article 4 paragraph (1) of the Income Tax Law.

 

 

 

 

 

(1)

Excluded from the provisions referred to in Article 2, a foreign national who constitutes a resident taxpayer is subject to Income Tax only on income received or accrued from Indonesia under the following conditions:

 

a.

having certain skills pursuant to statutory provisions; and

 

b.

this provision is valid for 4 (four) Tax Years since he/she becomes a resident taxpayer.

(2)

Included in the definition of income received or accrued from Indonesia as referred to in paragraph (1) is income received or accrued by a foreign national in connection with work, services or activities in Indonesia in whatever name and form paid outside Indonesia.

(3)

The provisions referred to in paragraph (1) do not apply to a foreign national taking advantage of the tax treaty between the Government of Indonesia and the government of a tax treaty partner where the foreign national accrues income from outside Indonesia.

 

 

 

 

(1)

Foreign nationals having certain skills referred to in Article 3 paragraph (1) subparagraph a include foreign workers occupying certain positions and foreign researchers.

(2)

Foreign nationalss having certain skills referred to in paragraph (1) employed by an employer must fulfil the following requirements:

 

a.

the employment of foreign workers who may occupy certain positions as stipulated by the minister who administers governmental affairs in the field of manpower; or

 

b.

foreign researchers appointed by the minister who administers governmental affairs in the field of research, development, study and application as well as inventions and innovations, integrated nuclear operations and space operations.

(3)

The criteria of certain skills referred to in paragraph (1) include:

 

a.

having expertise in the fields of science, technology and/or mathematics, as evidenced by

 

 

1.

certificate of expertise issued by an institution appointed by the Government of Indonesia or the government of the foreign worker’s country of origin;

 

 

2.

education diploma; and/or

 

 

3.

5 (five) years of work experience at the minimum,

 

 

in the field of science or field of work as per the field of expertise; and

 

b.

having the obligation to transfer knowledge.

 

 

 

 

The provisions on procedures for the imposition of Income Tax on foreign nationals referred to in Article 3 and Article 4 are stipulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Capital gains in the form of grants, aid or donations constitute Income Tax objects for the donor.

(2)

Excluded as Income Tax objects referred to in paragraph (1) provided that:

 

a.

the grants, aid or donations are given to:

 

 

1.

relatives within a lineage of one degree;

 

 

2.

religious bodies;

 

 

3.

educational bodies;

 

 

4.

social bodies, including foundations;

 

 

5.

cooperatives; or

 

 

6.

individuals conducting micro and small business; and

 

b.

there is no business, employment, ownership or control relationship between the parties concerned.

(3)

Provisions on:

 

a.

relatives within a lineage of one degree referred to in paragraph (2) subparagraph a number 1 are biological parents and biological children;

 

b.

religious bodies referred to in paragraph (2) subparagraph a number 2 are non-profit organisations whose main activity is managing places of worship and/or organising religious activities;

 

c.

educational bodies referred to in paragraph (2) subparagraph a number 3 are non-profit organisations whose main activity is organising education;

 

d.

social bodies, including foundations referred to in paragraph (2) subparagraph a number 4 are non-profit organisations whose main activity is organising:

 

 

1.

healthcare;

 

 

2.

care for the elderly or nursing homes;

 

 

3.

care for fatherless and/or motherless orphans and people with disabilities;

 

 

4.

the handling of social disabilities, abandonment and behavioural deviations;

 

 

5.

compensation and/or aid for victims of natural disasters, accidents and the like;

 

 

6.

scholarships; and/or

 

 

7.

environmental preservation;

 

e.

cooperatives referred to in paragraph (2) subparagraph a number 5 are bodies regulated under statutory provisions in the field of cooperatives; or

 

f.

individuals conducting micro and small business referred to in paragraph (2) subparagraph a number 6 are individuals owning and conducting productive business that fulfil the following criteria:

 

 

1.

having a maximum net worth of IDR500,000,000 (five hundred million rupiah), excluding land and buildings for a place of business; or

 

 

2.

having business turnover in a year of up to IDR2,500,000,000,00 (two billion and five hundred million rupiah).

(4)

Provisions on procedures for the assessment and calculation of capital gains referred to in paragraph (2) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Gifts are excluded from Income Tax objects provided that:

 

a.

they are received by:

 

 

1.

relatives within a lineage of one degree;

 

 

2.

religious bodies;

 

 

3.

educational bodies;

 

 

4.

social bodies, including foundations;

 

 

5.

cooperatives; or

 

 

6.

individuals conducting micro and small business, referred to in Article 6 paragraph (3); and

 

b.

there is no business, employment, ownership or control relationship between the parties concerned.

(2)

The gifts referred to in paragraph (1) may be in the form of money or in-kind.

(3)

Provisions on procedures for the assessment and calculation of gifts in the form of in-kind referred to in paragraph (2) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Aid or donations paid by the Social Security Administration Body to certain Taxpayers are excluded from Income Tax objects.

(2)

Certain Taxpayers referred to in paragraph (1) are:

 

a.

Taxpayers or underprivileged members of society;

 

b.

Taxpayers or members of society experiencing natural disasters; and/or

 

c.

Taxpayers or disaster-stricken members of society.

(3)

Provisions on aid or donations paid by the Social Security Administration Body to certain Taxpayers that are excluded from Income Tax objects as referred to in paragraph (1) are stipulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Income in the form of:

 

a.

domestically-sourced dividends or foreign-sourced dividends; or

 

b.

other income in the form of income after tax from an overseas permanent establishment and foreign-sourced income not through a permanent establishment,

 

that fulfil certain requirements are excluded from Income Tax objects.

(2)

Dividends referred to in paragraph (1) subparagraph a are excluded from Income Tax objects with the following provisions:

 

a.

domestically-sourced dividends received or accrued by Taxpayers:

 

 

1.

resident individuals insofar as the dividends are invested in the territory of the Unitary State of the Republic of Indonesia within a certain period; and/or

 

 

2.

resident corporates;

 

b.

foreign-sourced dividends received or accrued by resident corporate Taxpayers or resident individual Taxpayers, insofar as they are invested or used to support other businesses in the territory of the Unitary State of the Republic of Indonesia within a certain period;

 

c.

foreign-sourced dividends referred to in subparagraph b are:

 

 

1.

distributed dividends that are sourced from listed offshore companies; or

 

 

2.

distributed dividends that are sourced from non-listed offshore companies as per the proportion of shareholding;

 

d.

distributed dividends that are sourced from listed offshore companies referred to in subparagraph c number 1 are excluded from Income Tax objects in the amount of dividends invested in the territory of the Unitary State of the Republic of Indonesia within a certain period;

 

e.

if the distributed dividends that are sourced from listed offshore companies referred to in subparagraph d are invested in the territory of the Unitary State of the Republic of Indonesia amount to less than the dividends received or accrued by the Taxpayers, the following provisions shall apply:

 

 

1.

the invested dividends are excluded from Income Tax; and

 

 

2.

the difference between the dividends received or accrued by Taxpayers less the invested dividends referred to in number 1 is subject to Income Tax;

 

f.

in addition to fulfilling the requirements referred to in subparagraph b, distributed dividends that are sourced from non-listed offshore companies referred to in subparagraph c number 2 must be:

 

 

1.

invested a minimum of 30% (thirty per cent) of the net income after tax; or

 

 

2.

invested before the Director General of Taxes issued a notice of tax assessment on the said dividends in connection with the application of Article 18 paragraph (2) of the Income Tax Law;

 

g.

if the dividends referred to in subparagraph f are invested in Indonesia after the Director General of Taxes issues a notice of tax assessment on the said dividends in connection with the application of Article 18 paragraph (2) of the Income Tax Law, the said dividends are not excluded from Income Tax;

 

h.

if the distributed dividends that are sourced from non-listed offshore companies referred to in subparagraph f, are invested in the territory of the Unitary State of the Republic of Indonesia less than 30% (thirty per cent) of the amount of net income after tax, the following provisions shall apply:

 

 

1.

the invested dividends are excluded from Income Tax;

 

 

2.

the difference of 30% (thirty per cent) of net income after tax less the invested dividends referred to in number 1 is subject to Income Tax; and

 

 

3.

the net income after tax less the invested dividends referred to in number 1 as well as the difference referred to in number 2, are not subject to Income Tax;

 

i.

if the distributed dividends that are sourced from non-listed offshore companies referred to in subparagraph f, are invested in the territory of the Unitary State of the Republic of Indonesia amounting to more than 30% (thirty per cent) of the amount of net income after tax, the following provisions shall apply:

 

 

1.

the invested dividends are excluded from Income Tax; and

 

 

2.

the net income after tax less the invested dividends referred to in number 1, is not subject to Income Tax;

 

j.

dividends that are excluded from Income Tax objects referred to in subparagraph a and subparagraph b are dividends distributed based on the general meeting of shareholders or interim dividends pursuant to statutory provisions;

 

k.

the general meeting of shareholders or interim dividends referred to in subparagraph j include similar meetings and similar mechanisms of dividend distribution;

 

l.

domestically-sourced dividends received or accrued by resident individual Taxpayers or resident corporate Taxpayers referred to in subparagraph a, are not subject to Withholding Tax;

 

m.

if resident individual Taxpayers do not fulfil the provisions on investments referred to in subparagraph a number 1, domestically-sourced dividends received or accrued by the resident individual Taxpayers are subject to Income Tax payable when the dividends are received or accrued; and

 

n.

Income Tax payable referred to in subparagraph m must be self-remitted by the resident individual Taxpayers pursuant to statutory provisions.

