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RSM Indonesia Client Alert is part of our firm newsletters, however it is not designed for a consistent periodical basis, and its publishing depends on whether there is new technical issues that we would like to share to our clients.
RSM Indonesia Client Alert - 2025
RSM INDONESIA CLIENT ALERT – 20 March 2025
In recognition of difficulties faced by taxpayers to pay and/or report taxes using the Coretax tax administration system, on 27 February 2025, the Director of General Taxation (DGT) issued Decision No. KEP-67/PJ/2025 concerning the Policy regarding the Elimination of Administrative Penalties on Late Payment and/or Deposit of Tax Due and the Late Submission of Tax Returns related to the implementation of Coretax (KEP-67).
WHEN IS IT EFFECTIVE?
KEP-67 is effective on 27 February 2025 (although it has retroactive effect for tax penalties that would otherwise be due for late payment and/or late reporting of taxes for certain tax periods).
WHAT DOES KEP-67 PROVIDE?
KEP-67 provides the basis for DGT officials to not issue tax collection letters (surat tagihan pajak) that would otherwise be issued due to the late payment/deposit of taxes and/or late reporting of tax returns for certain periods. Further, if a tax collection letter has already been issued for late payment and/or reporting of taxes for that period, then the Head of the Regional Tax Office is authorized to cancel the tax collection letter.
This is implemented through provision of extended time deadlines for payment/deposit and/or reporting of certain taxes.
WHAT LATE PAID TAX PAYMENTS/DEPOSITS AND LATE REPORTED TAX RETURNS ARE SUBJECT TO KEP-67?
RSM INDONESIA CLIENT ALERT – 30 January 2025
The Global Minimum Tax (GMT), also known as Pillar Two, is a key initiative under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), aimed at reducing tax competition among jurisdictions, which has been considered a race to the bottom with diminishing benefits for many countries. The primary objective of GMT is to ensure that large multinational enterprises are subject to
a minimum Effective Tax Rate of 15% in each jurisdiction where they operate or, if not, in their home country.
As part of its commitment to the Inclusive Framework agreement reached in October 2021, Indonesia has now implemented GMT through the issuance of Minister of Finance Regulation No. 136 of 2024 (PMK-136), which provides the regulatory framework for the implementation of the Global Anti-Base Erosion (GloBE) Model Rules. The GMT framework applies a 15% minimum tax rate through three key mechanisms: the Qualified Domestic Minimum Top-up Tax (QDMTT), Income Inclusion Rule (IIR), and Undertaxed Payment Rule (UTPR).
WHEN DOES PMK-136 APPLY?
The regulation is effective on 1 January 2025.
RSM INDONESIA CLIENT ALERT – 14 January 2025
In accordance with the VAT Law, the VAT rate was required to increase to 12% no later than
1 January 2025. After considering concerns that the imposition of 12% would negatively impact the economy, the Government decided to limit the full impact of the VAT rate increase. Rather than amending the VAT Law that would have taken time (or, possibly, required a Government Regulation in Lieu of Law) this has been achieved through the release of Minister of Finance (MoF) Regulation
No 131 Year 2024 dated 31 December 2024 concerning “Treatment of VAT on Imported Taxable Goods, the delivery of Taxable Goods and Services, the utilization of Taxable Intangible Goods and Services from outside the Customs Area into the Customs Area” (PMK-131).
The use of a MoF regulation rather than a revision to the VAT Law also retains future flexibility to amend/revoke PMK-131 and expand the full impact of the 12% rate across those goods and services that PMK-131 regulates as only being subject to an effective VAT rate of 11%.
WHEN DOES PMK-131 APPLY?
PMK-131 is applicable starting 1 January 2025 to reduce the effect on most taxable goods and services of the increased VAT rate.
HOW DOES PMK-131 ADJUST THE IMPLEMENTATION OF THE 12% RATE?
In general, PMK-131 provides that most taxable goods and services will use an Other Tax Base (DPP Nilai Lain) equal to 11/12 of the import price, selling price or compensation, so that the effective VAT rate remains 11% (i.e., 11/12 x 12% = 11%).
The exceptions are luxurious goods, goods or services that are already subject to DPP Nilai Lain, or those subject to VAT using a Certain Amount (a specified rate other than the general VAT rate).
RSM Indonesia Client Alert - 2024
RSM Indonesia Client Alert – 18 November 2024
On 9 October 2024, the Minister of Finance (“MoF”) issued Regulation No 69 Year 2024 concerning Amendment of MoF Regulation No. 130/PMK.010/2020 concerning Provision of Facility for Reduction of Corporate Income Tax (“PMK-69” and, together with MoF Regulation No. 130/PMK.010/2020, the “Tax Holiday Regulations”).
