a.

that to provide legal certainty and ease in the imposition of Income Tax on income from the construction services business as well as to maintain a conducive business climate in the construction services sector, it is necessary to adjust the regulation of Income Tax on income from the construction service business;

b.

that based on the considerations referred to in letter a, it is necessary to enact a Government Regulation concerning the Second Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Services Business;

 

 

 

 

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);

3.

Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2008 Number 109, Supplement to the State Gazette of the Republic of Indonesia Number 4881) as amended by Government Regulation Number 40 of 2009 concerning the Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2009 Number 83, Supplement to the State Gazette of the Republic of Indonesia Number 5014);

 

 

 

 

GOVERNMENT REGULATION CONCERNING THE SECOND AMENDMENT TO GOVERNMENT REGULATION NUMBER 51 OF 2008 CONCERNING INCOME TAX ON INCOME FROM CONSTRUCTION SERVICE BUSINESS.

 

 

 

 

Several provisions of Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2008 Number 109, Supplement to the State Gazette of the Republic of Indonesia Number 4881) as amended by Government Regulation Number 40 of 2009 concerning the Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2009 Number 83, Supplement to the State Gazette of the Republic of Indonesia Number 5014) are amended, thereby, it reads as follows:

 

 

 

 

1.

The provisions of Article 1 are amended, thereby, it reads as follows:

 

 

 

 

 

 

Referred to herein this Government Regulation:

 

1.

Income Tax Law, hereinafter referred to as the PPh 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.

Construction Services are construction consulting and/or construction work services.

 

3.

Service User is an individual or entity, including a permanent establishment as the owner or employer using Construction Services.

 

4.

Service Provider is an individual or entity, including a permanent establishment as the provider of Construction Services.

 

5.

Contract Value of Construction Services is the value listed or should be listed in the Construction Services contract as a whole.

2.

The provisions of Article 2 are amended, thereby, it reads as follows:

 

 

 

 

 

 

(1)

Income from Construction Services business is subject to final Income Tax.

 

(2)

The Construction Service Business referred to in paragraph (1) has the following classifications:

 

 

a.

construction consulting service business classification for the general characteristics;

 

 

b.

construction consulting service business classification for the specialist characteristics;

 

 

c.

construction work business classification for the general characteristics;

 

 

d.

construction work business classification for the specialist characteristics; and

 

 

e.

integrated construction work business classification.

 

(3)

The classification referred to in paragraph (2) is carried out pursuant to statutory provisions.

 

(4)

Construction Service business referred to in paragraph (1) is conducted through activities in the form of the following services:

 

 

a.

construction consulting;

 

 

b.

construction work; and

 

 

c.

integrated construction work.

 

(5)

Construction consulting services referred to in paragraph (4) subparagraph a cover all or part of the activities that include the review, planning, design, supervision and management of the construction of a building.

 

(6)

Construction work services referred to in paragraph (4) subparagraph b cover activities that include the construction, operation, maintenance, demolition and reconstruction of a building.

 

(7)

Integrated construction work services referred to in paragraph (4) subparagraph c cover the integration of construction work and construction consulting services, including the integration of service functions in the integrated model of planning, procurement and development as well as the integrated model of planning and development.

 

 

 

 

3.

The provisions of paragraph (1) of Article 3 are amended and between (1) and paragraph (2), 1 (one) paragraph is inserted, namely paragraph (1a), thereby, Article 3 reads as follows:

 

 

 

 

 

 

(1)

Income Tax rates for Construction Service business referred to in Article 2 are as follows:

 

 

a.

1.75% (one point seventy-five per cent) for construction work carried out by Service Providers that have small-scale business entity certificates or work competency certificates for individual businesses;

 

 

b.

4% (four per cent) for construction work carried out by Service Providers that do not have business entity certificates or work competency certificates for individual businesses;

 

 

c.

2.65% (two point sixty-five per cent) for construction work performed by Service Providers other than the Service Providers referred to in subparagraph a and subparagraph b;

 

 

d.

2.65% (two point sixty-five per cent) for integrated construction work carried out by Service Providers that have business entity certificates;

 

 

e.

4% (four per cent) for integrated construction work carried out by Service Providers that do not have business entity certificates;

 

 

f.

3.5% (three point five per cent) for construction consulting services carried out by Service Providers that have business entity certificates or work competency certificates for individual businesses; and

 

 

g.

6% (six per cent) for construction consulting services performed by Service Providers that do not have business entity certificates or work competency certificates for individual businesses.

 

(1a)

The imposition of final Income Tax on Service Providers that do not have certificates as referred to in paragraph (1) subparagraph b, subparagraph e and subparagraph g does not negate the obligation to have the certificates pursuant to statutory provisions in the field of Construction Services.

 

(2)

In the event that a Service Provider constitutes a permanent establishment, the Income Tax rates referred to in paragraph (1), do not include Income Tax on the residual profits of the permanent establishment after the final Income Tax.

 

 

 

 

4.

The provisions of Article 7 paragraph (1) are deleted, thereby, Article 7 reads as follows:

 

 

 

 

 

 

(1)

Deleted.

 

(2)

Other income received or accrued by Service Providers from outside the Construction Service business is subject to rates pursuant to the general provisions of the Income Tax Law.

