The preamble to the 1945 Constitution of the Republic of Indonesia mandates that the establishment of the Republic of Indonesia is intended to establish a society that is prosperous, just, prosperous, equitable, both materially and spiritually. In line with this goal, Article 27 paragraph (2) of the 1945 Constitution stipulates that “Every citizen has the right to work and a decent living for humanity, therefore, the state needs to undertake various efforts or actions to fulfil the citizens’ rights to obtain work and a decent living. The fulfilment of the right to work and a decent living is, in principle, one of the important aspects of national development implemented to develop Indonesian people as a whole.

The Central Government has undertaken various efforts to establish and expand employment to reduce unemployment and accommodate new workers as well as encourage the development of Cooperatives and Micro, Small and Medium Enterprises to encourage the national economy which will improve people’s welfare. Even though the open unemployment rate continues to fall, Indonesia still needs quality job creation because:

 

a.

The total workforce in February 2022 amounted to 144.01 million people, an increase of 4.20 million people compared to February 2021;

 

b.

The working population amounts to 135.61 million people, of which 81.33 million people (59.97%) work in informal activities;

 

c.

The 2019 Corona Virus Disease (COVID-19) pandemic has affected 11.53 million people (5.53%) of the working age population, namely 0.96 million unemployed, 0.55 million Non-Labours, 0.55 million 0.58 million people unemployed and 9.44 million people of the working population experiencing reduced working hours;

 

d.

Wage increases whose growth is in line with economic growth and increased worker productivity are needed.

 

 

 

 

The Central Government has strived to expand social security and aid programs as a commitment to increase competitiveness and strengthen the quality of human resources as well as to accelerate the reduction of poverty and income inequality. Thus, through social security support and aid, the total benefits are not only received by workers, but also felt by the workers’ families.

In this regard, the Central Government needs to adopt strategic policies to create and expand employment by increasing investments, encouraging the development and improvement of the quality of Cooperatives and Micro, Small and Medium Enterprises. To increase job creation and expansion, stable and consistent economic growth is required every year. However, these efforts are faced with the current conditions, specifically, those concerning the weakening of economic growth along with rising prices (which is known as the phenomenon of stagflation). In the October 2022 World Economic Outlook (WEO) report, the International Monetary Fund (IMF) cut its global growth forecast to 3.2% in 2022 from the previous 3.6% in the April 2022 WEO. World economic conditions are projected to deteriorate in 2023, dropping to a level of 2.7%, well below the 4.9% figure reported by the WEO in October 2021. The steepest revisions to growth are reported for the main European economies, the United States economy and the People’s Republic of China economy. Growth in the United States is projected to fall to the level of 1.0% in 2023, from the expectations of 1.6% in 2022 and 5.7% in 2021. The Euro Zone economy which grew by 5.2% in 2021 is predicted to decline at the level of 3.1% in 2022 and 0.5% in 2023. The economy of the People’s Republic of China is expected to grow by approximately 3.2% in 2022 and 4.4% in 2023, far below the 8.1% reported last year.

In the world today, profound supply chain issues affect supply limitations, specifically, basic staples, such as food and energy. The limited supply, which is much worse than the decrease in demand, has resulted in an unprecedented increase in inflation in the last 40 years in several developed countries, such as the United States and Britain. The market economy surveyed by Bloomberg in mid-2022 anticipates a world inflation rate of above 6% in 2022, far higher than the figure of approximately 2% based on a Bloomberg survey at the end of 2021.

The Indonesian economy will be impacted by the visible global stagflation. Indonesia’s economic growth, formerly projected to be around 6% in 2022 by the IMF (WEO, October 2021), has been cut down quite significantly. The Bloomberg survey and IMF report (WEO, October 2022), the World Bank and the Asian Development Bank overview Indonesia’s economic growth only in the range of 5.1% - 5.3% for 2022 and will decline to a level of 4.8% in 2023. Concurrently, inflationary pressures have started to show, where the inflation rate at the end of the third quarter of 2022 reached almost 6% year-on-year, compared to a level of around 3% in the first quarter of 2022. The high level of uncertainty in the world economy, mainly driven by geopolitical conditions, poses risks to Indonesia’s weaker economic growth and higher inflation prospects. The policy mix response standards, particularly between monetary and fiscal policies, which have been continuously strengthened since the start of the Corona Virus Disease 2019 (COVID-19) pandemic, are increasingly required. In the era of stagflation, policy coordination becomes much more complex, in which the government must navigate between supporting economic growth and containing inflation.

Amidst turbulent global conditions and limited space for macro policy actions, strengthening domestic economic fundamentals to maintain domestic economic competitiveness must be a top priority. The stability of the strength of domestic demands, specifically, private consumption and investments amidst the rising price pressures and slumping global growth, is highly dependent on Indonesia’s ability to increase the competitiveness and attractiveness of the domestic market for investors. In this regard, the implementation of comprehensive structural reforms outlined in the Government Regulation in Lieu of Law concerning Job Creation becomes very important and urgent.