The Tax Holiday Regulations provide a facility for eligible investors to reduce the amount of corporate income tax (“CIT”) otherwise due by either 50% or 100% for a period of up to 20 tax years, depending on the amount of the investment. Eligible investors are either investors intending to invest in specified Pioneer Industries or those that are investing in non-Pioneer Industries that can demonstrate the proposed investment achieves a score of at least 80 points against the quantitative criteria specified in the Tax Holiday Regulations.
PMK-69’s main purpose is to extend the opportunity for investors to apply for a facility for reduction of CIT (“tax holiday”) until 31 December 2025 and to incorporate potential revisions to the tax holiday benefit if an investor is subject to Global Minimum Tax under Pillar Two of the international tax rules developed by the OECD. PMK-69 also updates the Tax Holiday Regulations to reflect recent laws and regulations, and to reflect changes to the tax administration system following the implementation of Coretax.
WHEN IS PMK-69 APPLIED?
PMK-69 starts to apply on 9 October 2024.
Eligible investors can submit applications for tax holidays until 31 December 2025.
RSM Indonesia Client Alert – 1 November 2024
Otoritas Jasa Keuangan (OJK) has released POJK No.15/2024 in October 2024 - this regulation focuses on ensuring the integrity of financial reporting by banks. It emphasizes the importance of accurate and reliable financial information for decision-making by regulators and stakeholders.
KEY POINTS
Financial Reporting Requirements. Banks must ensure the accuracy, transparency, and reliability of financial information and reports. Financial reports must comply with financial accounting standards and OJK regulations.
Prohibited Actions. Directors, commissioners, and executives are prohibited from manipulating financial information or reports. Any actions that cause financial reports to misrepresent the bank’s actual condition are forbidden.
Internal Control Policies. Banks must establish internal control policies to ensure the accuracy and transparency of financial reporting. These policies should prevent unauthorized transactions and ensure compliance with accounting standards.
Special Unit for Fraud Prevention. Banks are required to form special unit or designate executives responsible for preventing fraud in financial reporting.
Sanctions. Administrative sanctions, including fines and restrictions on business activities, are imposed for non-compliance. Severe penalties are outlined for significant violations, including fines up to Rp50 billion for commercial banks.
Roles and Responsibilities. The Board of Directors is responsible for the preparation and presentation of financial information and reports. The Board of Commissioners and Audit Committee must oversee the implementation of internal control policies.
Shareholders and Affiliates. Controlling shareholders must support reliable financial reporting and avoid any actions that could lead to misrepresentation. Affiliates are prohibited from interfering with the financial reporting process.
Reporting to OJK. Banks must report any significant weaknesses or conditions that could endanger their business continuity to OJK.
Implementation. Banks are given specific timeframes to comply with the new regulations, including establishing internal control policies and forming special units for fraud prevention.
RSM Indonesia Client Alert – 21 June 2024
The new Standards for internal audit has been issued by The Institute of Internal Auditors and will be effective January 2025 and organizations need to prepare for alignment with the new Standards.
BACKGROUND
The International Professional Practices Framework (IPPF) serves as a conceptual framework that organizes authoritative guidance issued by The Institute of Internal Auditors (IIA). As a globally trusted guidance-setting body, the IIA provides internal audit professionals worldwide with essential guidance through the IPPF.
Key points about the IPPF:
1. Purpose: It offers required and recommended guidance for internal auditors.
2. Guiding Principles: The IPPF emphasizes independence, objectivity, effectiveness, efficiency, and ethical practices.
3. Global Standards: The Global Internal Audit Standards (GIAS or Standards) within the IPPF guide professional practice worldwide.
4. IIASB Oversight: The International Internal Audit Standards Board (IIASB) continually reviews and updates these standards.
5. Recent Updates: In 2023, the IIASB thoroughly reviewed public feedback on draft standards, resulting in updates to the IPPF, including the International Standards for the Professional Practice of Internal Auditing. The new Standards will take effect in January 2025.
The new Standards are not just relevant to internal auditing as it impacts to the entire organization.
This means that collaboration is needed to bring implementation of the new Standards to be successful.
RSM Indonesia Client Alert – 2 February 2024
On 29 December 2023, the Minister of Finance issued Regulation No. 168 Year 2023 concerning Guidelines for the Implementation of Withholding Tax on Income Earned by Individuals from Employment, Services or Activities (“PMK-168”). PMK-168 is the implementing regulation for Government Regulation
No. 58 Year 2023 that was issued on 27 December 2023 (“GR-58”).