 

(3)

Foreign exchange difference gains or losses from Construction Services business are included in the calculation of the Contract Value of Construction Services subject to final Income Tax.

 

 

 

 

5.

Between Article 10C and Article 11, 1 (one) new article is inserted, namely Article 10D which reads as follows:

 

 

 

 

 

 

(1)

Implementation of the provisions on the final Income Tax referred to in Article 2 will be evaluated after 3 (three) Tax Years since this Government Regulation is promulgated.

 

(2)

The evaluation referred to in paragraph (1) is carried out by the minister who administers governmental affairs in the field of finance.

 

(3)

Based on the evaluation referred to in paragraph (2), income from the Construction Services business may be subject to Income Tax pursuant to the general provisions of Article 17 of the Income Tax Law.

 

 

 

 

1.

To contracts signed before this Government regulation is promulgated, the following provisions shall apply:

 

a.

for the payment of a contract or part of a contract prior to the enactment of this Government Regulation, Income Tax shall be imposed pursuant to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business as amended by Government Regulation Number 40 of 2009 concerning the Amendment to Government Regulation Number 51 2008 concerning income tax on Income from Construction Service Business;

 

b.

for the payment of a contract or part of a contract as of the enactment of this Government Regulation, Income Tax shall be imposed pursuant to this Government Regulation.

2.

When this Government Regulation comes into force, all statutory provisions constituting the implementing regulations of Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2008 Number 109, Supplement to the State Gazette of the Republic of Indonesia Number 4881) as amended by Government Regulation Number 40 of 2009 concerning the Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business (State Gazette of the Republic of Indonesia of 2009 Number 83, Supplement to the State Gazette of the Republic of Indonesia Number 5014), are declared to remain valid insofar as they do not contradict the provisions under this Government Regulation.

3.

This Government Regulation shall come into force on the date of promulgation.

 

 

 

 

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

 

 

 

 

Enacted in Jakarta
on 21 February 2022
PRESIDENT OF THE REPUBLIC OF INDONESIA,
signed
JOKO WIDODO

Promulgated in Jakarta
on 21 February 2022
MINISTER OF LAW AND HUMAN RIGHTS,
signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2022 NUMBER 47

OF
 

 

 

 

 

In most developing countries, efforts to increase construction capacity and capability are essential, including efforts to improve cost and time efficiency and quality of construction work. The construction sector also plays an important role in creating jobs, encouraging investment, and supporting the mobility of goods and services. To improve a more conducive construction business climate, it is necessary to support tax administration policies in favour of the construction sector.

Corona Virus Disease 2019 (COVID-19), which has been declared a pandemic by the World Health Organization, has had an impact on the decline in social, economic and community activities in Indonesia, including the construction sector as an economic business entrepreneur. Therefore, Government intervention is required through adjustments to the provisions stipulated under Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business as amended by Government Regulation Number 40 of 2009 concerning the Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Service Business, in the form of adjustments to the final Income Tax rate on Construction Services. With the adjustments to the final Income Tax rates on Construction Services, the Government expects that these policies may assist the construction sector in addressing the impact of the COVID-19 pandemic, thereby, the sustainability of business processes from upstream to downstream is maintained.

The policy of the final Income Tax rate application on Construction Services is, in principle, aimed at providing ease and simplification for the construction sector entrepreneurs to carry out their tax obligations. However, taking into account the fairness and equality principles, the policy of the final Income Tax imposition needs to be evaluated within a certain period. The evaluation results may be in the form of Income Tax imposition pursuant to the general provisions under the Income Tax Law

 

 

 

 

Article I

Number 1

Article 1

Sufficiently clear.

Number 2

Article 2

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

“Statutory provisions” refer to, among others, statutory provisions in the field of Construction Services and statutory provisions in the field of electricity.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Sufficiently clear.

Paragraph (6)

Sufficiently clear.

Paragraph (7)

Sufficiently clear.

Number 3

Article 3

Paragraph (1)

“Business entity certificate“ refers to the proof of recognition of the classification and qualification of the Construction Services business capability, including results of the accreditation of foreign Construction Services capability issued by:

a.	business entity certification agencies established by a business entity association accredited by the Ministry of Public Works and Public Housing and recorded by construction service development agencies;
b.	business entity certification agencies that have been accredited by the minister who administers governmental affairs in the field of energy and mineral resources; or
c.	the minister who administers governmental affairs in the field of energy and mineral resources.

 

“Work competency certificates for individual businesses” refer to the proof of recognition of the competence of construction workers issued by professional certification agencies and recorded by construction service development agencies.

Subparagraph a

Sufficiently clear.

Subparagraph b

Sufficiently clear.

Subparagraph c

“Service Providers other than the Service Providers referred to in subparagraph a and subparagraph b” refer to, among others, Service Providers that have medium-scale business qualifications or large-scale business qualifications or specialists.

Subparagraph d

Sufficiently clear.

Subparagraph e

Sufficiently clear.

Subparagraph f

Sufficiently clear.

Subparagraph g

Sufficiently clear.

Paragraph (1a)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Number 4

Article 7

Sufficiently clear.

Number 5

Article 10D

Sufficiently clear.

Article II

Sufficiently clear.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6767