(3)

Other income referred to in paragraph (1) subparagraph b is excluded from Income Tax objects with the following provisions:

 

a.

income after tax of an overseas permanent establishment received or accrued by resident corporate Taxpayers or resident individual Taxpayers insofar as it is invested or used to support other businesses in the territory of the Unitary State of the Republic of Indonesia within a certain period provided that the invested income after tax amounts to a minimum of 30% (thirty per cent) of the net income after tax;

 

b.

if income after tax of an overseas permanent establishment referred to in subparagraph a, invested in the territory of the Unitary State of the Republic of Indonesia amounts to 30% (thirty per cent) of the amount of net income after tax as referred to in subparagraph a, the following provisions shall apply:

 

 

1.

the invested income after tax is excluded from Income Tax;

 

 

2.

the difference of 30% (thirty per cent) of net income after tax less the invested income after tax as referred to in number 1 is subject to Income Tax; and

 

 

3.

the net income after tax less the invested income tax referred to in number 1 as well as the difference referred to in number 2, are not subject to Income Tax;

 

c.

if income after tax of an overseas permanent establishment referred to in subparagraph a, is invested in the territory of the Unitary State of the Republic of Indonesia of more than 30% (thirty per cent) of the amount of net income after tax referred to in subparagraph a, the following provisions shall apply:

 

 

1.

the invested income after tax is excluded from Income Tax; and

 

 

2.

the net income after tax less the invested income tax referred to in number 1, is not subject to Income Tax; and

 

d.

foreign-sourced income not through a permanent establishment received or accrued by resident corporate Taxpayers or resident individual Taxpayers is excluded from Income Tax if the income is invested in the territory of the Unitary State of the Republic of Indonesia within a certain period and fulfils the following requirements:

 

 

1.

the income is sourced from an overseas active business; and

 

 

2.

does not constitute income from an offshore company.

(4)

To taxes on income that have been paid or payable in a foreign country as referred to in paragraph (2) subparagraph b and paragraph (3) subparagraph a and subparagraph d, the following provisions shall apply:

 

a.

cannot be taken into account in the Income Tax payable;

 

b.

cannot be charged as an expense or income deduction; and/or

 

c.

tax overpayments are non-refundable;

(5)

If a Taxpayer does not invest the income within a certain period as referred to in paragraph (2) subparagraph b and paragraph (3) subparagraph a and subparagraph d, the following provisions shall apply:

 

a.

the foreign-sourced income constitutes income in the Tax Year it is accrued; and

 

b.

taxes on income that have been paid or payable in a foreign country constitute a tax credit as referred to in Article 24 of the Income Tax Law.

(6)

Provisions on procedures for the exclusion from Income Tax referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Investments referred to in Article 9 paragraph (2) subparagraph a number 1 and subparagraph b and paragraph (3) must fulfil certain criteria and periods.

(2)

The criteria referred to in paragraph (1) are carried out in investments in the form of:

 

a.

securities of the Republic of Indonesia and sharia securities of the Republic of Indonesia;

 

b.

bonds or sharia bonds of state-owned enterprises whose trading is supervised by the Financial Services Authority;

 

c.

bonds or sharia bonds of financing institutions owned by the government whose trading is supervised by the Financial Services Authority;

 

d.

financial investments in tax payment banks, including sharia banks;

 

e.

bonds or sharia bonds of private companies whose trading is supervised by the Financial Services Authority;

 

f.

infrastructure investments through government cooperation with business entities;

 

g.

priority-based real sector investments determined by the government;

 

h.

capital participation in companies newly incorporated and domiciled in Indonesia as shareholders;

 

i.

capital participation in companies already incorporated and domiciled in Indonesia as shareholders;

 

j.

cooperation with investment management institutions;

 

k.

the use to support other businesses in the form of loans for micro and small businesses in the territory of the Unitary State of the Republic of Indonesia pursuant to statutory provisions in the field of micro, small and medium enterprises; and/or

 

l.

other legal forms of investments pursuant to statutory provisions.

(3)

Investments referred to in paragraph (2) subparagraph a to subparagraph e and subparagraph l are placed in investment instruments in financial markets as follows:

 

a.

debt securities;

 

b.

sharia bonds;

 

c.

shares;

 

d.

participating units of mutual funds;

 

e.

asset-backed securities;

 

f.

participating units of real estate investment trust;

 

g.

deposits;

 

h.

savings accounts;

 

i.

current accounts;

 

j.

futures contracts traded on the futures exchange in Indonesia; and/or

 

k.

other financial market investment instruments, including investment-linked insurance products, finance companies, pension funds or venture capital approved by the Financial Services Authority.

(4)

Investments referred to in paragraph (2) subparagraph f to subparagraph l are placed in investment instruments in financial markets as follows:

 

a.

infrastructure investments through government cooperation with business entities;

 

b.

priority-based real sector investments determined by the government;

 

c.

investments in property in the form of land and/or buildings built thereon;

 

d.

direct investments in companies in the territory of the Unitary State of the Republic of Indonesia;

 

e.

investments in precious metals in the form of gold bars or bullion;

 

f.

cooperation with investment management institutions;

 

g.

the use to support other businesses in the form of loans for micro and small businesses in the territory of the Unitary State of the Republic of Indonesia pursuant to statutory provisions in the field of micro, small and medium enterprises; and/or

 

h.

other legal forms of investments outside the financial market pursuant to statutory provisions.

(5)

The investments referred to in paragraph (4) subparagraph b and subparagraph d are carried out through the mechanism of capital participation in companies in the form of limited liability companies.

(6)

Sectors constituting the government’s priorities in real sector investments referred to in paragraph (4)  subparagraph b include sectors specified in the national medium-term development plan.

(7)

The property referred to in paragraph (4) subparagraph c does not include property that is subsidised by the government.

(8)

The precious metals referred to in paragraph (4) subparagraph e are gold bars or bullion with a purity level of 99.99% (ninety-nine point ninety-nine per cent).

(9)

Gold bars or bullion referred to in paragraph (8) are gold produced in Indonesia and obtain accreditation and certificates from the National Standardisation Body and/or the London Bullion Market Association.

(10)

The investments referred to in paragraph (2) cannot be transferred, except in the form of investments referred to in paragraph (2).

 

 

 

 

The certain period referred to in Article 10 paragraph (1) is implemented with the following provisions:

a.

no later than:

 

1.

the end of the third month after the Tax Year in which the dividends or other income are received or accrued, for individual Taxpayers; or

 

2.

the end of the fourth month after the Tax Year in which the dividends or other income are received or accrued, for corporate Taxpayers; and

b.

a minimum of 3 (three) Tax Years from the Tax Year in which dividends or other income are received or accrued.

 

 

 

 

 

(1)

Income from investments in certain sectors received or accrued by pension funds are excluded from Income Tax objects.

(2)

Pension funds referred to in paragraph (1) are pension funds whose incorporation is approved by the Financial Services Authority.

(3)

Pension funds referred to in paragraph (2), other than those approved by the Financial Services Authority, also include pension funds approved by the Minister before the transfer of functions, duties and authority to regulate and supervise pension funds from the Minister to the Financial Services Authority on 31 December 2012.

(4)

Income from investments in certain sectors referred to in paragraph (1) is in the form of:

 

a.

interests, discounts and yield from deposits, deposit certificates and savings accounts at banks in Indonesia conducting business conventionally or based on sharia principles as well as Bank Indonesia Certificates; or

 

b.

interests, discounts and yield from bonds, sharia bonds, Sharia Securities and Treasury Notes that are traded and/or whose trading is reported on the stock exchanges in Indonesia.

(5)

Provisions on procedures for the exclusion from Income Tax objects referred to in paragraph (1) are regulated by a Ministerial Regulation.

 

 

 

 

 

(1)

Income in the form of scholarships that fulfil certain requirements, either received from tax subjects and/or non-tax subjects, is excluded from Income Tax objects.

(2)

The certain requirements referred to in paragraph (1) include scholarships received:

 

a.

by scholarship recipients constituting Indonesian Citizens; and

 

b.

to attend formal education and/or non-formal education carried out domestically and/or overseas.

(3)

Further provisions on scholarships that fulfil certain requirements that are excluded from Income Tax objects referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

The surplus received or accrued by non-profit institutions or organisations engaged in the education sector and/or research and development sector, listed in the corresponding agencies, is excluded from Income Tax objects in the amount of the surplus used for:

 

a.

the construction and/or procurement of educational and/or research and development means and infrastructure in the territory of the Unitary State of the Republic of Indonesia; and

 

b.

a maximum of 4 (four) years since the surplus is received or accrued.

(2)

The surplus referred to in paragraph (1) is the difference in the calculation of all income received or accrued other than income subject to final Income Tax and/or is not an Income Tax object, less the costs to derive, collect and maintain the said income.

(3)

The construction and/or procurement of educational and/or research and development means and infrastructure referred to in paragraph (1) subparagraph a include the use of surplus allocated in the form of endowment funds that fulfil certain requirements.

 

 

 

 

Provisions on:

a.

the surplus received or accrued by non-profit institutions or organisations engaged in the education sector and/or research and development sector that is excluded from Income Tax objects referred to in Article 14 paragraph (1); and

b.

the use of surplus allocated in the form of endowment funds that fulfil certain requirements referred to in Article 14 paragraph (3),

are regulated in a Ministerial Regulation.

 

 

 

 

(1)

The surplus received or accrued by social and/or religious bodies or institutions listed in corresponding agencies are excluded from Income Tax objects provided that the following requirements are fulfilled:

 

a.

reinvested in the form of social and religious means and infrastructure; and/or

 

b.

placed as endowment funds,

 

in a maximum period of 4 (four) years since the surplus is accrued.

(2)

The surplus referred to in paragraph (1) is the difference the calculation of all income received or accrued other than income subject to final Income Tax and/or is not an Income Tax object, less the costs to derive, collect and maintain the said income.

(3)

Further provisions on the surplus received or accrued by social and/or religious institutions or organisations excluded from Income Tax objects referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Revenues of the Hajj Financial Management Agency include:

 

a.

deposit for Hajj Fees and/or Special Hajj Fees;

 

b.

the value of hajj finances in the form of income from the development of hajj finances;

 

c.

hajj efficiency funds;

 

d.

people’s endowment funds; and/or

 

e.

other legal and non-binding sources.

