a.

that to harmonise the policy of reducing income tax rates on bond interest income received or accrued by non-resident taxpayers, creating equal income tax burden among bond investors as well as to further encourage bond market development and deepening, it is necessary to replace Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest as amended several times, last amended by Government Regulation Number 55 of 2019 concerning the Second Amendment to Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest;

b.

that based on the considerations referred to in letter a and to implement the provisions under Article 4 paragraph (2) of Law Number 7 of 1983 concerning Income Taxes as amended several times, last amended by Law Number 11 of 2020 concerning Job Creation, it is necessary to enact a Government Regulation concerning Income Tax on Income in the Form of Bond Interest Received or Accrued by Resident Taxpayers and Permanent Establishments;

 

 

1.

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

2.

Law Number 7 of 1983 concerning Income Taxes (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);

 

 

GOVERNMENT REGULATION CONCERNING INCOME TAX ON INCOME IN THE FORM OF BOND INTEREST RECEIVED OR ACCRUED BY RESIDENT TAXPAYERS AND PERMANENT ESTABLISHMENTS.

 

Referred to herein this Government Regulation:

1.

Bonds are debentures, government securities and local government bonds with a maturity of more than 12 (twelve) months issued by the government and non-government, including bonds issued based on sharia principles (sharia bonds).

2.

Bond Interest is the consideration received or accrued by Bondholders in the form of interest, ujrah/fees, profit sharing, margin, other similar income and/or discounts.

3.

Income Tax Law is Law Number 7 of 1983 concerning Income Taxes as amended several times, last amended by Law Number 11 of 2020 concerning Job Creation.

 

 

(1)

Income in the form of Bond Interest received or accrued by resident taxpayers and permanent establishments is subject to final income tax.

(2)

The final income tax rate referred to in paragraph (1) amounts 10% (ten per cent) of the income tax base.

(3)

The income tax base referred to in paragraph (2) for:

 

a.

interest from interest-bearing Bonds, amounts to the gross amount according to the holding period of the Bonds;

 

b.

discount from interest-bearing Bonds, amounts to the difference between the selling price or the nominal value over the acquisition price of the Bonds, excluding accrued interest; and

 

c.

discount from zero coupon Bonds, amounts to the difference between the selling price or the nominal value over the acquisition price of the Bonds.

(4)

If there is a negative discount or loss at the time of sale of interest-bearing Bonds, the negative discount or loss may be set off against the income tax base of the accrued Bond Interest referred to in paragraph (3) subparagraph a.

 

 

(1)

Provisions on the imposition of final income tax referred to in Article 2 paragraph (1) do not apply if the recipient of income in the form of Bond Interest constitutes:

 

a.

a pension fund taxpayer whose establishment or incorporation has been approved by the Minister of Finance or has obtained a permit from the Financial Services Authority and fulfils the requirements stipulated under Article 4 paragraph (3) subparagraph h of the Income Tax Law and the implementing regulations thereto; and

 

b.

a bank taxpayer incorporated in Indonesia or a foreign bank branch in Indonesia.

(2)

Income in the form of Bond Interest received and/or accrued by the taxpayers referred to in paragraph (1) subparagraph b is subject to income tax based on the statutory tax rates pursuant to the Income Tax Law.

 

 

(1)

Final income tax referred to in Article 2 is withheld by:

 

a.

the Bond issuer or custodian as the appointed payment agent, for interest and/or discount received by interest-bearing Bonds holders at the maturity date of the Bond Interest and discount received by the zero coupon Bonds holders at the maturity date of the Bonds;

 

b.

securities companies, dealers, banks, pension funds or mutual funds as brokers and/or buyers, for interest and discount received by the seller of the Bonds at the time of the transaction; and/or

 

c.

the custodian or sub-registry as the party that records the transfer of ownership rights, for interest and discount received by the seller of the Bonds if the sales transaction is performed directly without a broker and the buyer of the Bonds is not the party appointed as the withholding agent referred to in subparagraph b.

(2)

If Bond Interest issued by the Government is administered through the Bank Indonesia Scriptless Securities Settlement System, the final income tax referred to in Article 2 is self-remitted by the income recipient.

(3)

The withholding agent referred to in paragraph (1) and taxpayers that self-pay income tax referred to in paragraph (2) must submit a report on the withholding and/or remittance of income tax to the Directorate General of Taxes.

 

 

Further provisions on procedures for the withholding, remittance and filing of Income Taxes on Bond Interest referred to in Article 4 are stipulated by a Minister of Finance Regulation.

