INDONESIA: COVID-19 VAT IMPLICATIONS
INDONESIA – Update 25th May
Guidelines for new rules for Digital Goods and Services by foreign vendors
Complete provisions on the procedures for collection, deposit and VAT reporting are contained in the Minister of Finance Regulation (PMK) Number 48 / PMK.03 / 2020. A copy is available on the tax.go.id website. While the criteria and list of business actors appointed as VAT collectors will be announced later.
Source Credit – go.id
INDONESIA – Update 13rd May
The latest value added tax facility in Indonesia
The Indonesian government recently proposed four types of new fiscal incentives in response to the outbreak of COVID-19.
The government hopes the new fiscal incentives can help contain the economic impact of COVID-19 outbreak. A VAT incentive is included the incentives.
Minister of Finance (MoF) Regulation No. 23/PMK.010/2019 (PMK-23), which became applicable on 1 April 2020, provides that the government will automatically deem the following registered taxable entrepreneurs (PKP) as low risk and, as a result, they are eligible for a preliminary VAT refund facility (previously these types of PKP had to apply to be considered low risk with respect to the VAT refund facility):
- Those whose business classification (KLU) stated in their 2018 Corporate Income Tax Return (CITR) is among those listed in Attachment F of PMK-23; or
- Those who have been declared a company granted with KITE, which is a facility granted to companies that import goods and/or materials to be processed, assembled, or fitted on other goods to produce export goods.
The amount of preliminary VAT refunds available for these taxpayers has been increased from IDR 1 Billion to IDR 5 billion.
PKP that meet the above criteria do not need to submit an application for the VAT refund facility – they are automatically entitled to it. Moreover, the Directorate General of Taxation (DGT) does not need to declare the PKP as low risk as long as the KLU or KITE status is valid when the refund request is submitted. This facility is valid for VAT returns (including amendments) for the fiscal periods of April to September 2020, so long as the returns are submitted no later than 31 October 2020.
Source Credit – BDO
INDONESIA – Update 11th May
Emergency Tax Measures – Regulation Expanded to Include More Industries and Introduce Tax Exemption for SMEs
The Ministry of Finance (MOF) has expanded the list of qualifying taxpayers and industries eligible for income tax and value-added tax incentives that was first introduced through Regulation No. 23/PMK.03/2020 (PMK-23).
The incentives will now be available to the logistics, education, recreation, health services and retail sectors, among others, in addition to the existing list which mainly comprised manufacturing and processing industries. In addition, small and medium-sized enterprises (SMEs) are eligible for final tax exemptions from April to September 2020.
The new measures are included in MOF Regulation No. 44/PMK.03/2020 (PMK-44), which came into effect on 27 April 2020 and revokes PMK-23 issued earlier in response to the COVID-19 pandemic.
The salient features of PMK-44 are set out below.
- The following incentives are available from April to September 2020 for qualifying taxpayers:
- withholding tax exemption (article 21) for employees earning annual income not exceeding IDR 200 million (tax will be borne by the government);
- exemption from tax on import (article 22); – reduction of 30% in monthly tax instalment payment (article 25); and – preliminary VAT refund automatically granted up to a maximum of IDR 5 billion.
Expansion of list of qualifying taxpayers Taxpayers that may qualify for the incentives under articles 21, 22, 25 and the VAT refund are:
- taxpayers with business classification as listed in the attachments to PMK-44;
- taxpayers declared companies to which the Import Facility for Export Purposes has been granted; or
- taxpayers licensed as businesses in the Bonded Zone area (this is the newly added category introduced under PMK-44).
PMK-44 has also expanded the list of qualifying industries of taxpayers enjoying the incentives under articles 21, 22, 25 and the VAT refund accordingly.
Taxpayers may refer to the list in PMK-44 to confirm their eligibility for the aforesaid tax facilities. Tax exemption for SMEs The government will bear the 0.5% final tax on the gross revenue of SMEs for April to September 2020. This is applicable for SMEs with gross annual revenue of not more than IDR 4.8 billion. In addition, payments made during April to September 2020 to the qualifying SMEs would not be subject to withholding tax.
Source Credit – James Cheang
INDONESIA – Update 7h May
COVID-19: Preliminary refund for VAT
Charles Oetomo and Irma Sari Batubara of GNV Consulting Services discuss how the Ministry of Finance has moved to assist taxpayers affected by the ongoing COVID-19 outbreak in Indonesia.
