Tax-Free Dividends Mechanism is Similar to Tax Amnesty

JAKARTA. The government is preparing a number of derivative regulations of the Job Creation Law in the taxation cluster. One of the rules currently being drafted in the Draft Regulation of the Minister of Finance (RPMK) regulates the exemption of tax on dividends for individual taxpayers.

In the regulation which is planned to be issued in early January 2021, the dividend tax exemption mechanism is similar to the tax amnesty program.

For information, in the tax amnesty program, the government will waive sanctions for the voluntary disclosure of assets abroad provided that taxpayers repatriate the assets to Indonesia and then invest in a number of investment instruments for three years.

According to Taxation Regulation Director II, Directorate General of Taxation, Yunirwansyah, in the tax amnesty program, the government only sets eight investment instruments to accommodate repatriated assets. As for the dividend tax exemption policy, the government will determine 12 investment instruments.

Read: Omnibus Law on Job Creation Relaxes Income Tax Provisions

As it is known, in Article 111 of Law Number 11 of 2020 on Job Creation, the government will exempt tax on dividends received by corporate and individual taxpayers.

However, for an individual taxpayer, the exemption will be granted on the condition that dividends are received in Indonesia within a certain period of time.

Support the MSMEs

The government did not elaborate on the type of instrument to be determined.
However, according to Yunirwansyah, one of these is investment in the micro, small, and medium enterprise (UMKM) sector.

Thus, dividends used to finance the activities of MSME, in the form of loans or other, will be exempt from taxes. With this policy, the government hopes that businesses will be able to take part in the development of MSMEs in the country.