(2)

Revenues of the Hajj Financial Management Agency in the form of:

 

a.

deposit funds for Hajj Fees and/or Special Hajj Fees referred to in paragraph (1) subparagraph a; and

 

b.

income from the development of hajj finances referred to in paragraph (1) subparagraph b in certain financial fields or instruments,

 

are excluded from Income Tax objects.

(3)

Income from the development of hajj finances in certain financial fields or instruments referred to in paragraph (2) subparagraph b in the form of:

 

a.

yield from current accounts, time deposits, certificates of deposit and savings accounts, at banks in Indonesia that conduct business based on sharia principles as well as sharia securities issued by Bank Indonesia;

 

b.

yield from sharia bonds, sharia securities and sharia securities, which are traded and/or whose trading is reported on a stock exchange in Indonesia;

 

c.

domestically-sourced and foreign-sourced dividends or other income in the form of income after tax or income excluded from taxes or subject to 0% (zero per cent) tax of a permanent establishment or not through an overseas permanent establishment;

 

d.

share of profits received or accrued from holders of participating units of collective investment contracts which may take the form of yield from sharia mutual funds, collective investment contracts of asset-backed securities, collective investment contracts of real estate investment trusts, collective investment contracts of infrastructure investment funds and/or collective investment contracts based on similar sharia principles; and/or

 

e.

sales of investments in the form of gold bullion or gold accounts managed by sharia financing institutions,

 

pursuant to statutory provisions.

(4)

Further provisions on deposit funds for Hajj Fees and/or Special Hajj Fees and income from the development of hajj finances in certain financial fields or instruments received by the Hajj Financial Management Agency excluded from Income Tax objects referred to in paragraph (2) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

The amount of taxable income for resident taxpayers and permanent establishments is determined based on gross income less the costs to acquire, collect and maintain income, including promotional and sales expenses.

(2)

Promotional and sales expenses constituting deductible expenses referred to in paragraph (1) must take into account the following:

 

a.

to maintain and/or increase sales;

 

b.

be reasonably incurred; and

 

c.

according to sound business practice.

(3)

Further provisions on promotional and sales expenses constituting deductible expenses referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Bad debts that may be expensed in calculating taxable income must fulfil the following requirements:

 

a.

they have been expensed in the commercial income statement;

 

b.

the Taxpayers must submit a list of bad debts to the Directorate General of Taxes; and

 

c.

for the said bad debts:

 

 

1.

the collection case has been submitted to the District Court or government agency in charge of state receivables;

 

 

2.

there is a written agreement regarding the write-off of receivables/relief of debt between the creditor and the debtor concerned;

 

 

3.

the collection case has been published in a general or special publication; or

 

 

4.

the debtor acknowledges that a certain amount of the debt has been written off.

(2)

The requirements referred to in paragraph (1) subparagraph c do not apply to bad debts for small business debtors and other small business debtors.

(3)

Further provisions on procedures for the expensing of bad debts in calculating taxable income referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

To determine the amount of taxable income for resident Taxpayers and permanent establishments, the establishment or accumulation of reserve funds does not constitute a deductible expense.

(2)

Excluded from the provisions referred to in paragraph (1) are:

 

a.

allowances for bad debts for banks and other business entities that provide credit, financial leases, consumer finance companies and factoring companies calculated based on the applicable financial accounting standards with certain thresholds after coordinating with the Financial Services Authority;

 

b.

reserves for insurance businesses, including social aids established by the Social Security Administration Body;

 

c.

guarantee reserves for the Indonesia Deposit Insurance Corporation;

 

d.

reclamation reserves for mining businesses;

 

e.

reforestation reserves for forestry businesses; and

 

f.

reserves for closing and maintaining industrial waste landfill for industrial waste treatment businesses,

 

that fulfil certain requirements.

(3)

Provisions on the establishment or accumulation of reserve funds constituting deductible expenses that fulfil certain requirements referred to in paragraph (2) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Depreciation of costs for the purchase, establishment, addition, repair or changes of tangible assets, except land with ownership right, right to build, right to cultivate and right to use, which are held and used to derive, collect and maintain income with a useful life of more than 1 (one) year shall be carried out in equal parts over the specified useful life for these assets.

(2)

Depreciation of costs to acquire tangible assets referred to in paragraph (1), other than buildings, may also be carried out in decreasing parts over the useful life, which is calculated by applying the depreciation rate on the costs or net book value and at the end of useful life, the net book value is fully depreciated provided that it is carried out as per the consistency principle.

(3)

The calculation of the depreciation referred to in paragraph (1) and paragraph (2), useful life and depreciation rates of tangible assets is stipulated as follows:

 

Groups of Tangible Assets		Useful Life	Depreciation Rates Referred to in
			Paragraph (1)	Paragraph (2)
I.	Non-buildings
	Group 1	4 years	0,25	0,5
	Group 2	8 years	12.5%	0,25
	Group 3	16 years	6.25%	12.5%
	Group 4	20 years	0,05	0,1
II.	Buildings
	Permanent	20 years	0,05
	Non-permanent	10 years	0,1

(4)

Depreciation of tangible assets referred to in paragraph (1) and paragraph (2) commences in the month the costs are incurred, except:

 

a.

for tangible assets that are in progress, the depreciation commences in the month the assets are finished;

 

b.

for tangible assets that have never been used or have never produced, the depreciation commences in the month the assets are used to derive, collect and maintain income or in the month the assets concerned start to produce, with the approval of the Director General of Taxes; or

 

c.

for tangible assets held and used in certain business fields.

(5)

If permanent buildings referred to in paragraph (3) have a useful life of more than 20 (twenty) years, the depreciation referred to in paragraph (1) shall be carried out in parts equal to the useful life of:

 

a.

20 (twenty) years; or

 

b.

according to the actual useful life based on the Taxpayer’s bookkeeping, provided that it is carried out as per the consistency principle.

(6)

Taxpayers that have depreciated permanent buildings as referred to in paragraph (5):

 

a.

held and used before the 2022 Tax Year; and

 

b.

depreciated according to the useful life referred to in paragraph (5) subparagraph a,

 

may choose to depreciate according to the useful life referred to in paragraph (5) subparagraph b by notifying the Director General of Taxes no later than the end of the 2022 Tax Year.

(7)

The depreciation of tangible assets held and used in certain business fields is separately regulated, including when the depreciation commences as referred to in paragraph (4) subparagraph c.

(8)

In the event of a transfer or withdrawal of assets in connection with insurance compensations, the net book value of the assets is charged as a loss and the amount of received or accrued insurance compensations is recorded as income in the Tax Year:

 

a.

the said assets are withdrawn; or

 

b.

the insurance compensations are received if the amount of the insurance compensations to be received may only be known with certainty in the future, with the approval of the Director General of Taxes.

(9)

In respect of the costs for the repair of tangible assets, which have a useful life of more than 1 (one) year, the calculation of the depreciation is separately regulated.

(10)

Further provisions on:

 

a.

tangible asset groups, useful life and the calculation of the depreciation as referred to in paragraph (3);

 

b.

when the depreciation commences as referred to in paragraph (4);

 

c.

the depreciation of permanent buildings as referred to in paragraph (5);

 

d.

procedures for the submission of the notification as referred to in paragraph (6);

 

e.

the depreciation of tangible assets held and used in certain business fields referred to in paragraph (7);

 

f.

the expensing of losses and bookkeeping for income due to insurance compensations as referred to in paragraph (8); and

 

g.

the depreciation on expenses for the repair of tangible assets referred to in paragraph (9),

 

are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Amortisation of costs to acquire intangible assets and other costs, including costs to extend the right to build, right to cultivate and right to use and goodwill with a useful life of more than 1 (one) year that are used to derive, collect and maintain income shall be carried out according to groups of intangible assets, useful life and amortisation rates in equal parts or in decreasing parts over the useful life as regulated under Article 11A paragraph (2) of the Income Tax Law.

(2)

The amortisation referred to in paragraph (1) shall commence at the month the costs are incurred, except for certain business fields.

(3)

If intangible assets have a useful life of more than 20 (twenty) years, the amortisation referred to in paragraph (1) shall be carried out according to the useful life of:

 

a.

group 4 (four) intangible assets as referred to in Article 11A paragraph (2) of the Income Tax Law; or

 

b.

according to the actual useful life based on the Taxpayer’s bookkeeping,

(4)

Taxpayers that have amortised intangible assets referred to in paragraph (3):

 

a.

held and used before the 2022 Tax Year; and

 

b.

amortised according to the useful life referred to in paragraph (3) subparagraph a,

 

may choose to amortise according to the useful life referred to in paragraph (4) subparagraph b by notifying the Director General of Taxes no later than the end of the 2022 Tax Year.

(5)

Further provisions on:

 

a.

the calculation of amortisation as referred to in paragraph (1);

 

b.

when the amortisation for certain business fields commences as referred to in paragraph (2);

 

c.

the amortisation of intangible assets that have a useful life of more than 20 (twenty) years as referred to in paragraph (3); and

 

d.

procedures for the submission of the notification as referred to in paragraph (4),

 

are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Reimbursements or remunerations in the form of in-kind and/or fringe benefits constitute Income Tax objects as referred to in Article 4 paragraph (1) subparagraph a of the Income Tax Law.

(2)

The expenses of reimbursements or remunerations given in the form of in-kind and/or fringe benefits in connection with employment or services constitute deductible costs to determine taxable income for the employer or provider of the remunerations or reimbursements in the form of in-kind and/or fringe benefits insofar as they constitute the costs to derive, collect and maintain income.

