Covid-19 Spreading Escalates, the Recipient of Tax Incentive Widened to MSMEs

The government adds 18 sectors, with 749 Certain Business Classifications (Klasifikasi Lapangan Usaha/KLU), recipients of tax incentive package following the increasingly widespread impact of the 2019 Corona Virus Disease pandemic (COVID-19). In addition, the government also provides new facility intended for Micro, Small and Medium Enterprises (MSMEs), by bearing Income Tax (PPh) for the April tax period to September 2020.

The expansion of this tax incentive is stipulated in the Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) Number 44 / PMK.03 / 2020 concerning Tax Incentives for Taxpayers Affected by the Corona Virus Disease 2019 Pandemic, which is effective from enactment on 27 April, 2020. This regulation is a revision as well as repealing PMK Number 23 / PMK.03 / 2020, which previously governed the provision of tax incentives in the form of Income Tax Article (ITA) 21 borne by the government (DTP), exemption of ITA 22, reduction of ITA 25 by 30% and  the acceleration of VAT refunds. With the issuance of PMK Number 44 / PMK.03 / 2020, the types of tax incentives and taxpayers who receive the incentives are expanded to be as follows:

• Incentive of ITA 21

Recipients of ITA 21 borne by the government incentive are employees who work in companies engaged in one of 1,062 KLU, companies that obtain Import Facility of for Export Purpose (KITE) and companies in Bonded Zone. The income of employee whose income tax is borne by the Government is limited to a value of no more than IDR 200 million per year and only for tax period from April to September 2020.

Through the PMK, Minister of Finance Sri Mulyani Indrawati emphasized that companies included in the KLU list of recipients of ITA 21 borne by the government facility are obliged to provide employee tax borne by the government in cash. Thus, for the next six months the employee is entitled to full income with no tax deductible. Furthermore, the company as the employer is required to submit monthly reports on the realization of ITA 21 borne by the government.

• Exemption of ITA 22 on Import

This incentive is given to corporate taxpayers engaged in one of 431 certain industrial fields, KITE companies, and companies in Bonded Zone. This facility was previously only given to102 industry sectors and KITE companies.

• Reduction of ITA 25 by 30%

Related to this incentive, the taxpayer business sector which is entitled to a 30% reduction in installments of ITA 25 is extended to 846 specific industrial sectors, KITE companies, and companies in bonded zones. Formerly, this facility was only intended for taxpayers engaged in 102 industrial fields and KITE companies.

• Acceleration of VAT Restitution

The acceleration of VAT refund is given to taxpayers operating in one of the 431 specific industry sectors, KITE companies, companies in bonded zones, and determined as low risk VAT- Registered Persons (Pengusaha Kena Pajak/PKP).

This accelerated restitution facility is limited to an overpaid VAT of up to IDR 5 billion, without the requirement to carry out certain activities such as export of taxable goods or services, submission to VAT collector, or submission that is not subject to VAT collection. This facility was previously only given to 102 industry sectors and KITE companies.

• MSMEs Final Income Tax Borne by the Government

This new tax incentive is intended for MSMEs who get 0.5% final income tax facility as stipulated in Government Regulation (Peraturan Pemerintah/PP) Number. 23/2018. Therefore, MSME taxpayer does not need to make a tax payment, while the MSMEs transaction counterpart does not make tax deduction or collection when making payment to MSMEs. However, MSMEs must first obtain a Certificate of PP 23 and must report the realization of the Final Income Tax borne by the government in every tax period.

Types of Incentive	Incentive Recipient	Previous Recipient
ITA 21 Borne by The Government	Workers in 1062 KLU	Workers in 440 KLU
Exemption of ITA 22 on Import	Taxpayers in 431 specific industries, KITE companies and Bonded Zones	Taxpayers in 102 industries and KITE companies
Reduction of ITA 25 Installment by 30%	Taxpayers in 846 specific industries, KITE companies and bonded zones	Taxpayers in 102 specific industry sectors and KITE companies
Acceleration of VAT Refunds	Taxpayers in 431 specific industries, KITE companies and Bonded Zones	Taxpayers in 102 specific industry sectors and KITE companies
Final Income Tax of 0,5% Borne by The Government	MSME Taxpayers	-

Online Submission

To get the above fiscal incentives, taxpayer must submit an online application by first logging in through the website www.pajak.go.id. After entering the system, click feature "Layanan (Service)" feature and select "Info KSWP". Next, taxpayer will be directed to feature "Profil Pemenuhan Kewajiban Saya (My Obligation Compliance Profile)", before then given the choice of tax facilities to be utilized.

Through its official statement, the Directorate General of Taxes (DGT) adopted a policy that the notification of the utilization of the incentives of ITA 21 borne by the government and / or a 30% reduction in ITA 25 installments delivered up to 31 May, 2020 remains in effect for the April 2020 tax period. This policy will be set forth in a Director General of Taxes Circular Letter which will follow to be published. 

For more details, taxpayers can download PMK Number 44 / PMK.03 / 2020 and a list of KLU recipients of tax incentives can be seen in the appendix to the regulation.