The Omnibus Job Creation Law was passed in a plenary session of the Indonesian House of Representative on October 5, 2020. The Law has also been put into force and enacted since November 2, 2020. This Job Creation Law is expected to help the Government in restoring the national economy and creating massive labour opportunities amidst global economic competition.
In order to create job vacancies, Indonesia needs to adjust its regulation that covers various aspects related to ease of doing business, adjustment in investment climate, among those are changes in Tax Regulation. Tax Regulations relevant in job creation is covered in 4 (four) different laws which contained in Chapter VI – Ease of doing business, Section 7 (seven) – Taxation. They are:
- Article 111 regarding Income Tax Law (PPh)
- Article 112 regarding Value Added Tax of Goods and Services and Tax of Luxury Goods Sale Law (PPN & PPnBM),
- Article 113 regarding General Provisions and Tax Procedure Law (KUP), and
- Article 114 regarding Local Tax and Local Retribution Law (PDRD).
For Income Tax, there are several points of changes that hopefully can attract foreign investment to Indonesia, some of them are to remove Income Tax on Dividend derived from Indonesia, certain income (including Dividend) derived from outside of Indonesia is exempted from Income Tax as long as it is reinvested in Indonesia, a couple of income are excluded from Income Tax Object namely net income received by member of Cooperative, and change in Income Tax Article 26 Rate for interest.
In VAT Law, there are 4 Articles that have been changed, among them are capital participation in the form of assets (inbreng) is not subject to VAT and Consignment Goods is classified as Non-Taxable Goods.
For General Provisions and Tax Procedure Law, there are 4 major changes related to administrative sanction, statute of limitation of Tax Collection Letter issuance, interest in return and criminal and investigative provisions. For administrative sanction and interest in return, according to the new regulation, it is accounted using benchmark interest rate regulated monthly by Minister of Finance.
For Local Tax and Local Retribution Law, there is removal in Local Retribution and also changes in the law-making process of Local Regulation.
As far as Articles on Taxation in Job Creation Law is concerned, Government will issue 2 (two) Government Regulations and revise 12 (twelve) Minister of Finance Regulations (PMK) to regulate the implementations of Job Creation Law.
Attached in this Tax Alert are summary of changes and table of comparison for each of Income Tax Law, VAT Law, General Provisions and Tax Procedure Law, and Local tax and Local Retribution Law in the Job Creation Law. The summary and table are presented in Bahasa.
Read more :
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