For details of GR-58, please refer our Client Alert dated 11 January 2024.
PMK-168 revokes the following regulations:
1. Minister of Finance (“MoF”) Regulation No.250/PMK.03/2008 (“PMK-250”),
2. MoF Regulation No. 252/PMK.03/2008 (“PMK-252”),
3. MoF Regulation No. 102/PMK.010/2016 (“PMK-102”),
4. MoF Regulation No. 262/PMK.03/2010 (“PMK-262”) (specific clauses only), and
5. DGT Regulation No. PER-16/PJ/2016 (“PER-16/2016”).
When is PMK-168 applicable?
RSM Indonesia Client Alert – 1 February 2024
Minister of Finance Regulation No. 172 regarding Application of Arm’s Length Principle on Transaction Affected by Special Relationship was issued on 29 December 2023 (“MoFR-172”). MoFR-172 was mandated by Article 37 of Government Regulation No. 55 of 2022 (GR-55). It applies to any taxpayer conducting transaction affected by special relationship. In addition to providing additional clarification and guidance, MoFR-172 combines the regulatory content of three previous Minister of Finance regulations: MoFR-213/2016, which regulates transfer pricing documentation; MoFR-49/2019, which oversees the administration of the Mutual Agreement Procedure (“MAP”), and MoFR-22/2020, which contains administrative regulations for the Advance Pricing Agreement (“APA”) as well as the norm for applying the arm’s length principle (“ALP”). Therefore, these regulations are now revoked. This Client Alert summarises MOFR-172 and highlights key points for taxpayers conducting transactions where there is a special relationship.
When is MoFR-172 effective?
RSM Indonesia Client Alert – 11 January 2024
On 27 December 2023, the Government issued Regulation No. 58 Year 2023 concerning Income Tax Rate on Income earned from Employment or Service Activities for Individual Taxpayers (“GR-58”). In general, GR-58 creates a simplified system for calculating the amount of Article 21 income tax to be withheld during the year from payments to employees. It does not amend the rates of income tax used to determine the income tax due by resident employees on their annual income.
It applies for any employee receiving income in connection with work or services include state officials, civil servants, members of the Indonesian national armed forces, Indonesian national police, and retirees.
Although the title of GR-58 also refers to income tax on income earned by individuals from service activities, in practice the subject of GR-58 is limited to employees.
When is GR-58 applicable?
RSM Indonesia Client Alert - 2023
RSM Indonesia Client Alert – 14 July 2023
On 27 June 2023, the Minister of Finance issued Regulation No. 66 Year 2023 concerning Income Tax Treatment of Reimbursement or Compensation related to Employment or Services received or earned On 27 June 2023, the Minister of Finance issued Regulation No. 66 Year 2023 concerning Income Tax Treatment of Reimbursement or Compensation related to Employment or Services received or earned in On 27 June 2023, the Minister of Finance issued Regulation No. 66 Year 2023 concerning Income Tax Treatment of Reimbursement or Compensation related to Employment
On 27 June 2023, the Minister of Finance issued Regulation No. 66 Year 2023 concerning Income Tax Treatment of Reimbursement or Compensation related to Employment or Services received or earned in
the form of Benefit in Kind (“PMK-66”). PMK-66 is the long-expected regulation implementing the taxation
of Benefits in Kind (“BIK”) in accordance with Government Regulation No. 55 Year 2022 that was issued
on 20 December 2022 ("PP-55”).
As an implementing regulation, PMK-66 does not change the stipulation per Law No 7/2021 on the Harmonization of Tax Regulations that BIK are income tax objects for the recipient and the expense will be deductible for the provider if the costs are related to gaining, collecting or maintaining taxable income.
PMK-66 provides further details regarding what BIK are not included as an income tax object, how to determine the value of certain BIK, and the obligation to withhold. Importantly, PMK-66 also clarifies the obligations for BIK received in 2022 and those received during January - June 2023.
RSM Indonesia Client Alert – 29 May 2023
Government Regulation No 12 Year 2023 concerning the Granting of Business Licenses, Ease of Doing Business, and Investment Facilities for Business Players in Ibu Kota Nusantara (“GR-12”) was issued on 6 March 2023 to encourage investment by businesses in Ibu Kota Nusantara (“IKN”) and specific areas nearby, known as Partner Regions.
The regulation is effective on 6 March 2023.