 

 

 

 

 

Excluded from Income Tax objects for reimbursements or remunerations in connection with work or services received or accrued in-kind and/or fringe benefits referred to in Article 23 paragraph (1) include:

a.

food, foodstuff, beverage ingredients and/or beverages provided for all Employees;

b.

in-kind and/or fringe benefits provided in certain areas;

c.

in-kind and/or fringe benefits to be provided by the Employer in the implementation of work;

d.

in-kind and/or fringe benefits sourced or financed by the state budget, local government budget and/or village budget; or

e.

in-kind and/or fringe benefits of certain types and/or thresholds.

 

 

 

 

Food, foodstuff, beverage ingredients and/or beverages provided for all Employees referred to in Article 24 subparagraph a include:

a.

food and/or beverages provided by the employer at the workplace;

b.

food and/or beverage vouchers for employees who due to the nature of their work cannot take advantage of the provision of food and/or beverages referred to in subparagraph a, including Employees in marketing, transportation and off-site assignments; and/or

c.

foodstuff, beverage ingredients for all Employees with a certain value threshold.

 

 

 

 

(1)

In-kind and/or fringe benefits provided in certain areas referred to in Article 24 subparagraph b include facilities, infrastructure and/or facilities at the workplace for Employees and their families in the form of:

 

a.

residence, including housing;

 

b.

healthcare services;

 

c.

education;

 

d.

worship;

 

e.

transportation; and/or

 

f.

sports, excluding golf, power boating, horse racing, gliding or motorsports,

 

insofar as the employer’s business location obtains a certain regional determination from the Director General of Taxes.

(2)

Facilities, infrastructure and facilities at the workplace for Employees and their families in the form of transportation referred to in paragraph (1) subparagraph e include transportation for Employees and their families in carrying out assignments.

(3)

Certain areas referred to in Article 24 subparagraph b include areas that are economically feasible to be developed but the condition of the economic infrastructure is generally inadequate and difficult to reach by public transportation, whether by land, sea or air, thereby, to change the available economic potentials into a real economic strength, investors bear relatively high risks and a relatively long return period, including areas of sea waters that have a depth of more than 50 (fifty) meters where the seabed has mineral reserves, including remote areas.

 

 

 

 

(1)

In-kind and/or fringe benefits that must be provided by the employer in the implementation of work referred to in Article 24 subparagraph c include in-kind and/or fringe benefits in connection with requirements concerning the security, health and/or safety of Employees required by ministries or agencies pursuant to statutory provisions.

(2)

In-kind and/or fringe benefits that must be provided by the employer in the implementation of work in connection with requirements concerning the security, health and/or safety of Employees required by ministries or agencies pursuant to statutory provisions referred to in paragraph (1) include:

 

a.

uniform;

 

b.

equipment for work safety;

 

c.

Employee shuttle service;

 

d.

lodging for crew members and the like; and/or

 

e.

in-kind and/or fringe benefits received in the context of handling endemic, pandemic or national disasters.

 

 

 

 

The exclusion from Income Tax objects for reimbursements or remunerations in the form of in-kind and/or fringe benefits of certain types and/or thresholds referred to in Article 24 subparagraph e and foodstuff and/or beverage ingredients for all Employees with a certain value threshold referred to in Article 25 subparagraph c considers:

a.

the type and/or value of the received reimbursements or remunerations in the form of in-kind and/or fringe benefits; and/or

b.

the criteria for the recipient of reimbursements or remunerations in the form of in-kind and/or fringe benefits.

 

 

 

 

 

Reimbursements or remunerations in the form of in-kind and/or fringe benefits received or accrued in connection with work or services referred to in Article 23 paragraph (1) are assessed with the following provisions:

a.

for reimbursements or remunerations in the form of in-kind, based on the market value; and/or

b.

for reimbursements or remunerations in the form of fringe benefits, based on the amount of costs incurred or should be incurred by the provider.

 

 

 

 

The employer or provider of reimbursements or remunerations in the form of in-kind and/or fringe benefits must withhold Income Tax pursuant to statutory provisions in the field of taxation.

 

 

 

 

Provisions on:

a.

procedures for the granting of exclusions from Income Tax objects for reimbursements or remunerations in connection with work or services received or accrued in-kind and/or fringe benefits provided in certain areas as referred to in Article 26;

b.

the certain value threshold referred to in Article 25 subparagraph c and certain types and/or thresholds of in-kind and/or fringe benefits that are excluded from Income Tax objects as referred to in Article 28; and

c.

procedures for assessing and calculating reimbursements or remunerations in the form of in-kind and/or fringe benefits referred to in Article 29,

are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

The Minister is authorised to prevent tax avoidance practices as an effort by Taxpayers to reduce, avoid or delay the payment of tax that should otherwise be payable according to the object and purpose of statutory provisions in the field of taxation.

(2)

Tax avoidance practices referred to in paragraph (1) are prevented by:

 

a.

determining when dividends are accrued and the calculation basis by resident Taxpayers for capital participation in overseas business entities other than listed business entities;

 

b.

re-determining the amount of income and deductions as well as determining debt as capital to calculate the amount of taxable income carried out by the Director General of Taxes by applying the Arm's Length Principle;

 

c.

determining the party purchasing the company’s shares or assets through other parties or special purpose companies insofar as there is non arm's length pricing;

 

d.

determining the party performing the sale or transfer of shares of conduit companies incorporated or domiciled in tax haven countries;

 

e.

re-determining the amount of income accrued by resident individual Taxpayers from employers that transfer all or part of the resident individual Taxpayers’ income into costs or other expenses paid to companies that are not incorporated and domiciled in Indonesia;

 

f.

recalculating tax that should be payable based on the benchmarking of financial performance with Taxpayers in a similar business against Taxpayers that file operating profits that are too low compared to the financial performance of other Taxpayers in similar business files or file unreasonable business losses even though the Taxpayers have made commercial sales for 5 (five) years and filed tax losses for 3 (three) consecutive years;

 

g.

setting the threshold on the amount of borrowing costs that may be expensed for tax calculation purposes; and/or

 

h.

recalculating the amount of tax that should be payable by not expensing payments by resident Taxpayers to non-resident Taxpayers as deductible expenses due to the utilisation of differences in the tax treatment of instruments or entities that may have more than one characteristic in the country or jurisdiction where the Taxpayers are domiciled.

(3)

Mechanisms for preventing tax avoidance practices referred to in paragraph (2) subparagraph a to subparagraph f may only be applied to independent transactions influenced by a special relationship.

(4)

In the event of tax avoidance practices as referred to in paragraph (1) which cannot be prevented using the mechanisms set out in paragraph (2), the Director General of Taxes may re-determine the amount of tax that should be payable by referring to the principle of substance over form.

 

 

 

 

(1)

The special relationship referred to in Article 32 paragraph (3) is a state of dependence or attachment of one party to another caused by:

 

a.

equity ownership or participation;

 

b.

control; or

 

c.

family relationship either by blood or marriage,

 

which results in one party being able to control the other party or not being independent in conducting or carrying out activities.

(2)

The special relationship due to equity ownership or participation referred to in paragraph (1) subparagraph a shall be deemed to exist if:

 

a.

the Taxpayer has direct or indirect capital participation of a minimum of 25% (twenty-five per cent) in another Taxpayer; or

 

b.

the relationship between the Taxpayer with capital participation of a minimum of 25% (twenty-five per cent) in two or more Taxpayers.

(3)

The special relationship due to control referred to in paragraph (1) subparagraph b shall be deemed to exist if:

 

a.

one party controls another party or one party is controlled by another party, directly and/or indirectly;

 

b.

two or more parties are under the same control, either directly and/or indirectly;

 

c.

one party controls another party or one party is controlled by another party through management or use of technologies;

 

d.

there are the same people who are directly and/or indirectly involved or participating in managerial or operational decision-making on two or more parties;

 

e.

parties that are commercially or financially known or claim to be in the same business group; or

 

f.

one party claims to have a special relationship with another party.

(4)

The special relationship due to a family relationship either by blood or marriage referred to in paragraph (1) subparagraph c shall be deemed to exist if there is a family relationship either by blood or by marriage in in a vertical lineage of one degree and/or in a horizontal lineage of one degree.

 

 

 

 

(1)

The Minister is authorised to stipulate when dividends are accrued and the calculation basis by resident Taxpayers for capital participation in overseas business entities other than listed business entities as regulated under Article 32 paragraph (2) subparagraph a with the following provisions:

 

a.

the amount of resident Taxpayers’ capital participation is a minimum of 50% (fifty per cent) of the share capital; or

 

b.

jointly with other resident Taxpayers have capital participation of a minimum of 50% (fifty per cent) of the share capital.

(2)

When dividends are accrued by resident Taxpayers for capital participation in overseas business entities referred to in paragraph (1) shall be determined at the end of the fourth month after the expiration of the filing deadline for the Annual Tax Return for overseas business entities for the Tax Year concerned.

(3)

If the overseas business entities referred to in paragraph (1) do not have the obligation to file the Annual Tax Return or there is no filing deadline for the Annual Tax Return, when the dividends are accrued as referred to in paragraph (2) is determined at the end of the seventh month after the Tax Year concerned ends.

(4)

Further provisions on procedures for the determination of when dividends are accrued and the calculation basis by resident Taxpayers for capital participation in overseas business entities other than listed business entities referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Taxpayers conducting independent transactions influenced by a special relationship referred to in Article 33 paragraph (1) must apply the Arm's Length Principle.

(2)

Independent transactions influenced by a special relationship referred to in paragraph (1) include:

 

a.

controlled transactions; and/or

 

b.

transactions carried out between unrelated parties, but the affiliated parties of one or both transacting parties determine the counterparty and the price of the transaction.

 

 

 

 

(1)

The Director General of Taxes is authorised to re-determine the amount of income and/or deduction to calculate the amount of taxable income if the Taxpayers:

 

a.

do not apply the Arm’s Length Principle as referred to in Article 35 paragraph (1);

 

b.

apply the Arm’s Length Principle referred to in Article 35 paragraph (1) but according to the applicable provisions; and/or

 

c.

determine the Transfer Price but do not comply with the Arm’s Length Principle as referred to in Article 35 paragraph (1).