Therefore, Job Creation strategic policies and measures are needed which require the involvement of all related parties and as such, it is necessary to formulate and stipulate a Government Regulation in Lieu of Law concerning Job Creation to create the widest possible employment for the Indonesian people equally throughout the territory of the Republic of Indonesia to fulfil the right to a decent living. The scope of Government Regulation in Lieu of Law concerning Job Creation includes matters related to the following:

 

a.

enhancing the investment and business ecosystem;

 

b.

increasing the protection and welfare of workers;

 

c.

facilitation, empowerment and protection of Cooperatives and Micro, Small and Medium Enterprises; and

 

d.

increasing government investments and accelerating national strategic projects.

 

 

 

 

Job creation through the regulation related to improving the investment and business ecosystem at least contains the regulation of the simplification of Business Permits, investment requirements, ease of doing business, research and innovation, land acquisition and economic zones.

To support the implementation of strategic job creation policies and the regulation, Law Number 11 of 2020 concerning Job Creation which uses the omnibus law method has been enacted. However, the Law has been subject to a formal judicial review by the Constitutional Court. The Constitutional Court through Decision Number 91/PUU-XVIII/2020 has determined the verdict, including:

 

1.

the formulation of Law Number 11 of 2020 concerning Job Creation is contrary to the 1945 Constitution of the Republic of Indonesia and does not have conditionally binding legal force insofar as it is not construed as not being amended within 2 (two) years of the pronouncement of the decision;

 

2.

Law Number 11 of 2020 remains valid until amendments are carried out according to the stipulated grace period; and

 

3.

carry out amendments within a period of 2 (two) years after the decision is pronounced.

 

 

 

 

As a follow-up to the Constitutional Court Decision Number 91/PUU-XVIII/2020, the following have been carried out:

 

a.

Stipulating Law Number 13 of 2022 concerning the Second Amendment to Law Number 12 of 2011 concerning the Formulation of Legislation which has regulated and includes the omnibus method in the formulation of laws and has clarified meaningful public participation in the formulation of statutory provisions. With Law Number 13 of 2022, the use of the omnibus method has fulfilled certain, basic and standard methods and methods in the formulation of statutory provisions.

 

b.

Increasing meaningful participation which includes 3 (three) components, namely the right to be heard, the right to be considered and the right to be explained. For this reason, the Central Government has established a Task Force for the Acceleration of the Socialisation of Law Number 11 of 2020 concerning Job Creation (Job Creation Law Task Force) which has the function of carrying out the socialisation process of Law Number 11 of 2020 concerning Job Creation. The Job Creation Law Task Force together with ministries/agencies, Local Governments and stakeholders has carried out a socialisation process in various regions which is expected to increase public understanding and awareness of Law Number 11 of 2020 concerning Job Creation.

 

c.

Furthermore, corrections have also been made to technical typos have been amended in Law Number 11 of 2020, including incomplete subparagraphs, inaccurate references to articles or paragraphs, typos and/or titles or sequential numbers of chapters, sections, paragraphs, articles, paragraphs or numbers that are not appropriate, which are not substantial.

 

 

 

 

In addition to being a follow-up to the Constitutional Court Decision Number 91/PUU-XVIII/2020, the Government Regulation in Lieu of the Law concerning Job Creation also improves the formulation of the general provisions of the sectoral Law promulgated before the enactment of Law Number 12 of 2011 concerning the Establishment of Legislation. By improving the formulation of general provisions (the threshold of meanings or definitions, abbreviations or acronyms and general matters), the provisions outlined in the sectoral Law not amended under the Government Regulation in Lieu of Law concerning Job Creation must be read and interpreted the same as those amended by the Government Regulation in Lieu of Law concerning Job Creation.

As the next follow-up, it is necessary to formulate a Government Regulation in Lieu of Law concerning Job Creation to amend and replace Law Number 11 of 2020 concerning Job Creation. The scope of this Government Regulation in Lieu of Law concerning Job Creation includes:

 

a.

the enhancement of the investment and business ecosystem;

 

b.

employment;

 

c.

facilitation, empowerment and protection of Cooperatives and Micro, Small and Medium Enterprises;

 

d.

ease of doing business;

 

e.

research and innovation support;

 

f.

land acquisition;

 

g.

economic zones;

 

h.

Central Government investments and acceleration of national strategic projects;

 

i.

the implementation of government administration; and

 

j.

the imposition of penalties.

 

 

 

 

According to the Constitutional Court Decision Number 138/PUU-VII/2009, the abovementioned conditions have fulfilled the parameters as a compelling urgency in the context of enacting a Government Regulation in Lieu of Laws, including:

 

a.

because there is an urgent need to immediately resolve legal issues pursuant to the Law;

 

b.

the required Law does not yet exist, resulting in a legal vacuum or the inadequacy of the existing Law; and

 

c.

the legal vacuum that cannot be addressed by formulating a Law in common procedures which requires quite a long time, whereas the urgent situation requires certainty to be resolved.

 

 

 

 

Based on the above matters, in a pressing emergency, pursuant to the provisions under Article 22 paragraph (1) of the 1945 Constitution of the Republic of Indonesia, the President is authorised to issue a Government Regulations in Lieu of Law.

