Extension & Expansion of Tax Incentives for Taxpayers Affected by COVID-19

On 16 July 2020, the Minister of Finance (“MoF”) issued Regulation No. 86/PMK.03/2020 (“PMK-86”) that extends the applicable period and expands the business sectors that can access the tax incentives previously provided under MoF Regulation No. 44/PMK.03/2020 (‘PMK-44”) of 27 April 2020 that was an expansion of the initial tax incentives offered by MoF Regulation No. 23/PMK.03/2020 (‘PMK-23”) dated 21 March 2020. In addition, PMK-86 simplifies the administrative requirements to access the      incentives.

When is it effective?

PMK-86 is effective starting 16 July 2020. PMK-44 is revoked on this date.

Tax incentives offered

There are no changes to the type of tax incentives offered by PMK-86 compared to PMK-44. That is:

  • Article 21 tax to be borne by the Government (“ditanggung” – PPh 21 DTP) for employees of businesses in specified sectors, subject to the employee’s gross employment income not exceeding IDR 200 million for the year.
  • 0.5% Final Tax due under     Government Regulation No. 23/2018 will be borne by the Government (PPh Final DTP).
  • Article 22 on imports will be  exempted (“dibebaskan”) for businesses in specified sectors.
  • Article 25 corporate income tax instalments can be reduced by 30% for businesses in specified sectors.
  • Advance restitution of VAT for businesses in specified sectors, to a maximum refund request of IDR 5 billion.

For more details of these incentives, please refer to our Client Alert dated 8 May 2020 re PMK-44.

The differences relate to the increased number of business sectors (based on the KLU, or Business Classification Code used by the Tax Office), the extended period and simplified procedures to access the tax incentives, including a clarification that a branch is now included under the head office for the purposes of determining eligibility for the PPh 21 DTP incentive.

For further reading :

Extension & Expansion of Tax Incentives for Taxpayers Affected by COVID-19