The Indonesian government is drafting new regulations of tax. Even though it is in the drafting process, the businessmen should prepare for the new regulation. One of the obligations of a company is about taxes. The Ministry of Financial The Republic of Indonesia, Sri Mulyani Indrawati said about the philosophy of the draft. “The philosophy of the draft is to make the economy of Indonesia competitive,” she said. Reported from CNBC Indonesia, there are some main points in the new regulation as follows:
1. Regarding the Tarif Arrangement
In the draft tax regulation, there are will be 3 regulation that revised, such as:
• Income Tax (PPh);
• VAT (Value Added Tax); and
• KUP (General Tax Provisions).
2. Income Tax of Dividends
The Income-tax of domestic and foreign dividends will eliminate in the draft tax regulation. “So far, dividends from domestic and foreign, received through corporate income tax if they have shares under 25 percent. Meanwhile, shares above 25 percent are not objected to corporate Income tax.” Said Mrs. Sri Mulyani. Well, in the draft tax regulation all corporate income tax of dividends is abolished if the dividends are invested in Indonesia. Both local or foreign dividends are not objected to corporate income tax as long as it is invested in the territory of the Republic of Indonesia.
3. Individual Taxpayer Regime
The taxation regime In the Income Tax of Individual Taxpayer will be changed from World Wide to Territorial. This means that Indonesian citizens or foreigners will become taxpayers in Indonesia depending on how long they stay, cut off date 38 days and will be subject to territorial tax regimes.
4. More Obedient Taxpayers
The draft of tax regulation goals is to make taxpayers more obedient, increase taxpayers’ compliance without being burdened. Sri Mulyani said several things ease sanctions. If the taxpayer has been making corrections on annual or monthly tax reports, and arise underpayment and rectification, so far they have been penalized 2 percent per month from underpaid taxes.
“In this draft, 2 percent per month is very burdensome. We are decreasing the prorated monthly rate, the benchmark interest rate on the market plus 5 percent.”
The Indonesian government will decrease the fines sanctions for tax invoices that were not made or made not on time.
5. Relief of the Tax Credit
Indonesian government gives relief to credit input taxes. Especially for taxable companies, which have not been recorded as a tax object so far. The input tax which previously could not be credited can be credited.
6. Tax Incentive Facilities
In this draft tax regulation, the government will place all tax incentive facilities in one section, such as tax holidays, super deduction, income tax facilities for the special economic zone, and income tax for national securities in the international market.
7. Digital Company Tax
In the draft regulation tax, the government determines that international digital companies, such as Google, Amazon, etc, can collect, deposit and report value-added tax with a 10 percent rate. So there is no tax avoidance because they know how much the volume of economic activities.
8. Permanent Establishment
In the digital economy, companies do not have to exist in Indonesia. However, they can get a lot of benefits from Indonesia such as Google. But they do not have a permanent establishment. In this draft, the definition of permanent establishment is no longer based on physical presence. “Although they do not have a branch office in Indonesia, tax obligations still there,” Sri Mulyani said.
“The tariff will be determined in income tax and value-added tax of this draft. The President and Vice President have asked to complete the draft. So that it can be consulted to the public and it can be conveyed immediately to the Council to strengthen the economy of Indonesia”.
So, how do you face the new regulation of tax? Indo-Ned Consultancy is here to help the companies in preparing their taxes regarding the new regulation. Taxes and administration are one of our services as a consultant of business. We are available at Jakarta and Bali’s office. Find us by clicking the location on our website. We are reachable through WhatsApp number: 0821 6188 1767 or 0812 8622 5138.