(2)

The amount of income and/or reduction referred to in paragraph (1) is re-determined by Transfer Pricing according to the Arm's Length Principle to calculate the amount of taxable income.

(3)

Transfer Pricing according to the Arm's Length Principle referred to in paragraph (2) is determined using:

 

a.

the comparable uncontrolled price method;

 

b.

the resale price method;

 

c.

the cost plus method; or

 

d.

other methods.

(4)

Other methods referred to in paragraph (3) subparagraph d are for example:

 

a.

the profit split method;

 

b.

the transactional net margin method;

 

c.

the comparable uncontrolled transaction method;

 

d.

the tangible asset and/or intangible asset valuation method; or

 

e.

the business valuation method.

(5)

The methods referred to in paragraphs (3) and paragraphs (4) are used based on the accuracy and reliability of each method for independent transactions influenced by a special relationship.

((6)

The difference between the value of independent transactions influenced by a special relationship that does not comply with the Arm’s Length Principle and the value of independent transactions influenced by a special relationship according to the Arm's Length Principle referred to in paragraph (2) is a form of indirect profit sharing to affiliated entities, thereby, is treated as dividends which are subject to Income Tax pursuant to statutory provisions in the field of taxation.

 

 

 

 

 

(1)

Taxpayers purchasing company shares or assets through other parties or special purpose companies referred to in Article 32 paragraph (2) subparagraph c may be determined as the party actually purchasing if the Taxpayers concerned have a special relationship with the other party or special purpose companies and there is non arm's length pricing.

(2)

Company shares or assets referred to in paragraph (1) are in the form of:

 

a.

shares or assets previously held and/or used as collateral by resident Taxpayers determined as the party actually purchasing, in connection with the loan agreement; or

 

b.

assets constituting credit assets (receivables) to resident Taxpayers determined as the party actually purchasing, in connection with the loan agreement.

(3)

The parties or special purpose companies incorporated to purchase company shares or assets referred to in paragraph (1) are parties or entities that do not have business substance and incorporated by resident Taxpayers to purchase shares or assets of other resident Taxpayers.

 

 

 

 

(1)

Sales or transfers of shares of conduit companies incorporated or domiciled in tax haven countries related to entities incorporated or domiciled in Indonesia or permanent establishments in Indonesia as referred to in Article 32 paragraph (2) subparagraph d may be determined as sales or transfers of shares of entities incorporated or domiciled in Indonesia or permanent establishments in Indonesia.

(2)

Income from the sale or transfer of shares referred to in paragraph (1) is subject to Withholding Tax by 20% (twenty per cent) of the estimated net income.

 

 

 

 

(1)

The amount of income accrued by resident individual Taxpayers in connection with the work, activities or services from employers that have a special relation with overseas companies referred to in Article 32 paragraph (2) subparagraph e is re-determined by taking into account the reasonable level of income that should be accrued by the individual Taxpayers concerned.

(2)

Further provisions on the re-determination of the amount of income accrued by resident individual Taxpayers referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Tax that should be payable based on the benchmarking of financial performance with Taxpayers in a similar business referred to in Article 32 paragraph (2) subparagraph f is recalculated for Taxpayers that have made commercial sales for 5 (five) years and filed tax losses for 3 (three) consecutive years.

(2)

Further provisions on the benchmarking of financial performance with Taxpayers in a similar business in the context of calculating tax that should be payable as referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

The amount of borrowing costs that may be expensed to calculate tax as referred to in Article 32 paragraph (2) subparagraph g is limited by the Minister using:

 

a.

the method of certain debt-to-equity ratios;

 

b.

the method of determining a certain per centage of borrowing costs compared to operating income before deducted by borrowing costs, Income Tax, depreciation and amortisation; or

 

c.

other methods.

(2)

Provisions on the determination and procedures for the use of methods to limit the amount of borrowing costs referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Payments by resident Taxpayers to non-resident Taxpayers cannot be expensed as deductible expenses as referred to in Article 32 paragraph (2) subparagraph h if the payment:

 

a.

is not considered income of non-resident Taxpayers taxed in the country or jurisdiction where the non-resident Taxpayers are domiciled; or

 

b.

is expensed as a deductible expense of non-resident Taxpayers in the country or jurisdiction where the non-resident Taxpayers are domiciled,

 

which results in the said payment being not subject to tax or subject to lower tax, both in Indonesia and in the country or jurisdiction where the non-resident Taxpayers are domiciled.

(2)

Provisions on payments by resident Taxpayers to non-resident Taxpayers which cannot be expensed as referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Tax avoidance practices referred to in Article 32 paragraph (4) are prevented by re-determining the amount of tax that should be payable by taking into account:

 

a.

the limits of authority and procedures for the implementation;

 

b.

activities carried out by Taxpayers that are included in the scope of tax avoidance;

 

c.

stages of formal and material assessments;

 

d.

quality assurance mechanisms; and/or

 

e.

the protection of Taxpayers’ rights.

(2)

Tax avoidance practices referred to in paragraph (1) are prevented with good governance and the Taxpayers may continue to make dispute resolution efforts.

(3)

Provisions the limits of authority and procedures for the implementation, activities carried out by Taxpayers included in the scope of tax avoidance, stages of formal and material assessments, quality assurance mechanisms and the protection of Taxpayers’ rights referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

Resident Taxpayers may apply for an Advance Pricing Agreement to the Director General of Taxes.

(2)

Advance Pricing Agreement referred to in paragraph (1) is a written agreement between:

 

a.

the Director General of Taxes and the Taxpayer (unilateral);

 

b.

the Director General of Taxes and 1 (one) tax authority of the government of the tax treaty partner involving the Taxpayer (bilateral); or

 

c.

the Director General of Taxes and more than 1 (one) tax authority of the government of the tax treaty partner involving the Taxpayer (multilateral),

 

to agree on the criteria for transfer pricing and/or determining the arm’s length price or the advance arm’s length profit.

(3)

The application for Advance Pricing Agreement on controlled transactions is submitted based on:

 

a.

the Taxpayers’ initiative, the Taxpayers may apply for an Advance Pricing Agreement as referred to in paragraph (2) subparagraph a, subparagraph b or subparagraph c; or

 

b.

written notification from the Director General of Taxes as a follow-up to the application of non-resident Taxpayers to the Competent Authority of the tax treaty Partner, Taxpayers may apply for an Advance Pricing Agreement as referred to in paragraph (2) subparagraph b or subparagraph c.

(4)

The Advance Pricing Agreement referred to in paragraph (1) may cover all or part of controlled transactions for:

 

a.

the Advance Pricing Agreement period; and

 

b.

the roll-back, if the Taxpayers request a roll-back.

(5)

The controlled transactions referred to in paragraph (3) may be in the form of controlled transactions between Taxpayers and other resident Taxpayers and/or with non-resident Taxpayers.

(6)

The roll-back referred to in paragraph (4) is the implementation of the agreement in the Advance Pricing Agreement for Tax Years prior to the Advance Pricing Agreement period if for the said Tax Year:

 

a.

the facts and conditions of controlled transactions are not materially different from the facts and conditions of controlled transactions agreed upon in the Advance Pricing Agreement;

 

b.

the statute of limitation of the assessment has not elapsed;

 

c.

the notice of Income Tax assessment has not been issued; and

 

d.

is not being investigated for a tax crime or undergoing a sentence in the taxation sector.

(7)

The Advance Pricing Agreement referred to in paragraph (1) includes:

 

a.

the criteria in Transfer Pricing; and

 

b.

Advance Pricing,

 

for the Advance Pricing Agreement period and roll-back referred to in paragraph (4).

 

 

 

 

(1)

Based on the application referred to in Article 45 paragraph (1), the Director General of Taxes is authorised to establish an agreement with Taxpayers or cooperate with the competent authority of tax treaty partners to determine the Transfer Prices between the Taxpayers and related parties valid for a certain period.

(2)

The Director General of Taxes follows up the agreement or Transfer Pricing referred to in paragraph (1) by issuing a decree concerning the implementation of the Advance Pricing Agreement.

(3)

The Director General of Taxes is authorised to supervise the implementation of the Advance Pricing Agreement referred to in paragraph (2) and renegotiate after the certain period ends.

 

 

 

 

Further provisions on Advance Pricing Agreement referred to in Article 45 and Article 46 are regulated in a Ministerial Regulation.

 

 

 

 

 

The government is authorised to establish and/or implement agreements or treaties in the field of taxation with the governments of tax treaty partners, either bilaterally and multilaterally, in the context of:

a.

avoidance of double taxation and prevention of tax evasion;

b.

prevention of base erosion and profit shifting;

c.

exchange of tax information;

d.

tax collection assistance; and

e.

other tax cooperation.

 

 

 

 

Agreements or treaties in the field of taxation referred to in Article 48 are bilateral or multilateral agreements which state that the Government of Indonesia has bound itself with tax treaty partners in respect of taxation which may be in the form of:

a.

tax treaties;

b.

the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting;

c.

tax information exchange agreement;

d.

convention on mutual administrative assistance in tax matters;

e.

multilateral or bilateral agreement of the competent authority; and/or

f.

agreements or treaties that aim to address taxation challenges resulting from economic digitalisation and/or other base erosion and profit shifting.

 

 

 

 

(1)

The provisions under the tax treaties referred to in Article 49 letter a apply to individuals or entities constituting tax subjects:

 

a.

resident in Indonesia; and/or

 

b.

of tax treaty partners, 

 

as evidenced by a certificate of domicile.

(2)

Provisions on procedures for the application of tax treaties referred to in paragraph (1) are regulated by a Ministerial Regulation.