 

 

 

 

Article 111

Number 1

Article 2

Paragraph (1)

Subparagraph a

An individual as a tax subject may reside or be present in Indonesia or outside Indonesia. Undivided inheritance as a unit constitutes a substitute to tax subject, substituting those who have the right thereof, namely the heirs/heiresses. An undivided inheritance is designated as a substitute to tax subject to allow the income derived from the inheritance to be continuously taxed.

Subparagraph b

Entity is a group of people and/or capital that constitutes a unit that either conducts business or not, including limited liability companies, limited partnerships, other companies, state or local-owned enterprises in whatever name and form, firms, joint ventures, cooperatives, pension funds, partnership, alliances, foundations, mass organisations, social and political organisations or any similar organisations, institutions and other forms of entities, including collective investment contracts and permanent establishments.

 

State-owned and local-owned enterprises constitute tax subjects, regardless of their names and forms, thus any certain unit of Government bodies, such as institutions, entities and so forth, owned by the Central Government and Local Governments that conduct business or activities to accrue income, constitute tax subjects.

 

The definition of “alliance” also includes associations, unions, groups or affiliations of parties with the same interests.

Subparagraph c

Sufficiently clear.

Paragraph (1a)

Sufficiently clear.

Paragraph (2)

Tax subjects are categorised into tax residents and non-tax residents. A resident individual constitutes a Taxpayer if he/she receives or accrues income exceeding Personal Tax Relief. A resident corporate constitutes a Taxpayer since it is incorporated or domiciled in Indonesia. Non-tax residents, either individuals or entities, constitute Taxpayers because they receive and/or accrue income sourced from Indonesia or they receive and/or accrue income sourced from Indonesia through a permanent establishment in Indonesia. In other words, a Taxpayer is an individual or entity that has fulfilled subjective and objective

obligations in connection with the ownership of a Tax Identification Number (TIN).

 

Individual taxpayers receiving income below the Personal Tax Relief are not required to register to obtain a Tax Identification Number.

a.	Resident Taxpayers are taxed on income, either received or accrued from Indonesia or outside Indonesia, whereas non-resident Taxpayers are taxed only on income sourced from Indonesia;
b.	Resident Taxpayers are taxed based on net income at statutory tax rates, whereas nonresident Taxpayers are taxed based on gross income at equivalent tax rates; and
c.	Resident Taxpayers are required to file Annual Income Tax Returns as a means to determine the tax payable in a tax year, whereas non-resident Taxpayers are not required to file Annual Income Tax Returns because their tax obligations are fulfilled through final withholding tax.

 

For non-resident Taxpayers conducting a business or activities through permanent establishments in Indonesia, the fulfilment of their tax obligations is equivalent to the fulfilment of tax obligations of resident corporate Taxpayers as stipulated under this Law and the Law on general provisions and tax procedures.

Paragraph (3)

Subparagraph a

In principle, an individual who constitutes a resident taxpayer is an individual residing or present in Indonesia. Included in the definition of individuals residing in Indonesia are those who have the intention to reside in Indonesia. The determination of whether an individual intends to reside in Indonesia shall be considered based on circumstances.

 

The presence of an individual in Indonesia of more than 183 (one hundred and eighty-three) days does not have to be consecutive but it shall be determined by the total number of days the said individual is in Indonesia within any 12 (twelve) months period since his/her arrival in Indonesia.

Subparagraph b

Sufficiently clear.

Subparagraph c

An undivided inheritance inherited by a resident individual shall be considered a resident taxpayer in the definition under this Law pursuant to the status of the heirs/heiresses. To fulfil the tax obligations thereof, the said undivided inheritance substitutes the obligations of the heirs/heiresses who have the right thereof. In the event that the inheritance has been divided, the tax obligations thereof shall be transferred to the heirs/heiresses.

 

An undivided inheritance inherited by an individual as a non-tax resident not conducting a business or activities through a permanent establishment in Indonesia shall not be deemed a substitute to any tax subject because the tax imposed on income

received or accrued by the said individual shall be inherent to the object.

Paragraph (4)

A non-tax resident is an individual or entity residing or domiciled outside Indonesia that may receive or accrue income from Indonesia, through or not through a permanent establishment. An individual not residing in Indonesia but is present in Indonesia for no more than 183 (one hundred and eighty-three) days within a period of 12 (twelve) months, constitutes a non-tax resident.

 

If the income is received or accrued through a permanent establishment, the individual or entity is taxed through the permanent establishment. The said individual or entity shall maintain the status of a non-resident Taxpayer. Therefore, the permanent establishment substitutes the individual or entity as a non-tax resident in fulfilling tax obligations in Indonesia. In the event that the income is not received or accrued through a permanent establishment, tax shall be imposed directly on the non-tax resident.

Paragraph (5)

A permanent establishment contains the concept of the existence of a place of business, namely facilities that may be in the form of lands and buildings, including machinery, equipment, warehouses and computers or electronic agents or automated equipment owned, leased or used by any electronic transaction provider to conduct business through the internet.

