Government Expands Tax Facilities for Covid-19 Vaccines

The government added two more tax facilities related to the procurement of the Corona Virus Disease 2019 (Covid-19) vaccine. Both facilities include Value Added Tax (VAT) not-collected and VAT borne by the government.

The incentive is in addition to the facilities previously provided related to the procurement of the Covid-19 vaccine which includes exemption of import duty, Sales Tax on Luxury Goods (PPnBM), and Income Tax Article (ITA) 22 on import.

The addition of the two types of facilities is contained in the Minister of Finance Regulation (PMK) Number 239 / PMK.03 / 2020, which was released on 30 December 2020 and came into effect on 1 January 2021.

Read: The Government Exempts Import Tax of Covid-19 Vaccines

Previously, tax facilities for the procurement of the Covid-19 vaccine had been regulated in PMK Number 188 / PMK.04 / 2020 which was issued and came into effect on 26 November 2020.

Not Limited to Vaccines

In addition to vaccines, these additional incentives also apply to the procurement of other taxable goods needed for pandemic handling such as medicines, vaccine support equipment, laboratory equipment, Covid-19 detection equipment, personal protective equipment, equipment for patient care, and or other supporting equipment.

Then, the facilities are also provided for the use of certain services related to the handling of the Covid-19 pandemic, such as construction services, consulting services, engineering and management, rental services, and or other supporting services.

In the regulation explained, the VAT that is not collected will apply to the import of vaccines by certain parties that include government agencies, hospitals, and other parties.

VAT Borne by Government

Meanwhile, the government-borne VAT facility applies to four transactions related to vaccines and procurement of goods and services related to pandemic handling. 

First, the delivery of vaccines, certain goods, and services needed for handling the Covid-19 pandemic by VAT- Registered Persons to government agencies and hospitals. It includes the delivery of goods in the form of free gifts.

Read: Questioning VAT on Free Gifts Amid Corona Pandemic

Second, the use of specified services originating from outside the customs area within the customs area by government agencies and hospitals.

Third, the delivery of raw materials for the production of vaccines or drugs to address Covid-19, by VAT-Registered Persons, to the pharmaceutical industry that will produce vaccines and or drugs for handling Covid-19. With the condition that it has received a recommendation from the Ministry of Health.

Fourth, the delivery of vaccines and or drugs for the handling of Covid-19 by pharmaceutical companies that produce vaccines and or drugs, after receiving recommendations from the Ministry of Health. 

This regulation also provides an opportunity for other parties who import vaccines and other items for handling pandemic, outside government agencies and hospitals to obtain government-borne VAT facilities.

Provided that vaccines or other pandemic-related goods are imported, not for their own consumption but to be handed over to government agencies and hospitals. 

Government-Borne VAT Realization Report

After using the facility, the pharmaceutical company is obliged to make tax invoices or documents that are equivalent to tax invoices and make a report on the realization of VAT borne by the government.

Meanwhile, certain parties who use certain taxable services from outside the customs area within the customs area are required to make a tax payment slip and make a report on the realization of government-borne VAT.

The realization report may be submitted via www.pajak.go.id channel at maximum by the end of the following month after the relevant tax period.

If the companies do not make invoices and tax payment slips and do not submit a realization report, incentives will not be given and VAT will be payable upon delivery of the goods.

Extended Income Tax Incentives

Besides expanding vaccine tax facilities, the regulation also extends the provision of income tax incentives for taxpayers who contribute to the handling of the Covid-19 pandemic.

The incentives in question are in the form of, firstly, additional gross income reduction for domestic taxpayers who produce medical devices and or household health supplies.

Read: Government Releases New Tax Incentives to Overcome Covid-19

Then, the second charitable contribution that can be a reduction from gross income.
Third, the income received by health workers and income in the form of compensation for the use of assets is set at 0% and is final.  

The provision of facilities previously contained in Government Regulation (PP) Number 29 of 2020 is valid until 30 September 2020. With this provision, the validity period is extended to 30 June 2021.