Income Tax facilities in handling COVID-19

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The Government of Indonesia has issued Regulation Number 29 Year 2020 (“GR-29”) regarding Income Tax facilities in handling COVID-19.

A summary of GR-29 is as follows:

1. Additional net income deduction

  • Domestic taxpayers who produce medical equipment and/or household health supplies (Perbekalan Kesehatan Rumah Tangga / “PKRT”) for handling COVID-19 are granted an additional net income deduction.
  • The additional net income deduction is 30%.
  • The additional net income deduction is calculated from direct costs of producing medical equipment and/or PKRT and charged once in the tax year when the costs are spent.
  • In case there is any joint cost that cannot be split, the expense should be allocated on a proportional basis.
  • This facility is applicable for the following products:
    1. Medical equipment in the form of surgical mask and N95 respirator; personal protective clothing in the form of medical coverall, disposable gowns, heavy duty aprons, caps, shoe covers, goggles, face shields, and waterproof boots; surgical gloves; examination gloves; ventilators; and reagents for COVID-19 diagnostic tests; and/or
    2. PKRT in the form of antiseptic hand sanitizer and disinfectant.
  • The additional net income deduction is valid from 1 March 2020 to 30 September 2020, which period can be extended if necessary.

2. Deductible donations

  • Donations for handling COVID-19 can be a deductible expense as long as the following criteria are met:
    1. Proof of receipt of donations;
    2. The donation is received by the following donation collection organisers (who must have a Tax ID):
      • National Board for Disaster Management (Badan Nasional Penanggulangan Bencana/BNPB);
      • Regional Disaster Management Board (Badan Penanggulangan Bencana Daerah/BPBD);
      • Ministry of Health;
      • Ministry of Social Affairs; or
      • Donation collection organiser institution.
  • Donations can be given in the form of cash, goods, services, or free use of assets. The value of the non-cash donation will be based on:
    1. For goods:
      • Acquisition value, if the donated goods have not depreciated;
      • Fiscal book value, if the donated goods have depreciated; or
      • Cost of Goods Sold (COGS), if the donated goods are self-produced goods;
    2. For services, the COGS value of the services; and/or
    3. For the free use of assets, the COGS value of the use of the assets.
  • COVID-19 donations which have already been claimed as a deductible under Government Regulation Number 93 Year 2010 cannot be claimed as a deduction under GR-29.
  • Donations are deductible for the period from 1 March 2020 to 30 September 2020, which can be extended if necessary.

3. 0% Article 21 Final Income Tax on the following additional income received by human resources in the health sector:

  • Additional income provided by the Government in the form of honorariums/other benefits received/obtained by individual taxpayers who serve as human resources in health sector and are assigned to providing health services handling COVID-19.
  • 0% Article 21 Final Income Tax is applicable.
  • The 0% Article 21 Final Income Tax on additional income received by human resources in the health sector applies from 1 March – 30 September 2020, which period can be extended if necessary.

4. 0% Final Income Tax on rental income from the Government:

  • Income received/obtained by the taxpayer from Government for
    1. Rental of Land and/or building (L&B); and/or
    2. Rent and other income for the use of assets other than L&B in handling COVID-19.
  • 0% Article 21 Final Income Tax is applicable from 1 March 2020 to 30 September 2020, which period can be extended in certain cases.

5. Share buy-backs of publicly listed companies

  • Law No.2 Year 2020 stipulates that the Corporate Income Tax (CIT) rate for Limited Liability Companies at least 40% of whose paid-in shares are listed on the Indonesia Stock Exchange and which meet certain conditions will be reduced by a further 3% (i.e. the CIT rate will become 19% for the fiscal year 2020-2021 and 17% starting fiscal year 2022).
  • The certain conditions are as follows:
    1. Shares must be owned by a minimum of 300 parties;
    2. Each party may only own less than 5% of the entire issued and fully paid-up shares;
    3. The above provisions must be met for a minimum period of 183 calendar days within one fiscal year;
    4. These requirements must be met by submitting a report to the Directorate General of Taxes (DGT).
  • Based on a Government policy to handle fluctuating market conditions, Limited Liability Companies which buy back their shares within the period 1 March 2020 to 30 September 2020 will still be considered as meeting the requirements for bought back shares, provided that the repurchased shares are only owned until 30 September 2022.

Income Tax Rate Reduction for Public Companies

The Government of Indonesia has also issued Regulation Number 30 Year 2020 (“GR-30”) regarding Income Tax Rate Reductions for Public Companies.

A summary of GR-30 is as follows:

  • Limited Liability Companies at least 40% of whose paid-in shares are listed on the Indonesia Stock Exchange and which meet certain conditions will be reduced by a further 3%.
  • The certain conditions are as follows:
    1. Shares must be owned by a minimum of 300 parties;
    2. Each party may only own less than 5% of the entire issued and fully paid-up shares;
    3. The above provisions must be met for a minimum period of 183 calendar days within one fiscal year;
    4. These requirements must be met by submitting a report to the Directorate General of Taxes (DGT).
  • Limited Liability Companies who buy back their shares and/or have a special relationship with their shareholders will not be considered as complying with the certain conditions.
  • If the requirements are not met, Income Tax will be calculated using normal Income Tax rates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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