 

The place of business is permanent and used to conduct a business or carry out the activities of an individual who does not reside or an entity that is neither incorporated nor domiciled in Indonesia.

 

The definition of permanent establishment also includes individuals or entities as agents that are not independent, acting for and on behalf of any individual or any entity not residing or domiciled in Indonesia. Individuals not residing or entities not incorporated and not domiciled in Indonesia cannot be deemed to have a permanent establishment in Indonesia if the individuals or the entities, in conducting their business or activities in Indonesia, use any agent, broker or intermediary with an independent status, provided that the agents or intermediaries in reality fully act in the framework of carrying out their own companies.

 

An insurance company incorporated or domiciled outside Indonesia is deemed to have a permanent establishment in Indonesia if it receives insurance premium or assumes risks in Indonesia through its employees, representatives or agents in Indonesia. Assuming risks in Indonesia shall not mean that the events causing the risks occur in Indonesia. There is a matter of concern that the insured party shall reside, stay or domicile in Indonesia.

Paragraph (6)

Determination of the residence of an individual or the domicile of an entity is important to determine which Tax Office has jurisdiction to tax over the income received or accrued by the individual or entity.

 

Basically, the residence of an individual or the domicile of an entity shall be determined based on the actual circumstances. Therefore, the determination of the residence or domicile shall not only be based on formal considerations but also on reality.

 

Several matters are to be considered by the Director General of Taxes in determining the residence of an individual or the domicile of an entity include, among others, the domicile, residential address, family residence, place of business or other matters to be considered to facilitate the fulfilment of tax obligations.

Number 2

Article 26

For income received or accrued by non-resident Taxpayers sourced from Indonesia, this Law adheres to 2 (two) tax systems, namely self-assessment of tax obligations for non-resident Taxpayers conducting business or activities through permanent establishments in Indonesia and withholding by the parties obliged to pay for other non-resident Taxpayers.

 

This provision stipulates withholding on income sourced from Indonesia received or accrued by non-resident Taxpayers other than permanent establishments.

Paragraph (1)

Withholding Tax based on this provision must be carried out by government agencies, tax residents, event organisers, permanent establishments or representatives of other foreign companies performing payments to non-resident Taxpayers other than permanent establishments in Indonesia, at a rate of 20% (twenty per cent) of the gross amount.

 

The types of income subject to withholding may be categorised into:

1.	capital gains in the form of dividends, interest including premium, discounts and compensation for loan repayment guarantee, royalties, rent and other income in connection with the use of property;
2.	remunerations in connection with services, work and activities;
3.	prizes and awards in whatever name and form;
4.	pensions and other periodic payments;
5.	premium swaps and other hedging transactions; and/or
6.	gains due to debt relief.

 

Pursuant to this provision, for example, a resident corporate taxpayer pays a royalty of IDR100,000,000.00 (one hundred million rupiah) to a non-resident Taxpayer, the resident taxpayer is obliged to withhold Income Tax of 20% (twenty per cent) of IDR100,000,000.00 (one hundred million rupiah).

 

As another example, a foreign athlete who participates in a marathon in Indonesia wins a cash prize, the prize is subject to Withholding Tax of 20% (twenty per cent).

Paragraph (1a)

The domicile country of non-resident Taxpayers, other than those conducting business or business activities through permanent establishments that receive income from Indonesia shall be determined based on the residence or domicile of the beneficial owners. Therefore, the domicile country is not only determined based on the Certificate of Domicile but also the residence or domicile of the beneficial owners of the said income.

 

In the event that the beneficial owner is an individual, the domicile country is the country where the individual resides or is present, whereas, if the beneficial owner is an entity, the domicile country is the country where the owner or more than 50% (fifty per cent) of shareholders, either individually or collectively, is domiciled or where the effective management is located.

Paragraph (1b)

Sufficiently clear.

Paragraph (2)

This provision stipulates withholding tax on income received or accrued by non-resident Taxpayers that is sourced from Indonesia, other than income referred in paragraph (1), namely income from sales or transfer of property and insurance premiums, including reinsurance premiums. Such income is subject to withholding tax of 20% (twenty per cent) on deemed profit and is final. The Minister of Finance is authorised to determine deemed profit and other matters related to the implementation of withholding tax.

 

This provision shall not be applied if non-resident Taxpayers conduct business or activities through permanent establishments in Indonesia or if the income from the sale of property has been subject to tax pursuant to the provision under Article 4 paragraph (2).

Paragraph (2a)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Taxable income after deducted by tax on the permanent establishment in Indonesia is subject to tax of 20% (twenty per cent). Example:

Taxable Income of the permanent establishment in Indonesia in 2023:

Uraian	Jumlah (IDR)
Taxable Income of the permanent establishment in Indonesia in 2023:		17.500.000.000,00
Income Tax:
22% x IDR17,500,000,000,00	=	3.850.000.000,00	(-)
Taxable Income after tax	=	13.650.000.000,00
Article 26 Income Tax payable
20% x IDR13,650,000,000.00	=	2.730.000.000,00

 

If the income after tax of IDR13,65,000,000.00 (thirteen billion and six hundred and fifty million rupiah) is reinvested in Indonesia in accordance with or based on the Minister of Finance Regulation, the income is not subject to tax.

