Temporary Tax Incentives for Businesses Affected by COVID-19

In anticipation of the impact of the COVID-19 outbreak on the economic stability, productivity, and purchasing power, the Minister of Finance (the “MOF”) issued the MOF Regulation No. 23/PMK.03/2020 dated March 23, 2020 on Tax Incentives for Taxpayers Affected by the Coronavirus Outbreak (the “MOF Regulation”). The MOF Regulation sets out four types of tax incentives that may apply by certain taxpayers, as follows.

  • Income Tax Incentives for Employees

The Government will bear the Article 21 Income Tax for April to September 2020 for employees who meet the following criteria:

  1. They are employed by an employer that engages in certain manufacturing and service business lines listed in Annex A of the MOF Regulation and/or is a Company with Ease of Import for Export Purposes (Kemudahan Impor untuk Tujuan Ekspor) facility (a “KITE Company”);
  2. They have the Tax Identification Numbers (NPWP); and
  3. They have the annual gross income of maximum Rp200 million.

A relevant employer shall notify the relevant Tax Office to enjoy this incentive. The employer shall pay the Article 21 Income Tax that is borne by the Government in cash to the relevant employees.

  • Import Tax Incentives

As an incentive for taxpayers that engage in certain manufacturing business lines listed in Annex F of the MOF Regulation and/or are KITE Companies, the Government will not collect the Article 22 Income Tax for all imports up to September 2020. The relevant taxpayers shall apply for the Confirmation Letter of Non-collection of Article 22 Income Tax for Import to the relevant Tax Office. The incentive shall be granted as per the date of issuance of the Confirmation Letter.

  • Income Tax Installment Incentives

Taxpayers that engage in certain manufacturing business lines listed in Annex F of the MOF Regulation and/or are KITE Companies are also eligible for a 30% discount on their monthly Article 25 Income Tax installments. The relevant taxpayers shall notify the deducted installment amounts to the relevant Tax Office. This incentive will be granted until the tax period of September 2020.

  • Accelerated VAT Refunds

The fourth tax incentive granted under the MOF Regulation is by way of accelerated Value Added Tax (“VAT”) refunds for low risk taxable enterprises. This incentive is granted for taxpayers that (i) engage in certain manufacturing business lines listed in Annex F of the MOF Regulation or are KITE Companies; and (ii) have submitted their VAT Returns with an overpayment amount of maximum Rp5 billion. The accelerated refund will be granted for the VAT Returns submitted until the tax period of September 2020.

 

April 8, 2020

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