The Third Omnibus Law on Taxation Has Been Completed, Here Are Some Points!

JAKARTA. The Government and the House of Representatives (DPR) changed the name of the Draft Law on Taxation General Provisions and Procedures (KUP) to the Taxation Harmonization Bill (HPP). 

Quoting Kontan.co.id, the name change was made because the substance of the bill was not only about the amendment to Law Number 28 of 2007 concerning Law on Taxation General Provisions and Procedures. But also change the substance regulated in the Income Tax (PPh) Law and the Value Added Tax (PPN) Law and Sales Tax on Luxury Goods (STLG).

Therefore, the regulations that have been structured is as a harmonization of rules, or omnibus law. Thus, the Taxation Harmonization Bill will become the third omnibus law in the taxation sector to be issued by the government.

The government and the House of representatives hope that the latest regulation can increase tax revenues, expand the tax base, and build a fairer tax system. Here are some of the substances regulated in the Taxation Harmonization Bill;

1. The Tax ID Number will be replaced by National Identity  Number

The use of the National Identity Number (NIK) in lieu of the Taxpayer Identification Number (NPWP) applies to individual taxpayers. This is stated in the amendment to Article 2 of the KUP Law.

Therefore, the government will integrate NIK data which has only been recorded at the Ministry of Home Affairs with taxpayer data owned by the Ministry of Finance, in this case the Directorate General of Taxes (DGT).

2. Additional layers of taxable income

The government and the House of representatives also agreed to amend Article 17 of the Income Tax Law, regarding the layers of taxable income.

So far, the layers of taxable income only consist of four layers, with the highest layer with an income value of more than IDR 500 million with a 30% income tax rate.

However, in the latest regulation, the layer is increased by one, i.e.,for income above IDR 5 billion, with a 35% rate.

3. Tax amnesty program volume II

In the Taxation Harmonization Bill, the government and the House of representatives also agreed on a tax amnesty program volume two, in the form of a voluntary disclosure program that will begin to be implemented on 1 January 2022.

For taxpayers who participate in this program, they can disclose assets that have not been reported in the Annual Tax Return (SPT). With the condition, they have to pay final income tax at various rates, depending on the year of acquisition of the property and whether the property is reinvested (repatriation) or not.

4. VAT rate increases to 11%

The government and the House of Representatives also finally agreed on a gradual increase in the VAT rate from 10% to 12% in 2025.
The increase in the VAT rate will begin on 1 April 2022 at a rate of 11%.

5. Corporate income tax rate cut to 20% is cancelled

In addition to revising the KUP Law, the Income Tax Law, as well as the Law on VAT and STLG, the government and the House of representatives also agreed to revise Law Number 2 of 2002, regarding the ratification of Government Regulation in Lieu of Law (Perppu) Number 1 of 2020.

One of the amended substances is the plan to cut the rate of Income Tax Article 17 gradually from 25% to 20% in 2022. Because, in the draft bill that has just been agreed recently by the House of representatives and the government, it was stated that an income tax rate of 22% in 2022 would still be applied.