Paragraph (5)

In principle, withholding tax on non-resident Taxpayers is final, but for income referred to in Article 5 paragraph (1) subparagraph b and subparagraph c and for the income of non-resident individual Taxpayers or non-resident corporate Taxpayers whose status has changed to resident Taxpayers or permanent establishments, the withholding tax is not final, thereby, the withholding tax may be credited in the Annual Income Tax Return.

 

Example:

A as an individual foreign worker enters into a work agreement with PT B as a resident Taxpayer to work in Indonesia for a period of 5 (five) months starting 1 January 2023. On 20 April 2023, the work agreement is extended to 8 (eight) months, thereby, the agreement shall expire on 31 August 2023.

 

If the work agreement is not extended, A’s status will remain a non-tax resident. With the extension of the work agreement, A’s status changes from a non-resident Taxpayer to a resident Taxpayer starting 1 January 2023. From January to March 2023, A’s gross income has been subject to Article 26 Withholding Tax by PT B.

 

Pursuant to this provision, to calculate Income Tax payable on A’s income for January to August 2023 periods, Article 26 Income Tax which has been withheld and remitted by PT B on A’s income until March 2023, may be credited against A’s tax as a resident Taxpayer.

Article 112

Number 1

Article 1A

Paragraph (1)

Subparagraph a

“Agreement” includes buying and selling, exchanging, buying and selling in installments or other agreements that result in a supply of rights to goods.

Subparagraph b

A supply of Taxable Goods may occur due to a lease purchase agreement and/or a leasing agreement.

 

“Transfers of Taxable Goods due to a leasing agreement” refers to a supply of Taxable Goods due to a finance lease.

 

In the event that a supply of Taxable Goods by the Taxable Person is in the context of a finance lease, the Taxable Goods are deemed supplied directly from the supplier Taxable Person to the lessee.

Subparagraph c

“Intermediary traders” refer to individuals or entities that in their course of business or work under their own names enter into agreements or engagements on and for other persons’ behalf earning certain wages or remunerations, for example, commissioners.

 

“Auctioneers" refer to auctioneers of the Government or those appointed by the Government.

Subparagraph d

“Personal use” refers to the use for the self-interest of an entrepreneur, management or employees, either self-produced or non-self-produced goods.

 

“Free of charge” refers to provision without payment of, either self-produced goods or non-self-produced goods, such as product samples given for promotion to relatives or buyers.

Subparagraph e

Taxable Goods in the form of inventories and/or assets that, according to their original purpose, are not for sale and are remaining at the company’s dissolution are equivalent to personal use, thereby, deemed a supply of Taxable Goods.

 

Excluded from the provisions under subparagraph e are supplies referred to in Article 1A paragraph (2) subparagraph e.

Subparagraph f

In the event that a company has more than one place of supply, either as the head office or as a branch of the company, transfers of Taxable Goods between those places constitute supplies of Taxable Goods.

 

“Head office” refers to the residence or domicile.

 

“Branch” refers to, among others, the business location, representatives, marketing units and places of similar business activities.

Subparagraph g

Deleted.

Subparagraph h

Example:

In a murabaha transaction, the sharia bank acts as a provider of funds to purchase a motor vehicle from a Taxable Person A at the order of a sharia bank customer (Mr. B). Although based on sharia principles, sharia banks must first purchase the motor vehicle and then sell it to Mr. B, pursuant to this Law, the supply of the motor vehicle is deemed to be carried out directly by the Taxable Person A to Mr. B.

Paragraph (2)

Subparagraph a

“Broker” refers to brokers referred to in the Indonesian Commercial Code, namely intermediary traders appointed by the President or by an official declared authorised by the President for that purpose. They run their companies by doing work for a certain wage or provision, on the mandate of and on behalf of other people with whom they have no work relationship.

Subparagraph b

Sufficiently clear.

Subparagraph c

In the event that a Taxable Person has more than one place of business, either as the head office or company branch, and the Taxable Person has submitted written notification to the Director General of Taxes, transfers of Taxable Goods from one place of business to another place of business (the head office to a branch or vice versa or between branches) is deemed not included in the definition of a supply of Taxable Goods, except for transfers of Taxable Goods between the places of supplyl.

Subparagraph d

“Split-up” refers to the separation of businesses referred to in the Law stipulating limited liability companies.

a.	a Taxable Person to another Taxable Person are not included in the definition of supplies of Taxable Goods, therefore, no Value Added Tax is payable;
b.	an Entrepreneur that has not been or is not registered as a Taxable Person are included in the definition of supplies of Taxable Goods, therefore, there is Value Added Tax payable but not collected by the entrepreneur because the entrepreneur has not been or is not registered as a Taxable Person; or
c.	a Taxable Person to an entrepreneur that has not been or is not registered as a Taxable Person are included in the definition of supplies of Taxable Goods, therefore, there is Value Added Tax payable that must be collected by the Taxable Person. In the event that the transferred Taxable Goods are in the form of assets that, according to their original purpose are not for sale, Value Added Tax shall be imposed on the transfer of those Taxable Goods pursuant to the provisions on supplies of Taxable Goods in the form of assets that, according to their original purpose, are not for sale.

