The large impact of Covid-19 has spread to economic stability and productivity in certain sectors. Thus in order to maintain the stability of economic growth as well as gain in consumers purchasing power and increase productivity in several related sectors, the government issued a policy to extend tax incentives.

The tax incentives regulation is extended to support stakeholders’ business activities upon the impact of Covid-19, which initially came into force in 2020 through the Minister of Finance Regulation Number 23 of 2020 on Tax Incentives for Taxpayers Affected by the Corona Virus Outbreak. The tax incentives which extend the tax due to 30 June 2021 are regulated under the Minister of Finance Regulation Number 9 / PMK.03 / 2021 (“Minister of Finance Regulation Number 9/2021”).

The incentives include tax in Article 21 or Income Tax, Article 22 or Import Income Tax, Article 25 or Income Tax Installments, and Value Added Tax.

1. Based on Article 21 Law Number 36 of 2008 on Fourth Amendment to The Law Number 7 of 1983 on Income Tax (“Law on PPh”), every profession that earns income in Indonesia will be subject to Income Tax, popularly known as PPh (Pajak Penghasilan). Therefore, the issuance of Minister of Finance Regulation Number 9/2021, brings fresh air for taxpayers. Taxpayers, in this case are employees, receive additional income as a form of tax that is not withheld by the company as the tax obligations will be borne by the Government.

However, not all employees are subject to PPh are eligible for the underlying tax incentives; as there are certain criteria that need to be fulfilled by employees, such as:

• the company that pays the salary to the employees must be classified in the Business Field Classification Code (Kode Klasifikasi Lapangan Usaha/KLU), or has been included to be a part of Ease of Import for Export Purposes (Kemudahan Impor Tujuan Ekspor / KITE) or the company must obtain a Bonded Zone Operator permit (Izin Penyelenggara Kawasan Berikat), or Bonded Zone Entrepreneur Permit (Izin Pengusaha Kawasan Berikat), or Employer's License In Binding Area (Izin Pengusaha Dalam Kawasan Berikat) (“Eligible Company for Incentives”);
• the employee has Taxpayer Identification Number (Nomor Pokok Wajib Pajak); and
• during the corresponding Tax Period, the employee receives a permanent and regular gross income of no more than IDR 200 million a year.

2. Article 22 (1b) “Law on PPh” stipulates the Import Income Tax (PPh Impor), which is a tax imposed to the taxpayers who are either government or private companies that carry out import activities. Incentives based on Minister of Finance Regulation Number 9/2021 regulates that in order for taxpayers to be able to receive exemption from the collection of Import Income Tax, they are required to be either one of the Eligible Company for Incentives criterias.

Moreover, the taxpayers must also have either one of the licenses at the time of releasing goods from Bonded Zone (Kawasan Berikat) to Other Places in the Customs Area (Tempat Lain Dalam Daerah Pabean).

3. Based on Article 25 “Law on PPh”, taxpayers are allowed to fulfill their tax obligations via installments (“Angsuran PPh”). The latest update regarding the installments is also regulated under the Minister of Finance Regulation Number 9/2021, which provides benefit for taxpayers who are engaged in certain business fields, KITE companies, or companies in bonded zones, to receive incentives with a reduction in the installment amount of 50% of the total “Angsuran PPh”. In order to acquire such benefit, taxpayers only need to submit notifications through the website page pajak.go.id. After that, the head of the tax service office will issue a notification whether taxpayers are either entitled or not entitled to the tax incentives.
   
   
4. Minister of Finance Regulation Number 9/2021 also regulates the Value Added Tax Incentives (Insentif Pajak Pertambahan Nilai - PPN). The incentives for Value Added Tax are given to Taxable Entrepreneurs (“Pengusaha Kena Pajak – PKP”) who are classified as low-risk companies. They are required to operate in certain business fields, KITE Companies, and companies in bonded zones. PKP receives accelerated restitution incentives to the maximum amount of overpayment of IDR 5 billion. With the aim of PKP to be given a preliminary refund of overpayments of taxes, PKP must submit a Value added tax period notification letter (Surat Pemberitahuan Masa PPN/SPMPPN) for a maximum IDR 5 billion at the taxpayer's registered place. The letter must be submitted no later than the end of the month after the tax period for granting incentives ends. 

The granting period for the corresponding tax incentives is between January and June 2021. With the extension of this tax incentive, it is hoped that it can encourage taxpayers who are affected by Covid-19 to continue their business activities and prevent them from neglecting their tax duty.

For futher inquiries on the matter, please do not hesitate to contact Ms. Gabriella Lienardo ([email protected] or [email protected] ).