Indonesia Tax Incentive and Economic Policy in Relation to COVID-19

1. The CIT rate will be gradually reduced from the current rate of 25% to 22% for fiscal year 2020–2021 and to 20% starting fiscal year 2022.
2. The CIT rate for Limited Liability Companies with at least 40% of their paid-in shares listed on the Indonesia Stock Exchange and meet certain requirements, would be reduced by a further 3% (i.e. the CIT rate will become 19% for fiscal year 2020–2021 and 17% starting fiscal year 2022). The requirements will be further regulated under a Government Regulation.

1. Value-Added Tax (VAT)
   Utilisation of foreign intangible goods or services in Indonesia’s Customs Area through e-commerce system will be subject to Indonesian VAT and follow the prevailing provisions in the VAT Law. VAT collection, payment, and reporting is to be conducted by foreign sellers, foreign service providers, or foreign e-commerce marketplace (collectively referred to as “foreign e-commerce players”) and/or domestic marketplace as appointed by the Ministry of Finance (“MoF”). The collection, payment, and reporting mechanism will be governed by MoF. Marketplace is defined as business players providing electronic communication platform to be used in e-commerce, while foreign sellers or service providers are defined as individuals or companies residing or domiciled outside of Indonesia which carry out transactions with domestic party in Indonesia.
   
   
2. Income Tax or Electronic Transaction Tax
   Foreign e-commerce players with a “significant economic presence” in Indonesia can be deemed as having a Permanent Establishment (“PE”) in Indonesia. If a PE cannot be deemed under the existing rules of an applicable Tax Treaty, affected e-commerce players will be subject to an Electronic Transaction Tax (“ETT”). ETT will be imposed
   on direct sales or sales through the marketplace.
   
   Details on the tax rate, tax base, and calculation method will be governed in a Government Regulation, while the payment and reporting mechanism will be governed by MoF. The “significant economic presence” PE will be determined based on the following factors:

• Consolidated gross turnover of group businesses;
• Revenue from Indonesian market; or
• Number of active users within certain thresholds that will be governed by the MoF.

Certain tax matters where the deadline falls within a “force majeure period” due to COVID-19 will be extended as follows:

1. Submission of tax objection letter – extended for six months
   maximum;
2. Payment of tax refunds (normally payable within one month after the
   issuance of the Overpayment Tax Assessment Letter) – extended for
   one month maximum;
3. Issuance of the following decisions are extended by six months
   maximum:
   – Overpayment Tax Assessment Letter
   – Tax objection decision letter
   – Decisions as governed under Article 36 (1) of KUP Law on:
   a. Request for reduction/elimination of administrative sanction
   b. Request for reduction/cancellation of incorrect Tax Assessment
   Letter
   c. Request for cancellation of tax audit result.

The government will change the list of goods under the prevailing Customs Law that are provided with import duty exemption or reduction with regards to handling COVID-19 and anticipating any threat to the national economy. The change will be further governed by an MoF regulation.