Subparagraph e

Taxable Goods in the form of assets that, according to their original purpose are not for sale and are remaining at the dissolution of the company, for which Input VAT on acquisitions is non-creditable because they do not have a direct relationship with the business as referred to in Article 9 paragraph (8) subparagraph b are not included in the definition of supplies of Taxable Goods.

Number 2

Article 13

Paragraph (1)

In the event of a supply of Taxable Goods and/or a supply of Taxable Services, the Taxable Person supplying the Taxable Goods and/or supplying the Taxable Services are obliged to collect Value Added Tax payable and provide a Tax Invoice as a tax collection receipt. Tax Invoices do not need to be prepared specifically or differently from sales invoices. Tax Invoices may be in the form of sales invoices or certain documents designated as Tax Invoices by the Director General of Taxes.

 

Pursuant to this provision, for any supply of Taxable Goods in the form of assets that, according to the original purpose are not for sale as referred to in Article 16D, a Tax Invoice must be issued.

Paragraph (1a)

In principle, a Tax Invoice must be prepared upon a supply or receipt of payment in the event that payment occurs before the supply. In certain cases, the Tax Invoice may not be prepared at these times, for example, in the event of supplies of Taxable Goods and/or supplies of Taxable Services to government treasurers. Therefore, the Minister of Finance is authorised to set certain times as when the Tax Invoice is prepared.

Paragraph (2)

Excluded from provisions referred to in paragraph (1), to ease the administrative burden, Taxable Persons are allowed to prepare 1 (one) Tax Invoice which includes all supplies of Taxable Goods or supplies of Taxable Services occurring in 1 (one) calendar month to the same buyer of Taxable Goods or the same Taxable Service recipient, which is referred to as a consolidated Tax Invoice.

Paragraph (2a)

To ease the administrative burden, Taxable Persons are allowed to prepare a consolidated Tax Invoice no later than the end of the month of the supplies of Taxable Goods and/or supplies of Taxable Services even though in the month of supply, partial or full payments have occurred. Example 1:

In the event that Taxable Person A supplies Taxable Goods to entrepreneur B on 1, 5, 10, 11, 12, 20, 25, 28 and 31 July 2023, but up to 31 July 2023, there is no payment for the supplies, Taxable Person A is allowed to prepare 1 (one) consolidated Tax Invoice that includes all supplies performed in July 2023, no later than 31 July 2023.

 

Example 2:

Taxable Person A supplies Taxable Goods to entrepreneur B on 2, 7, 9, 10, 12, 20, 26, 28, 29 and 30 September 2023. On 28 September 2023, there is a payment by entrepreneur B for the supply on 2 September 2023. In the event that Taxable Person A issues a consolidated Tax Invoice, the consolidated Tax Invoice is prepared on 30 September 2023 which includes all supplies occurring in September 2023.

 

Example 3:

Taxable Person A supplies Taxable Goods to entrepreneur B on 2, 7, 9, 10, 12, 20, 26, 28, 29 and 30 September 2023. On 28 September 2023, there is a payment for the supply on 2 September 2023 and an advance payment for the supply in October 2023 by entrepreneur B. In the event that the Taxable Person A issues a consolidated Tax Invoice, the consolidated Tax Invoice is prepared on 30 September 2023 which includes all supplies and advance payments performed in September 2023.

Paragraph (3)

Deleted.

Paragraph (4)

Deleted.

Paragraph (5)

A Tax Invoice constitutes a tax collection receipt and can be used as a means to credit VAT Input. A Tax Invoice must be filled out completely, clearly and correctly and signed by the party appointed by Taxable Persons to sign it. However, information on Sales Tax on Luxury Goods is only filled out if, on a supply of Taxable Goods, Sales Tax on Luxury Goods is payable. A Tax Invoice that is not filled out pursuant to the provisions in this paragraph will result in the Value Added Tax listed therein being non-creditable pursuant to the provisions in Article 9 paragraph (8) subparagraph f.

Paragraph (5a)

Sufficiently clear.

Paragraph (6)

Excluded from provisions referred to in paragraph (5), the Director General of Taxes may determine documents commonly used in business that are equivalent to Tax Invoices.

a.	sales invoices used by entrepreneurs that are recognized by the general public, such as receipts for payments of telephone bills and airline tickets;
b.	for tax collection receipt, a Tax Invoice must exist, whereas the party that should otherwise prepare the Tax Invoice, namely the party supplying the Taxable Goods or Taxable Services, is outside the Customs Territory, for example, in terms of utilisation of Taxable Services from outside the Customs Territory, the Tax Payment Slip may be stipulated as the Tax Invoice; and
c.	certain documents are used in imports or exports of Tangible Taxable Goods. Paragraph (7)

Paragraph (7)

Deleted.

