COVID-19 Pandemic: Introduction to the Income Tax Facilities in Indonesia

• 21 Jul 2020

On 10 June 2020, the Indonesian Government has enacted a new regulation in response to the spreading of COVID-19 in Indonesia since the early March of 2020. It is undeniable that the pandemic has significantly affected the overall welfare of the Indonesian citizen. The regulation aims to provide support to the community, boost healthcare supplies industry, and maintain the stability of the stock market through the Income Tax facilities in order to deal with the unfavorable impact of the pandemic.

Legal Frameworks: Our below executive summary refers to Government Regulation No. 29 of 2020 on Income-Tax Facilities for the Management of Coronavirus Disease 2019 (COVID-19) (“GR 29/2020”). 

Main Keys on the Income Tax Facilities: We provide the following main keys on the Income-Tax facilities.

Additional Reductions for Healthcare Supplies Manufacturers: We note that GR 29/2020 provides additional reductions in net income of up to 30% for the following types of manufacturers (Art. 3 (1) of GR 29/2020):

1. Any domestic taxpayers who produce healthcare supplies such as surgical face masks, N95 respirators, personal protective equipment, surgical gloves, ventilators, etc. (Art. 3 (5) of GR 29/2020); and/or
2. Household Health Supplies/Perbekalan Kesehatan Rumah Tangga (“PKRT”) such as antiseptic hand sanitizers and disinfectant (Art. 3 (6) of GR 29/2020)

We further note that the manufacturers who have implemented the above facility shall submit a relevant expense report of producing the healthcare supplies along with its Annual Tax Notification/Surat Pemberitahuan Tahunan (“SPT”) of the relevant fiscal year to Director-General of Taxation (Art. 3 (9) and (14) of GR 29/2020).

Donations that Reduces Gross Income Facility: We note that taxpayers who make donations of money, goods, services and/or asset utilization without receiving any compensation to (a) National Disaster Mitigation Agency/Badan Nasional Penanggulangan Bencana (BNPB), (b) The Regional Disaster Mitigation Agency/Badan Penanggulangan Bencana Daerah (BPBD), (c) Ministry of Health; (d) Ministry of Social Affairs; or (e) Other donation collection organizing boards (collectively referred to “Organizers”) are entitled to gross income reduction. (Art. 4 (1) jo. Art. 5 (1) of GR 29/2020).

For the facility to be granted, the donations shall be supported by a donations receipt and received by Organizers that have secured Taxpayer Identification Numbers/Nomor Pokok Wajib Pajak (NPWP) (Art. 4 (2) of GR 29/2020).

In this respect, we also note that some documentation shall be submitted to the Director-General of Taxation by the relevant parties as follows:

1. Donators shall submit a nominative donations list along with the SPT for the relevant fiscal year (Art. 5(4) of GR 29/2020); and
2. Organizers shall submit a donation collections report along with the SPT for the relevant fiscal year (Art. 6 (1) of GR29/2020).

Deduction on Final Income Tax: We note that GR 29/2020 provides the following deduction on final income tax imposed to the following parties:

1. Workers on Health Sector: We note that any taxpayers who work in the health sector and obtain additional honorarium or any rewards that are subject to a final Article-21 Income Tax will be imposed of 0% of the total gross income received (Art. 8 (2) of GR 29/2020).
2. Taxpayers who lend their assets for COVID-19 management: Any compensation and indemnity of the taxpayers who lend their land, buildings, or other assets to the government will subject to a 0% final Income Tax (Art. 9 (2) of GR 29/2020).

Share Buybacks that are Traded through Exchange: We note that Art. 10 (1) of GR29/2020 specifies that taxpayers who fulfilled the following requirements are entitled to 3% lower rates than the initial Company Income Tax rates i.e. 22%and 20%[1]:

1. Publicly-traded companies;
2. Trade a total number of shares through the Indonesian Stock Exchange amounting to at least 40% of the total amount; and
3. Meet certain requirements as set out in Art. 10 (2) of GR 29/2020

Term of the Income Tax Facilities: We note that the aforementioned income tax facilities will remain applicable until 30 September 2020 and may be subject to extensions if deemed necessary.