 

 

 

 

(1)

The Director General of Taxes is authorised to exchange information for taxation purposes with the tax authorities of tax treaty partners pursuant to the provisions under the agreement or treaties in the field of taxation as referred to in Article 49.

(2)

The Director General of Taxes is authorised to request information from Taxpayers or other parties concerning matters related to taxation issues that will be exchanged as referred to in paragraph (1).

(3)

Taxpayers or other parties requested for information by the Director General of Taxes referred to in paragraph (2) must fulfil the request for information concerning matters related to taxation issues.

(4)

If the Taxpayers or other parties do not comply with the request referred to in paragraph (3), the Taxpayers or other parties are subject to penalties pursuant to statutory provisions in the field of taxation.

(5)

Further provisions on procedures for the exchange of information referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

The Director General of Taxes is authorised to implement the provisions under agreements or treaties in the field of taxation with the tax authorities of tax treaty partners to address tax challenges resulting from economic digitalisation and/or other base erosion and profit shifting as referred to in Article 49 letter f.

 

 

 

 

(1)

In addressing the tax challenges resulting from economic digitalisation based on agreements or treaties as referred to in Article 52, multinational companies that fulfil certain criteria as regulated under the agreements or treaties are considered to fulfil the subjective and objective tax obligations, thereby, are taxed in Indonesia.

(2)

Provisions on taxation resulting from economic digitalisation based on agreements or treaties referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

In addressing other base erosion and profit shifting challenges, multinational company groups covered in the agreements or treaties, may be subject to global minimum tax in Indonesia based on the agreements or treaties referred to in Article 52.

(2)

Provisions on the imposition of the global minimum tax based on agreements or treaties referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Aid or donations, including:

 

a.

zakat, infaq and alms received by amil zakat boards or amil zakat institutions incorporated or approved by the government and received by eligible donees; or

 

b.

compulsory religious donations for the followers of religions acknowledged by the government, received by religious institutions incorporated or approved by the government and received by eligible donees,

 

are excluded from Income Tax objects insofar as there is no business, employment, ownership or control relationship between the parties concerned.

(2)

Aid or donations referred to in paragraph (1) may be in the form of money or in-kind.

(3)

Provisions on aid or donations, including zakat, infaq, alms or religious donations excluded from Income Tax objects as referred to in paragraph (1) are regulated in a Ministerial Regulation.

 

 

 

 

 

(1)

Business income received or accrued by resident Taxpayers with a certain gross turnover is subject to final Income Tax within a certain period.

(2)

The final Income Tax rate referred to in paragraph (1) is 0.5% (zero point five per cent).

(3)

Excluded as business income subject to final Income Tax referred to in paragraph (1) is as follows:

 

a.

income received or accrued by individual Taxpayers from services in connection with independent personal services;

 

b.

income received or accrued overseas on which tax is payable or has been paid overseas;

 

c.

income that has been subject to final Income Tax pursuant to separate statutory provisions in the field of taxation; and

 

d.

income that is excluded from a taxable object.

(4)

Services in connection with independent personal services referred to in paragraph (3) subparagraph a include:

 

a.

professionals who perform independent personal services, consisting of lawyers, accountants, architects, doctors, consultants, notaries, conveyancers, appraisers and actuaries;

 

b.

musicians, presenters, singers, comedians, film stars, soap opera stars, commercial stars, directors, film crews, photo models, models, actors/actresses and dancers;

 

c.

sportsmen;

 

d.

advisors, teachers, trainers, public speakers, extension workers and moderators;

 

e.

authors, researchers and translators;

 

f.

advertising agencies;

 

g.

project supervisors or managers;

 

h.

intermediaries;

 

i.

salespeople;

 

j.

insurance agents; and

 

k.

distributors of multilevel marketing or direct selling companies and other similar activities.

 

 

 

 

(1)

Resident Taxpayers that have a certain gross turnover which is subject to final Income Tax as referred to in Article 56 paragraph (1) are:

 

a.

individual Taxpayers; and

 

b.

corporate Taxpayers in the form of cooperatives, limited partnerships, firms, limited liability companies or village-owned enterprises/joint village-owned enterprises,

 

that receive or accrue income with a gross turnover not exceeding IDR4,800,000,000 (four billion and eight hundred million rupiah) in 1 (one) Tax Year.

(2)

Excluded as Taxpayers referred to in paragraph (1) if:

 

a.

the Taxpayers choose to be subject to Income Tax based on:

 

 

1.

the rates under Article 17 paragraph (1) subparagraph a of the Income Tax Law, for individual Taxpayers; or

 

 

2.

the rates under Article 17 paragraph (1) subparagraph b of the Income Tax Law taking into account Article 31E of the Income Tax Law, for corporate Taxpayers;

 

b.

corporate Taxpayers in the form of limited partnerships or firms incorporated by several individual Taxpayers with special expertise who provide services similar to services in connection with independent personal services as referred to in Article 56 paragraph (4);

 

c.

corporate Taxpayers eligible for Income Tax incentives based on:

 

 

1.

Article 31A of the Income Tax Law;

 

 

2.

Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year and the amendments or replacements thereto; or

 

 

3.

Article 75 and Article 78 of Government Regulation Number 40 of 2021 concerning the Implementation of Special Economic Zones and the amendments or replacements thereto; and

 

d.

permanent establishment Taxpayers.

(3)

The Taxpayers referred to in paragraph (2) subparagraph a must notify the Director General of Taxes.

(4)

The Taxpayers referred to in paragraph (3) for the following Tax Years cannot be subject to final Income Tax pursuant to this Government Regulation.

(5)

Provisions on procedures for the notification referred to in paragraph (3) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

The amount of certain gross turnover referred to in Article 57 paragraph (1) is the amount of gross turnover in 1 (one) year from the last Tax Year before the Tax Year concerned, which is determined based on the total gross turnover of the business, including the gross turnover of branches.

(2)

If individual Taxpayers are husband and wife who:

 

a.

desire a written prenuptial agreement on the separation of assets and income; or

 

b.

the wife chooses to exercise tax rights and obligations on her own,

 

as referred to in Article 8 paragraph (2) subparagraph b and subparagraph c of the Income Tax Law, the amount of gross turnover referred to in paragraph (1) is determined based on the combined gross business turnover of the husband and wife.

 

 

 

 

(1)

The certain period for the imposition of the final Income Tax referred to in Article 56 paragraph (1) is no longer than:

 

a.

7 (seven) Tax Years for individual Taxpayers;

 

b.

4 (four) Tax Years for corporate Taxpayers in the form of cooperatives, limited partnerships, firms, village-owned enterprises/joint village-owned enterprises or individual companies incorporated by 1 (one) person; and

 

c.

3 (three) Tax Years for corporate Taxpayers in the form of limited liability companies.

(2)

To the calculation of the period referred to in paragraph (1), the following provisions apply:

 

a.

for Taxpayers registered after the enactment of this Government Regulation, the period for the imposition of final Income Tax is calculated from the Tax Year the Taxpayers concerned are registered;

 

b.

for village-owned enterprise/joint village-owned enterprise Taxpayers or individual companies incorporated by 1 (one) person registered before the enactment of this Government Regulation, the period for the imposition of final Income Tax is calculated from the Tax Year this Government Regulation comes into force.

 

 

 

 

(1)

The total gross turnover of the business income referred to in Article 56 paragraph (1) every month is the tax base used to calculate the final Income Tax.

(2)

Individual Taxpayers that have a certain gross turnover as referred to in Article 57 paragraph (1) subparagraph a, for the fraction of business gross turnover of up to IDR500,000,000.00 (five hundred million rupiah) in 1 (one) year Taxes are not subject to Income Tax.

(3)

The fraction of business gross turnover not subject to Income Tax referred to in paragraph (2) is the total business gross turnover cumulatively calculated since the first Taxable Period in a Tax Year or a fraction of a Tax Year.

(4)

The gross turnover constituting the tax base referred to in paragraph (1) and the total business gross turnover cumulatively calculated referred to in paragraph (3) are remunerations or the value of the reimbursements in cash or monetary value received or accrued from business, before deducted by sales discounts, cash discounts and/or similar discounts.

(5)

Income Tax payable is calculated based on the rates referred to in Article 56 paragraph (2) multiplied by:

 

a.

the tax base referred to in paragraph (1), for corporate Taxpayers as referred to in Article 57 paragraph (1) subparagraph b; or

 

b.

the tax base referred to in paragraph (1) after taking into account the fraction of the business gross turnover referred to in paragraph (2), for individual Taxpayers as referred to in Article 57 paragraph (1) subparagraph a.

 

 

 

 

(1)

Taxpayers referred to in Article 57 paragraph (1) whose gross turnover in the current Tax Year has exceeded IDR4,800,000,000.00 (four billion and eight hundred million rupiah), the business income remains subject to the Income Tax rates referred to in Article 56 paragraph (2) until the end of the Tax Year concerned.

(2)

Business income referred to in Article 56 paragraph (1) received or accrued in the following Tax Years by the Taxpayers as referred to in paragraph (1) is subject to Income Tax based on:

 

a.

the rates under Article 17 paragraph (1) subparagraph a of the Income Tax Law, for individual Taxpayers; or

 

b.

the rates under Article 17 paragraph (1) subparagraph b of the Income Tax Law by taking into account Article 31 E of the Income Tax Law, for corporate Taxpayers.

 

 

 

 

(1)

Income Tax payable referred to in Article 60 paragraph (5) is settled by:

 

a.

self-remittance by Taxpayers that have a certain gross turnover; or

 

b.

withholding or collection by withholding or collecting agents if the Taxpayers concerned conduct transactions with parties appointed as withholding or collecting agents.

(2)

Income Tax payable referred to in paragraph (1) subparagraph a must be self-remitted every month.

(3)

The withholding or collection of Income Tax payable referred to in paragraph (1) subparagraph b must be performed by withholding or collecting agents for every transaction with Taxpayers subject to final Income Tax pursuant to this Government Regulation.

