In order to smooth out the process of providing income tax discounts to support businesses and ensure a speedy economic recovery, the Indonesian government has issued an implementing regulation to tax reduction policy.
In implementing the provisions regarding Corporate Income Tax reduction, as regulated in Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Financial System Stability for Mitigation of the COVID-19 Pandemic (“Perppu 1/2020”), on April 21, the Directorate General of Tax issued Regulation of the Director-General of Tax Number PER-08/PJ/2020 of 2020 on the Calculation of Income Tax Installments for the Current Tax Year in Relation to the Adjustment of Income Tax Tariff for Corporate Taxpayers (“DGT Regulation 08/2020”).
Under DGT Regulation 08/2020, the calculation of the amount of Article 25 PPh Installment for each month, due to the adjustment of income tax tariff for corporate taxpayers, applies to:
- General Taxpayers; and
- Taxpayers with Periodic Financial Statement Obligations, including:
- Banks;
- State-Owned Enterprises;
- Regionally-Owned Enterprises;
- publicly listed Taxpayers; and
- other Taxpayers that are required to make periodic financial statements based on the provisions of laws and regulations.
The adjustment of income tax tariff, which is implemented over taxable income for domestic Corporate Taxpayers and permanent establishments, shall become:
- 22% (twenty-two percent), which applies to the 2020 Tax Year and 2021 Tax Year; and
- 20% (twenty percent), which starts to apply to the 2022 Tax Year.
Furthermore, Domestic Taxpayers can obtain a reduction of Income Tax tariff amounting to 3% (three percent) lower than the Income Tax tariff, if they meet the criteria below:
- Domestic Taxpayers are in the form of Publicly-Traded Company (Perseroan Terbuka);
- Domestic Taxpayers have a total number of shares which are traded in a stock exchange in Indonesia of at least 40% (forty percent); and
- Domestic Taxpayers meet certain requirements.
Therefore, the Income Tax tariff for said Domestic Taxpayers shall become:
- 19% (nineteen percent), that applies in the 2020 Tax Year and 2021 Tax Year; and
- 17% (seventeen percent), that starts to apply to the 2022 Tax Year.
The implementing regulation above shall provide additional clarity for all relevant parties looking to take advantage of the policy.