Implementation of Reduction of Corporate Tax Income

According to Perppu Number 1 of 2020 the government has lowered the rate of corporate income tax from the previous rate 25 percent to 22 percent for the tax years of 2020 and 2021, and become 20 percent starting in 2022 tax year.

The income tax calculation for tax year 2019 uses the tariff that applies to 2019 tax year which is 25 percent. Thus, the calculation and deposit of underpayment income tax (Income Tax Article/ITA 29) reported in the 2019 Annual Tax Return are still using the 25 percent tariff.

As a result of and the reduction in rates, the calculation and deposit of corporate income tax installments (ITA 25 installments) for 2020 can use a rate of 22 percent starting from the 2019 annual tax return period and the tax period thereafter.

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For taxpayers who have not submitted their annual tax return 2019 until the end of March 2020, the calculation and payment of ITA 25 installments are as follows:

1. ITA 25 installment for tax period of March 2020 (which is deposited no later than April 15, 2020) is equal to the installment in the previous tax period.
2. ITA 25 installment for the tax period of April 2020 (which was deposited at the latest on May 15, 2020) is calculated based on the fiscal profit reported in the 2019 annual tax return, but have already used the new rate of 22 percent.

Therefore, the government also urged that the corporate taxpayer promptly submit the 2019 Annual Tax Return in order to start taking advantage of the reduction in ITA 25 installment. 

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. (KEN/AGS)