(4)

Further provisions on procedures for the remittance referred to in paragraph (2) and procedures for the withholding or collection referred to in paragraph (3) are regulated in a Ministerial Regulation.

 

 

 

 

(1)

If the Taxpayers subject to final Income Tax pursuant to this Government Regulation transact with withholding or collecting agents as referred to in Article 62 paragraph (1) subparagraph b, the Taxpayers must apply for a certificate to the Director General of Taxes.

(2)

The Director General of Taxes issues a certificate stating that the Taxpayers concerned are subject to final Income Tax pursuant to this Government Regulation.

(3)

Further provisions on procedures for the submission of applications and issuance of certificates referred to in paragraph (1) and paragraph (2) are regulated in a Ministerial Regulation.

 

 

 

 

 

Income Tax rate applied to taxable income for resident corporate Taxpayers and permanent establishments is:

a.

22% (twenty-two per cent) taking effect in the 2020 Tax Year and the 2021 Tax Year; and

b.

22% (twenty-two per cent) taking effect in the 2022 Tax Year, pursuant to the provisions under Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations.

 

 

 

 

(1)

Resident corporate Taxpayers referred to in Article 64:

 

a.

in the form of Public Companies;

 

b.

with the total share capital traded on the stock exchange in Indonesia of a minimum of 40% (forty per cent); and

 

c.

fulfil certain requirements,

 

are eligible for a 3% (three per cent) lower rate than the rate referred to in Article 64.

(2)

Certain requirements referred to in paragraph (1) subparagraph c include:

 

a.

the shares referred to in paragraph (1) subparagraph b must be held by a minimum of 300 (three hundred) parties;

 

b.

each party referred to in subparagraph a may only hold shares of less than 5% (five per cent) of the total issued and paid-up shares;

 

c.

the provisions referred to in paragraph (1) subparagraph b as well as in subparagraph a and subparagraph b must be fulfilled within a minimum period of 183 (one hundred and eighty- three) calendar days within a period of 1 (one) Tax Year; and

 

d.

the requirements referred to in paragraph (1) subparagraph b as well as in subparagraph a, subparagraph b and subparagraph c are fulfilled by Public Company Taxpayers by submitting a report to the Directorate General of Taxes.

(3)

The parties referred to in paragraph (2) subparagraph a and subparagraph b exclude:

 

a.

Public Company Taxpayers buying back their shares; and/or

 

b.

those that have a special relationship as regulated under the Income Tax Law with Public Company Taxpayers.

(4)

The special relationship referred to in paragraph (3) subparagraph b for Public Company Taxpayers includes the controlling shareholders and/or major shareholders as regulated under statutory provisions in the capital market sector.

(5)

If the provisions referred to in paragraph (1) and paragraph (2) are not fulfilled, Income Tax payable is calculated using the Income Tax rate referred to in Article 64.

 

 

 

 

In certain cases, the provisions referred to in Article 65 paragraph (3) subparagraph a may be excluded pursuant to statutory provisions in the field of taxation.

 

 

 

 

The Chairperson of the Board of Commissioners of the Financial Services Authority or the appointed official submits a list of Public Company Taxpayers that fulfil the certain requirements as referred to in Article 65 paragraph (2) and paragraph (3) subparagraph a to the Minister through the Director General of Taxes.

 

 

 

 

Further provisions on the format and procedures for the submission of:

a.

the report referred to in Article 65 paragraph (2) subparagraph d; and

b.

the list of Public Company Taxpayers that fulfil certain requirements referred to in Article 67,

are regulated in a Ministerial Regulation,

 

 

 

 

 

(1)

The calculation of the period for the imposition of final Income Tax for individual Taxpayers and corporate Taxpayers in the form of cooperatives, limited partnerships, firms or limited liability companies registered:

 

a.

before the enactment of Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover, the period for the imposition of final Income Tax is calculated from the 2018 Tax Year until:

 

 

1.

the end of the period referred to in Article 5 of Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover, insofar as the Taxpayers concerned continue to fulfil the criteria to be subject to final Income Tax pursuant to this Government Regulation; or

 

 

2.

Taxpayers no longer fulfil the criteria to be subject to final Income Tax pursuant to this Government Regulation, even though the period referred to in number 1 has not ended; or

 

b.

after the enactment of Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover until the enactment of this Government Regulation, the period for the imposition of final Income Tax is calculated from the Tax Year the Taxpayers are registered until:

 

 

1.

the end of the period referred to in Article 5 of Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover, insofar as the Taxpayers concerned continue to fulfil the criteria to be subject to final Income Tax pursuant to this Government Regulation; or

 

 

2.

the Taxpayers no longer fulfil the criteria to be subject to final Income Tax pursuant to this Government Regulation, even though the period referred to in number 1 has not ended.

(2)

Individual Taxpayers and corporate Taxpayers in the form of cooperatives, limited partnerships, firms or limited liability companies registered before the enactment of this Government Regulation and no longer fulfil the requirements to carry out tax obligations pursuant to Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover, cannot be subject to final Income Tax pursuant to this Government Regulation.

 

 

 

 

 

Provisions on the buying back of shares listed on stock exchanges referred to in Government Regulation Number 29 of 2020 concerning Income Tax Incentives in the Context of Handling Corona Virus Disease 2019 (COVID-19) apply as follows:

a.

resident Taxpayers:

 

1.

in the form of Public Companies;

 

2.

with the total share capital traded on the stock exchange in Indonesia of a minimum of 40% (forty per cent); and

 

3.

fulfil certain requirements,

 

are eligible to a 3% (three per cent) lower rate than the rate referred to in Article 64;

b.

certain requirements referred to in letter a number 3 include:

 

1.

the shares referred to in letter a number 2 must be held by a minimum of 300 (three hundred) parties;

 

2.

each party referred to in number 1 may only hold shares of less than 5% (five per cent) of the total issued and paid-up shares;

 

3.

the provisions referred to in letter a number 2 as well as number 1 and number 2 must be fulfilled within a minimum period of 183 (one hundred and eighty-three) calendar days within a period of 1 (one) Tax Year; and

 

4.

the requirements referred to in letter a number 2 as well as number 1, number 2 and number 3 are fulfilled by Public Company Taxpayers by submitting a report to the Directorate General of Taxes;

c.

the parties referred to in subparagraph b number 1 and number 2 exclude:

 

1.

Public Company Taxpayers buying back their shares; and/or

 

2.

those that have a special relationship as regulated under Law concerning Income Tax with Public Company Taxpayers;

d.

in the event of policies of the central government or institutions that carry out the supervisory functions in the capital market sector to address the significantly fluctuating market conditions, Public Company Taxpayers that buy back their shares as referred to in letter c number 1 based on the policies of the central government or institution concerned, are considered to be compliant with the requirements referred to in letter b number 1 and number 2;

e.

the policies of the central government or institutions having supervisory functions in the capital market as referred to in letter d shall be stipulated in the form of a letter of appointment or a letter of approval;

f.

the buyback of shares referred to in letter d shall be carried out no later than 30 September 2020;

g.

shares bought back referred to in letter d may only be held by Taxpayers until 30 September 2022;

h.

if after the period referred to in letter g, shareholding does not fulfil the provisions in letter a, Resident Taxpayers in the form of Public Companies referred to in letter d are not eligible for a 3% (three per cent) lower rate than the rate referred to in Article 64;

i.

the assumption of continuing to fulfil the provisions referred to in letter d only applies to the 2021 Tax Year and the 2022 Tax Year; and

j.

Taxpayers must attach a report on the results of the buyback of shares traded on the stock exchange in Indonesia as referred to in subparagraph d pursuant to statutory provisions in the Annual Income Tax Return for the Tax Year concerned.

 

 

 

 

When this Government Regulation comes into force, all implementing regulations of Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, last amended by Law Number 11 of 2020 concerning Job Creation (State Gazette of the Republic of Indonesia of 2020 Number 245, Supplement to the State Gazette of the Republic of Indonesia Number 6573), are declared to remain valid insofar as they do not contradict the provisions under this Government Regulation.

 

 

 

 

When this Government Regulation comes into force:

a.

Government Regulation Number 18 of 2009 concerning Aid or Donations Including Zakat or Compulsory Religious Contributions Excluded from Income Tax Objects (State Gazette of the Republic of Indonesia of 2009 Number 35, Supplement to the State Gazette of the Republic of Indonesia Number 4984), is revoked and declared invalid;

b.

the provisions under Article 2A of Government Regulation Number 94 of 2010 concerning the Calculation of Taxable Income and Settlement of Income Tax in the Current Year (State Gazette of the Republic of Indonesia of 2010 Number 161, Supplement to the State Gazette of the Republic of Indonesia Number 5183) as amended several times, last amended by Government Regulation Number 9 of 2021 concerning the Tax Treatment to Support Ease of Doing Business (State Gazette of the Republic of Indonesia of 2021 Number 19, Supplement to the State Gazette of the Republic of Indonesia Number 6621), are revoked and declared invalid;

c.

Government Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover (State Gazette of the Republic of Indonesia of 2018 Number 89, Supplement to the State Gazette of the Republic of Indonesia Number 6214), is revoked and declared invalid;

d.

the provisions under Article 10 of Government Regulation Number 29 of 2020 concerning Income Tax Facilities in the Context of Handling Corona Virus Disease 2019 (COVID- 19) (State Gazette of the Republic of Indonesia of 2020 Number 148, Supplement to the State Gazette of the Republic of Indonesia Number 6526), are revoked and declared invalid; and

e.

Government Regulation Number 30 of 2020 concerning the Reduction of Income Tax Rates for Resident Corporate Taxpayers in the Form of Public Companies (State Gazette of the Republic of Indonesia of 2020 Number 152, Supplement to the State Gazette of the Republic of Indonesia Number 6530), is revoked and declared invalid.

