Extended Tax Incentives and Tax Facilities in response to Covid-19

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Published on 9/16/2021 - Issue Q3/2021
 
A series of Tax Regulations have been issued and effective since 1 April 2020 in order to provide reliefs to taxpayers operating in certain industries, in accordance with certain Business Classifications (Klasifikasi Lapangan Usaha/”KLU”), who are affected by the Covid-19 pandemic. 
  

Tax Incentives

Below please find a list of the original tax incentives and their recent updates stipulated by the recently issued Minister of Finance Regulation (“MoF Reg”) 82/2021, dated and effective as of 1 July 2021:
  • Article 21 Employee Income Tax borne by the Government; applying to taxpayers with KLUs as listed in the appendix of MoF Reg 82/2021. There are 1189 KLUs which are entitled to this Article 21 Employee Income Tax incentive;
  • Exemption of Article 22 Income Tax on imports by eligible taxpayers. The eligible taxpayers are covered in 132 KLUs as outlined in the appendix of MoF Reg 82/2021; 
  • 50 percent reduction of Article 25 income tax installment for eligible taxpayers. The incentives are granted to taxpayers in 216 KLUs as outlined in the appendix of MoF Reg 82/2021;
  • VAT refund acceleration for taxpayers in 132 KLUs requesting refund for a maximum of IDR 5 billion; 
  • Government-borne final income tax, applying to:
        • Micro, Small & Medium Enterprise taxpayers; and
        • Taxpayers earning construction income in connection with the acceleration program to improve irrigation water utilization.
 
A realization report must be submitted by the taxpayers ,utilizing the above-mentioned tax Incentives. MoF Reg 82/2021 allows for taxpayers to submit the revised realization report for January 2021 tax period to June 2021 tax period by 31 October 2021 at the latest. 
 

Tax Facilities

In addition, through the MoF Reg 83/2021 of 1 July 2021, the Minister of Finance has extended the period for granting tax facilities in connection with the Covid-19 handling until 31 December 2021, in order to aid public participation in handling Covid-19 in the form of:
  • 30 percent additional tax deduction of the production costs in connection with medical device production (e.g. surgical masks, protective clothing, ventilators etc.), as well as with the supply of household health products (e.g. antiseptic hand sani-tizer and disinfectant);
  • Provision of deductible donations in the form of goods, services, money, or free-use of assets which are provided to the Minis-try of Social Affairs, Ministry of Health , National Agency for Disaster Management (Badan Nasional Penanggulangan Bencana/”BNPB”) or other Institutions authorized to collect donations;
  • Imposition of 0 percent Article 21 Final in-come tax on additional income from the Government which is received by health workers;
  • Imposition of 0 percent Final income tax on rental income which is received from the Government in the context of handling Covid-19. 
 
As the tax incentives and tax facilities have been extended several times with respect to the current pandemic, it is interesting to see if further reliefs shall be implemented.

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