The Pandemic is Not Over Yet, VAT and Income Tax Incentives Have Been Extended

The government has extended the provision of VAT and income tax facilities, related to the handling of the Covid-19 pandemic, whose validity period expires on 31 December 2021, for the next six months or until 30 June 2022.

There are three types of incentives that get an extension of the validity period, first, Value Added Tax (VAT) and Income Tax Article (ITA) 22 on imports for the purchase of goods in the context of handling Covid-19 and income tax on income received by medical personnel and human resources in the health sector.

The extension of the validity period is carried out because the handling of the Covid-19 pandemic has not been completed and Indonesia is still in the status of a national disaster.

The policy is regulated in the Regulation of the Minister of Finance (PMK) Number 226/ PMK.03/2021 which is valid since 1 January 2022. The regulation revokes the previous provisions of PMK Number 239/PMK.03/2020 which has been amended by PMK Number 83/PMK.03/ 2021.

Types of VAT Facilities

The types of facilities provided for the goods include not-collected VAT and government-borne VAT. A not-collected VAT facility is granted for import activities on goods for the handling of the Covid-19 pandemic carried out by government agencies, hospitals, and others.

Meanwhile, the VAT facility borne by the government is provided for the delivery of taxable goods related to the handling of the Covid-19 pandemic.

The VAT facility borne by the government for the transfer of vaccine raw materials or medicines can be granted after the pharmaceutical company that produces vaccines or drugs has received a recommendation letter from the Ministry of Health.

The government-borne VAT facility also applies as long as the VAT-Registered Persons who transfers the goods makes a tax invoice and a realization report of the VAT borne by the government. Otherwise, incentives will not be given and the VAT-Registered Persons are still required to pay the VAT payable and will be penalized.

Cannot Be Credited

In the latest regulation, the government also emphasizes that VAT-Registered Persons who use incentives cannot credit the VAT that has been borne by the government. In the previous rules, this provision was not mentioned.

The Exemption of Income Tax Article 22 on Import

The provision of ITA 22 and ITA 22 on import facilities which have an additional validity period until 30 June 2022 is granted for imports or transfer of goods and services used for handling the Covid-19 pandemic.

This facility is provided through an Exemption Certificate (SKB) of ITA 22 on import, which is obtained after the company using the facility submits an application to the Directorate General of Taxes (DGT) through the www.pajak.go.id page.

For the use of the exemption facility of ITA 22 and ITA 22 on import, the company must submit a realization report to the DGT not more than every 20th of the following month, after the tax period.

Facility Coverage Narrowed

Although the time period was extended, the coverage of the provision of VAT, ITA 22 and ITA 22 on import facilities have been narrowed. Among other things, by cutting the number of goods or objects that receive facilities and no longer providing facilities for imports or the transfer of services.

In addition, the government also did not provide this facility for the transfer of taxable services used in the context of handling the Covid-19 pandemic, which in the previous regulation were provided with facilities.

Differences in objects of VAT facility:

Number	Old Rules	New Rules
1	Drugs	Drugs
2	Vaccines and Vaccination Support Equipment	Vaccines and Vaccination Support Equipment
3	Laboratory Equipment	Laboratory Equipment
4	Covid-19 detection equipment	Covid-19 detection equipment
5	Personal protective equipment	Personal protective equipment
6	Equipment for patient care	Equipment for patient care
7	Other supporting equipment for pandemic purposes (According to other parties)	Removed
8	Construction services	Removed
9	Consulting, engineering and management services	Removed
10	Rental services	Removed
11	Other supporting services	Removed

Differences in the object of ITA 22 and ITA 22 on Import facilities: 

Number	Old Rules	New Rules
1	Drugs	Drugs
2	Vaccines and Vaccination Support Equipment	Vaccines and Vaccination Support Equipment
3	Laboratory Equipment	Laboratory Equipment
4	Covid-19 detection equipment	Covid-19 detection equipment
5	Personal protective equipment	Personal protective equipment
6	Equipment for patient care	Equipment for patient care
7	Other supporting equipment for pandemic purposes (According to other parties)	Removed
8	Technical services	Removed
9	Management services	Removed
10	Consulting services	Removed
11	Other services	Removed

Exemption of Health Worker Income Tax

The government has also extended the provision of income tax incentives on income received by health workers and other human resources related to efforts in handling the Covid-19 pandemic. The facility which previously expired until 31 December 2021, has now been extended until 30 June 2022.

The types of facilities provided include 0% income tax and final income tax on additional income received.

In addition to health workers, this facility is given to taxpayers who receive compensation or replacement because their assets are used to handle the Covid-19 pandemic.

However, this extension of the validity period does not apply to net income reduction facilities for taxpayers who produce medical devices or household health supplies.
Because the latest regulation only mentions, extensions are given for 0% income tax and final income tax facilities.