 

 

 

 

(1)

Provisions on the tax treatment of reimbursements or remunerations in the form of in-kind and/or fringe benefits referred to in Article 23 to Article 29 apply as follows:

 

a.

for employers or providers of reimbursements or remunerations in the form of in-kind and/or fringe benefits that maintain bookkeeping for the 2022 accounting year starting before 1 January 2022, effective as of 1 January 2022; and

 

b.

for employers or providers of reimbursements or remunerations in the form of in-kind and/or fringe benefits that maintain bookkeeping for the 2022 accounting year starting on 1 January 2022 or onwards, effective when the 2022 accounting year starts.

(2)

Provisions on the withholding of Income Tax for employers or providers of reimbursements or remunerations in the form of in-kind and/or fringe benefits and filing in Income Tax Returns for the recipients of reimbursements or remunerations in the form of in-kind and/or fringe benefits apply as follows:

 

a.

the obligation to withhold Income Tax referred to in Article 30 for employers or providers of reimbursements or remunerations in the form of in-kind and/or fringe benefits is effective for income received or accrued as of 1 January 2023; and

 

b.

for income in the form of in-kind and/or fringe benefits received or accrued by since:

 

 

1.

1 January 2022 until 31 December 2022, from the employers or providers of reimbursements or remunerations referred to in paragraph (1) subparagraph a; or

 

 

2.

the beginning of the 2022 accounting year until 31 December 2022, from the employers or providers of reimbursements or remunerations referred to in paragraph (1) subparagraph b,

 

that has not been subject to the withholding of Income Tax by the employers or providers of the reimbursements or remunerations referred to in letter a, Income Tax payable must be self-calculated and paid and filed by the recipient in the Income Tax Return for the 2022 Tax Year.

 

 

 

 

This Government Regulation comes into force on the date of promulgation.

 

 

 

 

For public cognisance, this Government shall be promulgated by placement in the State Gazette of the Republic of Indonesia.

 

 

 

 

Stipulated in Jakarta
on 20 December 2022
PRESIDENT OF THE REPUBLIC OF INDONESIA,
signed
JOKO WIDODO

Promulgated in Jakarta
on 20 December 2022
MINISTER OF THE STATE SECRETARIAT OF THE REPUBLIC OF INDONESIA,
signed
PRATIKNO

 

STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2022 NUMBER 231

 

 

 

 

 

To suppress the budget deficit and increase the tax ratio, the Government has undertaken fiscal policy measures, among others, reforming the tax sector. In line with the tax reforms, the regulation of tax policies has been subject to comprehensive, consolidative and harmonious adjustments through Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations. One of the adjusted materials is the provisions on the Income Tax Law.

 

Under Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations, among others, there is a mandate for further regulation in the provisions under Article 32C concerning Income Tax objects, exclusion from Income Tax objects, deductible expenses, depreciation of tangible assets and/ or amortisation of intangible assets, the tax treatment of reimbursements or remunerations in the form of in-kind and/or fringe benefits, instruments to prevent tax avoidance and application of international agreements in the field of taxation.

 

In addition, implementing provisions of the Income Tax Law also need to be adjusted because the regulation has been changed under Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations, as follows:

 

a.

Government of the Republic of Indonesia Regulation Number 18 of 2009 concerning Aid or Donations Including Zakat or Compulsory Religious Contributions Excluded from Income Tax Objects;

 

b.

Government of the Republic of Indonesia Regulation Number 23 of 2018 concerning Income Tax on Business Income Received or Accrued by Taxpayers with Certain Gross Turnover;

 

c.

Government Regulation Number 29 of 2020 concerning Income Tax Facilities in the Context of Handling Corona Virus Disease 2019 (COVID- 19); and

 

d.

Government of the Republic of Indonesia Regulation Number 30 of 2020 concerning the Reduction of Income Tax Rates for Resident Corporate Taxpayers in the Form of Public Companies.

 

 

 

The scope of regulation under this Government Regulation includes adjustments to several provisions under the Income Tax Law, with the following subject matters:

 

a.

the criteria for certain skills and the imposition of Income Tax for foreigners;

 

b.

further regulation of income excluded from taxable objects, deductible expenses, depreciation and/or amortisation, reimbursements or remunerations in the form of in-kind and/or fringe benefits, instruments to prevent tax avoidance and application of international agreements in the field of taxation;

 

c.

adjustments to the regulation of aid or donations including zakat, infaq, alms and compulsory religious donations excluded from Income Tax objects;

 

d.

adjustment to Income Tax regulation of business income received or accrued by Taxpayers that have a certain gross turnover; and

 

e.

adjustments to the reduction of Income Tax rates for resident corporate Taxpayers in the form of Public Companies.

 

The formulation of this Government Regulation is expected to establish a tax system that prioritises the principles of fairness and legal certainty, thereby, may improve the performance of tax revenues and the tax base and realise the objectives of Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations, namely increasing sustainable economic growth to establish fair, prosperous and well-off society.

 

 

 

 

Article 1

Sufficiently clear.

Article 2

Sufficiently clear.

Article 3

Sufficiently clear.

Article 4

Sufficiently clear.

Article 5

Sufficiently clear.

Article 6

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Subparagraph a

Sufficiently clear.

Subparagraph b

“Business relationship between the parties concerned” refers to a relationship that occurs if there are routine transactions between the provider and the recipient.

 

“Employment relationship between the parties concerned” refers to a relationship that occurs if there is a relationship in the form of employment, the provision of services or direct or indirect implementation of activities between the provider and the recipient.

 

“Ownership relationship between the parties concerned” refers to a relationship that occurs if there is direct or indirect capital participation between the provider and the recipient.

 

“Control relationship between the parties concerned” refers to a relationship that occurs if there is direct or indirect control between the provider and the recipient as referred to in Article 18 paragraph (4) subparagraph b of the Income Tax Law.

Paragraph (3)

Subparagraph a

Sufficiently clear.

Subparagraph b

Sufficiently clear.

Subparagraph c

Sufficiently clear.

Subparagraph d

“Social bodies” include social welfare institutions incorporated in Indonesia.

Subparagraph e

Sufficiently clear.

Subparagraph f

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 7

Sufficiently clear.

Article 8

Paragraph (1)

“The Social Security Administration Body” refers to a legal entity incorporated to administer social security programs, including:

a.	the Social Security Administration Body for Health Insurance;
b.	the Social Security Administration Body for Worker Social Security;
c.	Civil Servant Savings and Insurance Company (PT TASPEN (Persero));
d.	Social Insurance Company of the Armed Forces of the Republic of Indonesia (PT ASABRI (Persero); and
e.	other legal entities incorporated to administer social security programs.

 

“Religious bodies or institutions” refer to non-profit bodies whose main activity is managing places of worship and/or organizing religious activities.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Article 17

Sufficiently clear.

Article 18

Sufficiently clear.

Article 19

Paragraph (1)

Subparagraph a

Sufficiently clear.

Subparagraph b

Sufficiently clear.

Subparagraph c

Number 1

Sufficiently clear.

Number 2

Sufficiently clear.

Number 3

“A general or special publication” refers to publications by an Indonesian legal entity through print or electronic media which includes the publication of announcements in the publication of newspapers/magazines or other common mass media, issuance of the Association of State-Owned Banks (HIMBARA)/Association of National Commercial Banks (PERBANAS), issuance/announcements of the Financial Services Authority and publications by associations that have been registered as Taxpayers and creditors are members.

Number 4

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Article 20

Paragraph (1)

Sufficiently clear.

Paragraph (2)

“Certain requirements” include the scope of other business entity subjects that distribute credit and requirements for reinvestment costs pursuant to statutory provisions.

Paragraph (3)

Sufficiently clear.

Article 21

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Based on a Taxpayer’s bookkeeping, there are permanent buildings that have useful lives exceeding 20 (twenty) years. The Taxpayer is given the option in calculating the tax depreciation costs of the permanent buildings in equal parts with a useful life of 20 (twenty) years or according to the actual useful life based on the Taxpayer’s bookkeeping.

Paragraph (6)

For permanent buildings held and used before the 2022 Tax Year and the depreciation has been calculated with a useful life of 20 (twenty) years, Taxpayers are given the option to calculate the depreciation costs according to the actual useful life based on the Taxpayers’ bookkeeping, by notifying the Director General of Taxes no later than the end of the 2022 Tax Year.

 

Example:

In January 2017, a Taxpayer purchased a factory building worth IDR1,000,000,000.00 (one billion rupiah). The depreciation of the costs for the acquisition of the factory building commenced in January of the 2017 Tax Year. The useful life of the factory building based on the Taxpayer’s bookkeeping is 30 (thirty) years. However, the Taxpayer performs the depreciation with a useful life of 20 (twenty) years and a depreciation rate of 5% (five per cent) per year.

 

To depreciate the factory building which has a useful life of more than 20 (twenty) years, the Taxpayer may choose to calculate the depreciation costs according to the actual remaining useful life based on the Taxpayer’s bookkeeping with the depreciation rate calculated based on the tax net book value, by notifying the Director General of Taxes no later than the end of the 2022 Tax Year.

 

In February 2022, the Taxpayer notified of the option to calculate the depreciation costs for the factory building according to the actual useful life based on the Taxpayer’s bookkeeping. According to the Taxpayer’s bookkeeping, the factory building has been depreciated for 5 (five) years with the remaining useful life at the beginning of the 2022 Tax Year (1 January 2022) of 25 (twenty-five) years. To calculate the depreciation starting from the 2022 Tax Year, the following are determined:

a.	depreciation rate	\(= {1 \over 25\ \mathrm {years}} \times 100\%\)
		\(= 4\%\text{ } \text{per year}\)
b.	tax net book value	\(= \text {IDR1,000,000,000.00} - (5 \times 5\% \times \text{IDR1,000,000,000.00})\)
		\(= \text{IDR750,000,000.00}\)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6836