Responding Corona, Tax Stimulus Package is Officially Valid

The Indonesian government officially released a tax stimulus package to minimize the impact of the Coronavirus pandemic (Covid-19) on the people's purchasing power and national economic growth. The certainty and details of the fiscal incentive are contained in the Minister of Finance Regulation Number 23/PMK. 03/2020, which was published on 23 March 2020 and effective from 1 April 2020 to 30 September 2020 (six months).

There are several types of tax incentives prepared by the government, namely Income Tax Article (ITA) 21 borne by the government,  exemption from ITA 22 on import, reduction of ITA 25,  acceleration of Value Added Tax  (VAT) refund, and  reduction in Corporate Income Tax rates. 

The most of stimulus package is intended for workers and employers engaged in the manufacturing industry with certain Business Classifications (Klasifikasi Lapangan Usaha/KLU), as well as companies and Small and Medium Enterprises (SMEs) who obtain facilities for Import Facility for Export Purposes (Kemudahan Impor Untuk Tujuan Ekspor/KITE).

ITA 21 Borne by the Government

To maintain the people's purchasing power, for the next six months, the government will bear the obligation of ITA 21 for workers in the manufacturing industry.  However, only workers who meet the following criteria are eligible to obtain the facility:

1. The gross income is less than IDR 200 million per year,
2. The workers have Tax ID Number (Nomor Pokok Wajib Pajak/NPWP), and
3. The employers (the entrepreneur) are engaged in one of the 440 KLUs in the manufacturing industry, as well as KITE companies and SMEs KITE.

The government emphasizes that the ITA 21 borne by the government must be paid in cash by the employers at the time of the payment of income to employees. Thus, employees in the manufacturing industry will receive full income without any tax deduction every month from April to September 2020. To be able to use the facility, the employer must meet the following conditions:

1. Submit a written notice to the Head of the registered Tax Office,
2. Attach the Decree of the Minister of Finance regarding the determination of the company that obtain KITE facilities (specific for KITE Taxpayers),
3. Submit the Realization Report of ITA 21 DTP (Ditanggung Pemerintah/Borne by the Government) to the Head of the registered Tax Office.
4. Make a Tax Payment Slip (Surat Setoran Pajak/SSP) or printed billing code and attach it to the Realization Report of ITA 21 DTP, and
5. Submit Reports and the attachments no later than 20 July 2020 for the April-June 2020 Tax Period and 20 October 2020 for the July-September 2020 Tax Period.

Exemption from ITA 22 on Import

The next facility is the exemption of ITA 22 on import for businesses in certain manufacturing sectors (102 KLUs) as well as entrepreneurs and SMEs who obtain KITE facilities.The stimulus is given in order to maintain the pace of imports that support production activities.  However, only entrepreneurs who meet the following criteria and conditions can use this facility:

1. Have a specified KLU code and/or have been designated as a KITE company,
2. File a Notice of Tax Exemption (Surat Keterangan Bebas/SKB) in a written form to the Head of the Tax Office where the Taxpayer is registered,
3. Attach the Decree of the Minister of Finance regarding the determination of the company that obtain KITE facilities (specific for KITE taxpayer),
4. Submit Realization Reports of the Exemption of ITA 22 on Import every three months to the Head of the Tax Office, and
5. Submit Reports and the attachments no later than 20 July 2020 for the April-June 2020 Tax Period and 20 October 2020 for the July-September 2020 Tax Period.

30% Reduction of ITA 25

To maintain the stability of economic growth while increasing export performance, the government is also preparing incentives to reduce the ITA 25 by 30% for businesses in certain manufacturing sectors (102 KLUs) as well as entrepreneurs and SMEs who obtain KITE facilities. The terms and conditions are nearly the same as the policy of ITA 22 exemption, as follows:

1. Have a specified KLU code and/or have been designated as a KITE company,
2. File a notice of reduction of 30% from the installments of ITA 25 that should be payable,
3. Submit a written notice to the Head of the registered Tax Office,
4. Submit a Realization Report of ITA 25 Installment Reduction every three months to the Head of Tax Office, and
5. Submit Reports no later than 20 July 2020 for the April-June 2020 Tax Period and 20 October 2020 for the July-September 2020 Tax Period.

Accelerated VAT Refunds

The last facility provided by the government in anticipating and mitigating the economic decrease due to the Covid-19 pandemic is the acceleration of VAT refunds for exporters and non-exporters in certain manufacturing sectors (102 KLUs), as well as entrepreneurs and SMEs who obtain KITE facilities. For the exporters, there is no limit on the value of restitution, while for non-exporters, the value of the restitution is IDR5 billion at maximum. Similar to the other facilities, there are a number of conditions and requirements that must be fulfilled by Taxpayers, as follows:

1. Have a specified KLU code and/or have been designated as a KITE company, and
2. Submit a refund of Periodic VAT Overpayment Return with a maximum amount of overpayment of IDR5 billion.

Taxpayers who meet the criteria and requirements will be granted a refund and automatically determined as a low-risk VAT-Registered Person (Pengusaha Kena Pajak/PKP). Thus, Taxpayers are no longer need to submit applications for the determination of low-risk VAT-Registered Persons and the Director General of Taxes no longer need to decide ex-officio.

In addition, low-risk VAT Registered Persons are also facilitated by the elimination of the requirements to carry out certain activities such as exporting taxable goods and services, as well as transfers to collectors or transfers that are not subject to VAT.  

Gradual Cuts on Corporate Income Tax

The government has lowered tariff for Corporate Income Tax to 22% for 2020-2021 and 20% for 2022 onwards. Previously, the tariff was 25%. Meanwhile, limited companies that have met certain requirements and are listed on the Indonesia Stock Exchange with at least 40% tradable shares, can get an additional 3% tariff reduction from the new income tax rate.

The policy is effective since March 31, 2020 following the issuance of regulation in lieu of law (Perppu) No. 1 Year 2020 on State Financial and Financial System Stability Policy to Manage Corona Virus Disease 2019 (COVID-19) Pandemic and/or to Anticipate Threats that Will Endanger National Economy and/or Financial System Stability.

To find out more about the policy details and the list of business fields that receive incentives, you can download it here.  (ASP/KEN)