 

When this Government Regulation comes into force, all statutory provisions constituting the implementing regulations of Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest (State Gazette of the Republic of Indonesia of 2009 Number 33, Supplement to the State Gazette of the Republic of Indonesia Number 4982) as amended several times, last amended by Government Regulation Number 55 of 2019 concerning the Second Amendment to Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest (State Gazette of the Republic of Indonesia of 2019 Number 147, Supplement to the State Gazette Republic of Indonesia Number 6373), are declared to remain valid insofar as they do not contradict the provisions under this Government Regulation.

 

When this Government Regulation comes into force, Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest (State Gazette of the Republic of Indonesia of 2009 Number 33, Supplement to the State Gazette of the Republic of Indonesia Number 4982) as amended several times, last amended by Government Regulation Number 55 of 2019 concerning the Second Amendment to Government Regulation Number 16 of 2009 concerning Income Tax on Income in the Form of Bond Interest (State Gazette of the Republic of Indonesia of 2019 Number 147, Supplement to the State Gazette Republic of Indonesia Number 6373), is revoked and declared invalid.

 

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 30 August 2021

PRESIDENT OF THE REPUBLIC OF INDONESIA,

signed

JOKO WIDODO

 

Promulgated in Jakarta

on 30 August 2021

MINISTER OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA,

signed

YASONNA H. LAOLY

 

STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2021 NUMBER 197

 

 

 

 

 

 

Law Number 11 of 2020 concerning Job Creation stipulates space for a reduction in the income tax rate on interest income received by non-resident taxpayers at a lower rate of 20% (twenty per cent) through a Government Regulation. Based on this, Government Regulation Number 9 of 2021 concerning the Tax Treatment to Support Ease of Doing Business, which among others stipulates the reduction of the income tax rate on Bond Interest income received by non-resident taxpayers other than permanent establishments to 10% (ten per cent), has been promulgated.

 

Taking this into account, to provide equal income tax treatment between domestic and foreign investors and to reduce distortions in the establishment of Bond prices between investors, it is necessary to adjust the income tax rate on Bond Interest income received or accrued by resident taxpayers and permanent establishments. Further, the income tax rate on Bond Interest is adjusted as an effort to develop and deepen the domestic Bond market.

 

Article 1

Sufficiently clear.

Article 2

Paragraph (1)

Resident taxpayers consist of individuals, undivided inheritance as a unit in lieu of the beneficiaries and entities, that constitute tax residents pursuant to the Income Tax Law.

 

Included as corporate taxpayers are mutual funds and collective investment contracts.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Interest-bearing Bonds are known as interest-bearing debt securities.

 

The holding period of Bonds is known as the holding period.

 

Accrued interest is known as accrued interest.

 

Zero coupon Bonds are known as non-interest-bearing debt securities.

Paragraph (4)

Example:

On 1 July 2022, PT AAA (issuer) issues interest-bearing Bonds as follows:

-	The nominal value is IDR 12,000,000.00 per Bond.
-	The holding period of the Bonds is 5 years (due on 1 July 2027).
-	Fixed rate amounts to 16% per year, interest is due every 30 June and 31 December.
-	The initial public offering is listed on the Indonesia Stock Exchange (IDX).

Article 3

Paragraph (1)

Subparagraph a

Pursuant to Article 4 paragraph (3) of the Income Tax Law and the implementing regulations thereto, income from capital invested by pension funds in certain sectors is excluded from income tax objects.

Subparagraph b

Although income in the form of Bond Interest received or accrued by bank taxpayers in Indonesia and foreign bank branches in Indonesia is not subject to final withholding tax pursuant to this Government Regulation, it is an income tax object subject to income tax based on statutory tax rates pursuant to the Income Tax Law.

Paragraph (2)

Income tax based on statutory tax rates pursuant to the Income Tax Law is the calculation of income tax by calculating taxable income pursuant to the provisions under the Income Tax Law, by applying the income tax rate for corporate taxpayers at the rate stipulated under Law Number 2 of 2020 concerning the Stipulation of Government Regulation in Lieu of Law Number 1 of 2020 concerning State Financial Policy and Financial System Stability to Control Corona Virus Disease 2019 (COVID-19) Pandemic and/or in Response to Dangerous Threats to the National Economy and/or the Stability of the Financial System into a Law.

Article 4

Paragraph (1)

Sufficiently clear.

Paragraph (2)

“Bank Indonesia Scriptless Securities Settlement System” refers to an infrastructure used as a means of administering transactions and securities electronically. Securities administration includes the settlement, registration of ownership and payment of coupons or settlement of securities.

Paragraph (3)

Sufficiently clear.

Article 5

Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Sufficiently clear.

Article 8

Sufficiently clear.

 

 

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6715