There are two broad types of investment facility:
Those under the authority of the Central Government:
⇒ Income tax
⇒ VAT and Sales Tax on Luxury Goods
⇒ Customs
Those under the authority of the IKN Authority:
⇒ Special tax and special revenue facilities
⇒ Facilitation, provision of land and infrastructure to implement investment activities in IKN
This Client Alert summarizes the tax facilities for income tax, VAT and Sales Tax on Luxury Goods.
The over-arching concept is that the facilities are only available in relation to activity and income generated in the IKN by taxpayers located in the IKN.
RSM Indonesia Client Alert - 2022
RSM Indonesia Client Alert – 31 May 2022
In recognition of increased crypto asset trading activity, the Ministry of Finance (MoF) issued regulation No. 68/PMK.03/2022 on 30 March 2022 (PMK-68) to regulate the taxation of these transactions.
When is it effective?
PMK-68 is effective on 1 May 2022.
What is crypto asset?
PMK-68 defines crypto asset as an intangible commodity in the form of a digital asset that uses cryptography, peer-to-peer networks, and a distributed ledger to manage the creation of new units, verify transactions and secure transactions without the intervention of other parties.
RSM Indonesia Client Alert – 28 April 2022
Participants of the Voluntary Disclosure Program (VDP) can reduce the rate of final tax due for the assets being declared if those assets will be invested in Government Debt Securities or as an equity investment in Natural Resource Processing businesses and/or Renewable Energy businesses. Please refer our Client Alert dated 31 January 2022.
Article 16 of Minister of Finance (MoF) Regulation No. 196/PMK.03/2021 (PMK-196) further states:
⇒ The investment into Natural Resource Processing businesses and/or Renewable Energy businesses shall be carried out in the form of new business establishment and/or equity participation in companies conducting IPO and/or right issues.
⇒ The activities for the Natural Resources Processing sector refers to the processing of natural sourced raw materials into semi-finished goods or finished goods that add value to those raw materials.
⇒ The activities for the renewable energy sector refer to exploitation (generation) of energy from renewable materials.
In accordance with Article 16(4) of PMK-196, the MoF has issued Decision No. 52/KMK.010/2022 on 24 February 2022 (KMK-52) to list the business sectors that a participant of the VDP may invest in to access the lower rate of final tax.
RSM Indonesia Client Alert – 26 April 2022
On 30 March 2022, the Minister of Finance issued 14 regulations to implement changes to VAT as a consequence of the enactment of Law No. 7/2021 to Harmonize Tax Regulations (Law 7). These were primarily issued to reflect the imposition of the new 11% rate of VAT, effective on 1 April 2022, and the 12% rate that will be applied no later than 1 January 2025. However, there are also other amendments to some of the existing regulations.
This Client Alert summarises key aspects of Minister of Finance regulation No.60/PMK.03/2022 (PMK-60) that amends 48/PMK.03/2020 (PMK-48) regarding the application of VAT for foreign e-commerce businesses. PMK-60 and, previously, PMK-48 regulate the collection of VAT where intangible goods and/or services are provided from overseas to buyers/users in the Indonesian customs area via e-commerce (Perdagangan Melalui Sistem Elektronik or PMSE). E-commerce refers to trade conducted through electronic systems.Therefore PMK-60 regulates the collection of VAT by foreign e-commerce businesses that undertake relevant transactions with parties located in Indonesia.
Please refer our Client Alerts dated 20 May 2020 and 4 August 2020 for details of PMK-48 and its implementing regulation, Director General of Taxation regulation No. PER-12/PJ/2020 (PER-12).
RSM Indonesia Client Alert – 16 March 2022
On 21 February 2022, Government Regulation No. 9 Year 2022 (GR-9) was issued to amend the final tax rates on construction service businesses that were previously regulated by Government Regulation No. 51 Year 2008 jo Government Regulation No. 40 Year 2009 concerning Income Tax on Income from Construction Service Business (GR-51 jo GR-40). The stated reason for the amendment is to assist development of the construction sector, especially when considering the impacts of COVID-19.
RSM Indonesia Client Alert – 31 January 2022
As stipulated in Law No 7 to Harmonise Tax Regulations (the HPP Law), the Voluntary Disclosure Program (VDP) is now active, running from 1 January until 30 June 2022. To support implementation of the VDP, including guidance for submission, Minister of Finance Decree No. 196/PMK.03/2021 dated 22 December 2021 (PMK-196) has been issued, with effect from 23 December 2021.
This Client Alert summarises PMK-196 and aspects of the HPP Law with regards to the VDP.