Attracting Investors, Government Cuts Tax on Bond Interest to 10% Final

The government cut the final Income Tax (PPh) rate on profits in the form of interest or bond discount to 10% received by domestic taxpayers and permanent establishments (BUT) from the previous rate of 15%.

This rate reduction was carried out to attract investors in the domestic bond market. In addition, so that the income tax rate on bond interest for domestic taxpayers and BUT is in line with the applicable rate for foreign taxpayers other than BUT, which was previously also lowered to 10%.

The cut in the final income tax interest rate or bond discount is regulated through Government Regulation (PP) Number 91 of 2021 which also revokes or replaces the previous rule, namely Government Regulation Number 16 of 2009 which has been amended by Government Regulation Number 55 of 2019.

Tax Base

As for the tax base on bond interest with coupons or interest-bearing debt securities, is the gross value of bonds during the holding period.

Meanwhile, the tax base on bond discount with coupons is the difference between the selling price or nominal value compared to the acquisition price, excluding current interest.

Meanwhile, for a bond discount without interest or non-interest bearing debt securities, the tax base is based on the excess difference between the selling price or nominal value and the acquisition price.

Tax Cut

Final income tax on the interest and discount on the bond will be deducted by the designated payment agent, intermediary trader and the party who recorded the transfer of ownership of the rights to the interest and discount.

Several parties appointed as interest or discount paying agents usually act as bond issuers or custodians.

Meanwhile, the financial intermediary includes securities companies, dealers, banks, pension funds or mutual funds. As for the party that is the registrar of each transfer of bond ownership is the custodian or sub-registry.

However, if the bonds are issued by the government through the Bank Indonesia Scriptless Security Settlement System, then the income tax on bond interest must be paid by the recipient himself.

Pension Fund and Bank Bonds Exempted

However, the amount of the income tax rate on the bond interest does not apply to pension fund taxpayers and bank taxpayers established in Indonesia.

The income tax rate on bond interest received by pension fund taxpayers must refer to the provisions of Article 4 paragraph (3) of the Income Tax Law.  As for those received by bank taxpayers, they use the generally accepted income tax rates.

In addition to lowering the interest income tax rate on bonds, the government also allows any losses that occur to be taken into account in determining the gross amount.