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Tax Reform For ‘Expatriate’ Income, Dividends and Penalties.

The Indonesian government plans to make major changes to encourage investment and economic growth through the Omnibus law, which is in the process of being finalized.

Changes To Expatriate Income Taxes

The planned change creates a territorial tax system, which aims to prevent foreign nationals and Indonesian citizens from being taxed on income outside borders between countries.
Foreigners who work in Indonesia for more than 183 days will be taxed only on the income they earn in Indonesia. Meanwhile, Indonesians who work abroad will be exempt from paying income tax in Indonesia.

Changes In Dividend Tax and Relief of Tax Fines

The government plans to eliminate dividend tax for companies with less than 25 percent share ownership. It aims to equalize the taxation for companies that invest abroad.
In addition, the government will also reduce penalties from 2 percent per month to adjust to interest rate penalties aimed at creating justice in accordance with the magnitude of interest rates. However, if the payment is not appropriate (less) then the addition will be from 5% to 10%.

Corporate Income Tax Reduction and Digital Economic Tax Enforcement

The government will also gradually reduce corporate income tax from 25% to 20% due to a plan to impose corporate income tax to 22% in 2021 and 20% in 2023. This plan also includes an additional 3% reduction in corporate income tax for companies who went public for 5 years.
The government will also start taxing digital companies such as Netflix, Spotify, and Amazon because they carry out economic activities in Indonesia.
The government through new regulations on digital companies will use the appointment of Permanent Establishment (BUT) for digital multinational companies that do not have a physical presence or employees in Indonesia but get financial benefits from economic activities in Indonesia.

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