Paragraph (8)

Amended Tax Invoices are, among others, Tax Invoices containing errors in the completion or errors in the writing. Included in the definition of errors in the completions or errors in the writing are, among others, adjustments to the Selling Price due to a reduction in the quantity or quality of Taxable Goods which reasonably may occur upon the delivery.

Paragraph (9)

A Tax Invoice fulfils the formal requirements if it is filled out completely, clearly and correctly pursuant to the requirements referred to in paragraph (5) or requirements stipulated by a Director General of Taxes Regulation as referred to in paragraph (6).

 

Tax Invoices or certain documents that are equivalent to Tax Invoices fulfil material requirements if they contain correct or actual information concerning supplies of Taxable Goods and/or supplies of Taxable Services, exports of Tangible Taxable Goods, exports of Intangible Taxable Goods, exports of Taxable Services, imports of Taxable Goods or utilisation of Taxable Services and utilisation of Intangible Taxable Goods from outside the Customs Territory within the Customs Territory.

 

Therefore, even though Tax Invoices or certain documents that are equivalent to Tax Invoices already fulfil the formal requirements and the Value Added Tax has been paid, if the information contained in the Tax Invoices or certain documents equivalent to Tax Invoices does not comply with the actual facts concerning supplies of Taxable Goods and/or supplies of Taxable Services, exports of Tangible Taxable Goods, exports of Intangible Taxable Goods, exports of Taxable Services, imports of Taxable Goods or utilisation of Taxable Services and utilisation of Intangible Taxable Goods from outside the Customs Territory within the Customs Territory, the Tax Invoices or certain documents equivalent to Tax Invoices do not fulfil the material requirements.

Article 113

Number 1

Article 9

Paragraph (1)

The due date for payment and remittance of tax payable for any given time or a Taxable Period shall be stipulated by the Minister of Finance no later than 15 (fifteen) days from the time of supply or from the end of a Taxable Period. Lateness in the payment or remittance shall be subject to administrative penalties pursuant to statutory tax provisions.

Paragraph (2)

Sufficiently clear.

Paragraph (2a)

Sufficiently clear.

Paragraph (2b)

Sufficiently clear.

Paragraph (2c)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (3a)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Number 2

Article 11

Paragraph (1)

If after calculating the actual amounts of tax payable and tax credit, a surplus is produced (the tax credit is greater than the tax payable) or after payment of taxes which should not have otherwise been payable, Taxpayers are entitled to claim tax refunds, provided that the Taxpayers have no tax liabilities.

 

In the event that the Taxpayers have tax liabilities, including all kinds of taxes of the head office and the branch offices, the overpayment must be calculated first to settle the tax liabilities and the surplus, if any, shall be refunded to the Taxpayers.

Paragraph (1a)

Sufficiently clear.

Paragraph (2)

a.	for Notices of Tax Overpayment Assessment as referred to in Article 17 paragraph (1), calculated from the date of receipt of written applications for tax refunds;
b.	for Notices of Tax Overpayment Assessment as referred to in Article 17 paragraph (2) and Article 17B, calculated from the issuance date;
c.	for Preliminary Tax Refund Decision Letter as referred to in Article 17C and Article 17D, calculated from the issuance date;
d.	for Objection Decision Letters, Amendment Decision Letters, Administrative Penalty Relief Decision Letters, Administrative Penalty Nullification Decision Letters, Administrative Penalty Relief Decision Letters, Tax Assessment Cancellation Decision Letters or Interest Compensation Decision Letters, calculated from the issuance date;
e.	for Appeal Decisions, calculated from the receipt of the Appeal Decisions by the Office of the Directorate General of Taxes authorised to execute court decisions; or
f.	for Civil Review Decisions, calculated from the receipt of Civil Review Decisions by the Office of the Directorate General of Taxes authorised to execute court decisions,

 

to the issuance of Tax Refund Decision Letter.

Paragraph (3)

Sufficiently clear.

Paragraph (3a)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Number 3

Article 13A

Deleted.

Number 4

Article 15

Paragraph (1)

To cover the possibility that a Notice of Tax Underpayment Assessment is under-stated or the tax payable in a Notice of Nil Tax Assessment is under-stated or a tax refund has been given mistakenly as stated in the Notice of Tax Overpayment Assessment, the Director General of Taxes is authorised to issue a Notice of Additional Tax Underpayment Assessment within 5 (five) years from the time of supply or at the end of a Taxable Period, a Fraction of a Tax Year or a Tax Year.

 

A Notice of an Additional Tax Underpayment Assessment is a correction of the previous notice of tax assessment. The Notice of Additional Tax Underpayment Assessment is only

issued when a notice of tax assessment has already been issued. In principle, the issuance of

a Notice of an Additional Tax Underpayment Assessment requires an audit. If the previous notice of tax assessment is issued based on an audit, a re-audit is to be conducted before the Notice of Additional Tax Underpayment Assessment is issued.

