Government Releases New Tax Incentives to Overcome Covid-19

The government provides new facilities for individual and corporate taxpayers who contribute to Corona Virus Disease 2019 (Covid-19) countermeasures. The tax facilities provided are in the form of a reduction and imposition of a final Income Tax (PPh) rate of 0%, as stipulated in Government Regulation (PP) Number 29 of 2020 which is issued and valid as of 10 June, 2020.

The contribution of taxpayers which are the conditions of providing Income Tax incentives includes producing medical devices or household health supplies, giving donations, becoming health workers and other supporting staff, leasing goods and services, and repurchasing shares or buyback.

The government through PP number 29 year 2020 mentioned, this policy was taken because considering the amount of fund needed to tackle Covid-19. Meanwhile, the ability of the state to fund is very limited, both in the state budget (APBN), regional budget (APBD) and other sources of financing. Therefore, through this facility it is hoped that the community will come down and contribute to overcoming the Covid-19 outbreak.

Incentives for Medical Equipment Manufacturer

Companies that produce medical devices and / or household health supplies (PKRT) such as antiseptic, hand sanitizer, and disinfectant are given a net income reduction facility of 30% of production cost. This facility is valid up to 30 September 2020. The requirement to obtain the facility, the company must submit an expense report to the Directorate General of Taxes (DGT) at the latest when submitting the annual income tax return. If the company passes the deadline or does not report according to the provisions, this cost cannot be used as a deduction from the net income of the taxpayer.

Incentive for Giving Donation

The gross income reduction facility is also given to taxpayers who make donation in the form of money, goods, services or property utilization without compensation. The condition is that the donation is given to the BNPB (National Agency for Disaster Countermeasure), BPBD (Regional Agency for Disaster Countermeasure) Ministry of Health, Ministry of Social Affairs or the organizing agency for collecting donations not more than 30 September 2020.

The amount of the contribution that can be deducted from gross income must be in accordance with the acquisition cost of goods before being depreciated. However, if the item has been depreciated, the value of the donation must be in line with the fiscal book value. 

Meanwhile, if the goods are produced by themselves, the value of the recognized contribution is calculated based on the cost of goods sold (HPP). But, if the contribution is provided in the form of service or asset without compensation, the amount of the reduction is based on the value of the cost of services or the value of asset utilization. 

For these contributions, taxpayer must submit a nominative list of donations no later than during submitting their Annual Income Tax Return. If not, the contribution cannot be a deduction from gross income.

Income Tax Incentives for Health Workers

The next incentive is the final income tax of 0% on the additional income received by health worker and other supporting personnel who are assigned the handling of Covid-19. The additional income referred to in the form of honorarium or other benefits provided by the government at the end of the month until 30 September 2020.

This facility also applies to taxpayers who are state officials, civil servants, members of the Indonesian National Armed Forces (TNI) and the Indonesian National Police (Polri), and their retirees.

Tax Incentives for Leases Related to Covid-19 Countermeasure

Then, taxpayers who earn income from leasing goods to the government for handling Covid-19 are also entitled to the incentive of final income tax of 0%. The 0% final income tax will be deducted by the government at the end of each month when a payment occurs or when the payment is due, depending on the first event to happen. For the deduction, taxpayers will get witholding tax slip, which later must be reported to the Periodic Income Tax Return.

However, the government stressed that the costs incurred by taxpayers in the context of collecting and maintaining income cannot be charged as a deduction from gross income. Meanwhile, this facility applies to income received before or after this provision is issued, until 30 September 2020.

Tax Discount on Stock Buyback

Furthermore, for companies in the form of Limited Companies (PT), whose shares are traded on the stock exchange and want to buy back shares, can take advantage of the tax facility 3% lower than the general prevailing rate of 22%.

In fact, the 3% income tax discount rate is a facility that can be utilized by companies whose 40% shares are traded on a stock exchange and meets certain requirements.The specific requirements are more than 40% of the traded shares of the company owned by a minimum of 300 parties, with the amount of shares that each party must have is less than 5%, within a minimum of 183 calendar days. In this case, the company conducting the buyback is excluded from this facility.

However, due to worsening economic conditions which are reflected in part from fluctuation in share price, the government gives discretion to companies, which carry out buyback to stabilize their stock price, can enjoy lower rates. On condition that the company gets an appointment or approval from the Financial Services Authority (OJK). This facility is provided to companies that make a buyback not more than 30 September, in order to respond to fluctuating market conditions. (ASP/AGS)