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Indonesia: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 2 December 2020

Tax-related measures introduced in Indonesia in response to the COVID-19 pandemic are regulated under Ministry of Finance (MoF) Regulation No. 86/PMK.03/2020 and MoF Regulation No. 110/PMK.03/2020 on Tax Incentives for Taxpayer Affected by the Coronavirus Outbreak, and Government Regulation in Lieu of Law (Perppu) no 1 year 2020.

Article 21 Employee Income Tax

The Government will bear the cost of Article 21 Employee Income Tax for the months of April – December 2020 for employees who:

  • receives income from a qualified employer (There are 1,189 categories of industries and companies,  those listed in the Attachment A of MoF No. 86/PMK.03/2020)
  • has a Tax ID number (NPWP)
  • receives an annualized regular gross income not exceeding IDR 200 million. Bonus and Religious. Holiday Allowance are not included in calculating the threshold.

The employer should give the Art. 21 income tax as additional payment to the employee.

The taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on MoF 86/PMK.03/2020.

Article 22 Income Tax on Imports

Article 22 Income Tax on Imports can be exempted for companies who:

  • Have a business classification stated in that is among those listed in the Attachment H of of MoF No. 86/PMK.03/2020 (there are 721 specific industrial fields or companies that have been granted KITE (Import Facility for Export Purposes)).
  • Qualified taxpayers must apply for this incentive via DJP Online website. If approved, the DJP Online system will issue a Tax Exemption Letter (SKB) that is valid starting from the issuance date up to and including 31 December 2020.
  • The taxpayer should submit realization letter to DGT (three months period for April – June 2020 realization letter should be submitted on 20 July 2020 at the latest and on the 20th of the following month thereafter) through DJP online with specific format that can be uploaded from DJP online.

Article 25 Income Tax

  • A 50% reduction of the Article 25 Monthly Tax Installments for qualified taxpayers (1,013 specific industrial fields, listed in the Attachment M of MoF No. 110/PMK.03/2020) is provided.
  • This reduction in tax installments is valid until the tax period of December 2020.
  • Qualified taxpayers must inform the tax office that they are utilizing this incentive via DJP Online website.

Value Added Tax (VAT)

The government will automatically consider qualified taxpayers (listed in the Attachment P of MoF No. 86/PMK.03/2020) as low-risk and provide a preliminary VAT refund facility for the fiscal periods April through December 2020.

  • Applicable for VAT returns (including amendments) that are submitted before 20th January 2021 with overpayment status, with a maximum amount of IDR 5 billion (per month).
  • Taxpayer is not in the preliminary evidence audit position and did not perform any criminal actions during the last five years before VAT return submission.

Additional Information

New digital economy tax measures 

On 31 March 2020, the Indonesian government issued the Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang/Perppu) No.1 Year 2020 (the regulation) which purports to apply new measures to the digital economy. On 16 May  2020, Perppu 1/2020 was passed into Law No. 2 Year 2020. The new law imposed tax on over-the-top electronic transaction. This tax is imposed on foreign traders, foreign service providers, and / or trade operators through an overseas electronic system (PMSE) that cannot be designated as a permanent establishment (BUT). The issuance of these regulations occurred in the context of the Indonesian government’s response to Covid-19.

Of particular note is that the regulations seek to apply 10% VAT to the provision of intangible goods and services through an e-commerce system by non-residents for consumption in Indonesia. The obligation to register and account for VAT applies to foreign e-commerce providers (including foreign platforms, foreign individuals and digital companies). Foreign e-commerce providers are entitled to appoint a representative in Indonesia to fulfil their tax obligations.

According to The Director-General of Tax No.PER-12/PJ/2020 of 2020, starting July 2020, the government imposes 10% VAT to the provision of intangible goods and services through an e-commerce system by non-residents for consumption in Indonesia. 

On-line platform operators may wish to verify their VAT obligations in Indonesia.

In general, the obligation to collect VAT from payments made by Indonesian buyers and customers is the responsibility of the e-commerce business providers (either e-commerce foreign or domestic providers, or offshore traders). The Indonesian tax office will appoint the e-commerce business providers as VAT collectors if the transactions satisfy certain thresholds in the Indonesia market. 

E-commerce marketplace providers will be appointed as VAT Collectors if their activity in the Indonesian market meets either of the following thresholds:

  • transaction value with customers in Indonesia exceeding IDR 600 million in a year or IDR 50 million in a month; 
  • access to their e-commerce platform from Indonesia exceeds 12 thousand users in 12 months, or one thousand users in one month.

Additional Information

Other tax measures

The Ministry of Finance has issued MoF Regulation No. 125/PMK.010/2020 on import Value Added Tax (VAT) for newsprint paper and/or magazine paper, borne by the 2020 state budget until December 31, 2020.

According to Government Regulation No. 48/2020 on the amendment to Government Regulation No. 81/2015 on the import and/or submission of taxable strategic goods that are exempted from added value taxes, Liquefied Natural Gas or LNG has been added to list of products the imports of which will no longer be charged with VAT.

The Ministry of Finance has issued MoF Regulation No. 96/PMK.010/2020 on the amendment to MoF Regulation No. 11/PMK.010/2020 on the implementation of Government Regulation No. 78/2019 on Income Tax Facilitation for Investment in Certain Business Fields and/or Certain Regions. The regulation effectively gives the Indonesia Investment Coordinating Board (BKPM) the authority to determine the eligibility of companies for the tax allowance as the application must now be done through the BKPM’s Online Single Submission (OSS) system. This regulation came into effect starting August 10, 2020.

According to MoF Regulation No. 83/PMK.04/2020, the period for providing tax incentives as well as simplifying the procedures for micro, small and medium enterprises (MSMEs) will be extended to December 2020.

Recovery plan

Business or taxation Incentives (Rp120.61 trillion)

Rp44.82 trillion of incentives have been allocated through taxes borne by the government such as reduction in article 25 (corporate income tax), exemption from income tax Article 21 (employee income tax), Article 22 on imports tax, and preliminary VAT refunds.

Ministries & Regional Governments (Rp106.05 trillion)

Rp36.06 trillion has been allocated to boost tourism sector, food security and fisheries, industrial estates, ICT development, Central Government loan to regional governments, and anticipating economic recovery.

Key measures

To qualify for these incentives, companies or individual need to obtain an Ease of Import for Export Purposes (KITE) under certain Business Classification Code (KLU) in the Attachment M of MoF No. 110/PMK.03/2020.

50% deduction of Article-25 (monthly corporate income tax installment) for taxpayers that conduct activities in 1,013 specific business fields, applicable until December 2020.

Exemption of Income Tax Article 22 on Import Tax and purchases of the aforementioned goods by agencies/government institutions, referral hospitals, and other parties designated to assist in handling the COVID-19 outbreak as mentioned in appendix I of 86/PMK.03/2020 (PMK 86/2020). 

Preliminary VAT refund for low-risk Taxable Entrepreneur (PKP) who submits an overpayment of VAT Tax Return overpayment for April – December 2020 tax period up to IDR 5 billion per month.

An exemption of Income Tax Article 21 on Employee Income Tax with annual gross income up to Rp200 million. Taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on PMK 86/2020.

2 major programs are currently running for MSME: Interest Subsidy Program (Rp35 trillion) and Fund Placement Program (Rp79 trillion) has reached a realization of Rp36.3 trillion.

Sectors/Industries/Areas affected

Food, trade, electricity, oil and gas, mining and coal, forestry, tourism and the creative economy, telecommunications, logistics, transportation and construction.

Additional information regarding employment-related measures, economic stimulus measures and other measures.