 

Therefore, Notice of Additional Tax Underpayment Assessment cannot be issued before preceding issuance of a notice of tax assessment. The Notice of an Additional Tax Underpayment Assessment is issued provided that the new data, including previously undisclosed data result, result in the increase of tax payable in the previous notice of tax assessment. In line with this, if a Notice of Tax Overpayment Assessment is issued as a consequence of the 12 (twelve) month period having elapsed as referred to in Article 17B, the Notice of Additional Tax Underpayment Assessment will only be issued if new data, including previously undisclosed data, is discovered. In the event that new data, including previously undisclosed data, is discovered upon the issuance of the Notice of Additional Tax Underpayment Assessment and/or new data, including previously undisclosed data, is later discovered by the Director General of Taxes, another Notice of Additional Tax Underpayment Assessment may be issued.

 

“New data” refer to data or information concerning the entirety of requirements to calculate the amount of tax payable which is not disclosed by the Taxpayer upon previous assessment, either in the Tax Return and the attachments thereto as well as in the Taxpayer’s bookkeeping submitted upon an audit.

a.	not fully disclosed by the Taxpayer in a Tax Return and the attachments thereto (including financial statements); and/or
b.	upon audit for initial assessment, the Taxpayer fails to disclose data and/or fails to provide other correct, complete and detailed information, thus, not allowing the tax authorities to correctly apply statutory tax provisions to calculate the amount of tax payable.

 

Although a Taxpayer has notified the data in the Tax Return or disclosed the data upon an audit but if the data is notified or disclosed in such a way that renders it impossible for the tax authorities to correctly calculate the amount of tax payable, thereby, the amount of tax payable is understated, this data is included in the meaning of previously undisclosed data.

1.	The Tax Return and/or financial statements state advertisement expenses of IDR10,000,000.00 (ten million rupiah) whereas, in fact, these expenses comprise advertisement in a mass media of IDR5,000,000.00 (five million rupiah) and the remaining IDR5,000,000.00 (five million rupiah) constitutes donation or gift that cannot constitute a deductible expense.
	lf upon initial assessment, the Taxpayer fails to disclose such details, thereby, the tax authorities cannot make any correction on the expenses in the form of donation or gift resulting in incorrect calculation of tax payable, such data on expenses in the form of donation or a gift are deemed previously undisclosed data.
2.	The Tax Return and/or financial statements state the classification of depreciated fixed assets that is not attached with detailed information on the assets of each specified group and upon audit for initial assessment, the Taxpayer fails to disclose such details, thereby, the tax authorities are unable to verify the validity of the specified classification, for example, assets which should be classified as group 3 non-building tangible assets are included in group 2. As a result, the misclassification of the assets is not corrected and accordingly, the tax payable cannot be correctly calculated.
	lf data stating that the assets classification is incorrect is subsequently discovered, said data constitutes previously undisclosed data.
3.	A Taxable Person purchases a number of goods from another Taxable Person and on the purchase, the selling Taxable Person issues a tax invoice. Some of the goods are used in activities directly related to business, such as production, distribution, marketing and management expenses and the other goods are indirectly related to business. All of the tax invoices are credited as Input VAT by the buyer Taxable Person.
	If upon initial assessment, the Taxable Person fails to disclose detailed use of the goods which results in the absence of correction on Input VAT crediting by the tax authorities and as a result, the VAT payable cannot be correctly calculated. If data or other information concerning errors in Input VAT crediting with no direct relation whatsoever with the specified business activities are discovered, said data or information constitutes previously undisdosed data.

Paragraph (2)

If, folIowing the issuance of a notice of tax assessment, new data, including previously undisclosed data that has not taken been into account as the base for the assessment, are discovered, tax underpayment shall be collected using a Notice of Additional Tax Underpayment Assessment plus an administrate penalty of a 100% (one hundred per cent) surcharge of the tax underpayment.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Deleted.

Paragraph (5)

Sufficiently clear.

Number 5

Article 17B

Paragraph (1)

The term “the application is completely received” refers to a Tax Return has been filled out completely as referred to in Article 3.

 

A notice of tax assessment issued based on audit findings on applications for tax refunds may be in the form of a Notice of Tax Underpayment Assessment or Notice of Nil Tax Assessment or Notice of Tax Overpayment Assessment.

Paragraph (1a)

The term “undergoing the preliminary audit” commences since the date the notification of the preliminary audit is submitted to the Taxpayers, their representatives, attorney, employees or adult family members.

Paragraph (2)

The time limit referred to in paragraph (1) is intended to provide legal certainty concerning applications by Taxpayers or Taxable Persons, therefore, after the said time limit elapses and Director General of Taxes does not make any decision, the application is deemed granted. In addition, the time limit is intended for orderly tax administration.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Sufficiently clear.

Paragraph (6)

Sufficiently clear.

Paragraph (7)

Sufficiently clear.

Number 6

Article 19

Sufficiently clear.

Number 7

Article 27A

Deleted.

Number 8

Article 27B

Sufficiently clear.

Number 9

Article 38

Sufficiently clear.

Article 114

Sufficiently clear.

 

 

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6841