In light of the COVID-19 pandemic, the Minister of Finance has issued Regulation No. 23/PMK.03/2020 (PMK-23) stipulating a series of tax incentives in order to maintain the stability of economic growth, people’s purchasing power, and productivity of certain sectors. Effective from April 1 2020, the salient points of the regulations are as follows:
Article 21 withholding tax return (Article 21 tax return)
The incentive for Article 21 tax from the MoF is in the form of ‘tax borne by the government” effective from the tax period of April to September 2020. This is for employees working in certain corporate areas, who are receiving an annualised gross fixed and regular employment income in this relevant period amounting to IDR 200,000,000 ($13,110) and have a tax identification number (NPWP).
The eligible employers are the taxpayers in the business group code (KLU) listed in the attachment integrated in the regulation (KLU from 10110 to 33200, including manufacturing industries, repair and maintenance service and assembly service). They have been designated for import facility for export – Kemudahan Impor Tujuan Ekspor (KITE) – by the Directorate General of Custom and Excise (DJBC). This relevant KLU has been stated and reported in the 2018 corporate income tax return.
Article 21 tax borne by the government shall be given in cash to the employee and not counted as taxable income for the employee. To get this, the qualified employer should:
- Submit the notification letter in the specified format;
- Issue the tax payment slip stamped with “Article 21 tax return suspended by the government Eks “;
- Submit the notification realisation letter of Article 21 tax borne by the government in the required format as stated in the attachment, with the tax payment slip, at the latest on July 20 2020 for the period of April to June 2020 and on October 20 2020 for the period of July to September 2020.
Article 22 withholding tax return (Article 22 tax return)
Similar to the Article 21 tax borne by the government facility, the Article 22 import tax exemption is provided for certain taxpayers doing stipulated business and/or a KITE company. The exemption of Article 22 import tax facilities is granted through the Article 22 import tax exemption letter for taxpayers (KLU 10432 to 31004 as listed in the attachment), and/or taxpayers who have been designated as a KITE company.
These companies should have stated and reported their KLU in the 2018 corporate income tax returns and submit a written application for a tax exemption letter of Article 22 import tax as referred to in the required letter format as stipulated in the attachment.
The exemption letter is effective from the issuance date of exemption certificate until September 30 2020. Taxpayers who have obtained a tax exemption letter are required to submit a realisation notification every 3 months as in the format on its appendix, together with the tax payment slip, to be delivered at the latest by July 20 2020 for the period of April to June 2020 and October 20 2020 for the period of July to September 2020.
Article 25 income tax instalments (Article 25)
Article 25 provides for a 30% reduction effective from the period of April to September 2020. The eligible taxpayers are similar with those eligible for the Article 22 import tax facility, i.e. whose KLU listed in attachment (10432 to 31004) and/or who have been designated as KITE company. To obtain this, the taxpayers should submit a notification letter in the required format as stated in the attachment. The KLU should have been stated and reported in their 2018 corporate income tax returns. A detailed calculation on the 30% reduction of Article 25 is provided in the related attachment.
The taxpayers who want to utilise this facility should submit the realisation notification in the required format, attached with the tax payment slip, to be delivered by July 20 2020 for the period of April to June 2020 and by October 20 2020, for the period of July to September 2020.
Preliminary refund for VAT
A preliminary refund for VAT is available for taxpayers who are doing business as listed in KLU 10432 to 31004 or have been designated as a KITE company, and have filed monthly VAT returns with the tax overpayment at a maximum of IDR 5,000,000,000.
These taxpayers are categorised as low-risk VAT-able entrepreneurs (as per Article 9 (4c) of the VAT law) and shall be granted with the option of a preliminary VAT refund. Additionally, the KITE designation letter issued by the MoF should be attached to the monthly VAT return that has applied for a preliminary VAT refund, from the effective date of this regulation (April 1 2020) up to the September 2020 period (submitted the latest by October 31 2020).
The procedure for a preliminary VAT refund is in accordance with the prevailing MoF regulation regarding preliminary refunds (PMK-39).
Source Credit – International tax review
INDONESIA – Update 28th April
VAT credit refund limit (‘resitution’) has been increased to IR 5billion.
Source Credit – Richard Asquith – (Avalara)
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