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Further Improvement of Tax Incentives for Taxpayers Affected by COVID-19

Following the release of Minister of Finance (“MoF”) Regulation No. 86/PMK.03/2020 (“PMK-86”) that extended the applicable period and expanded the business sectors that can access the tax incentives previously provided under MoF Regulation No. 44/PMK.03/2020 of 27 April 2020, the MoF has now issued Regulation No. 110/PMK.03/2020 dated 14 August 2020 that:

  • Increases the permitted reduction for Article 25 corporate income tax instalments from 30% to become 50%.
  • Provides a new incentive for tax borne by Government for final tax on construction services income relating to the Program to Accelerate the Improvement of Water Use for Irrigation (P3-TGAI).

There are no changes to the other tax incentives provided  under PMK-86 and no changes to the lists of eligible business sectors (KLU). Please refer to our Client Alert dated 14 August 2020  for information regarding the tax incentives provided under PMK-86.

When is it effective?

The revisions are effective from 14 August 2020: 

  • For corporate income tax instalments, the 50% reduction is applicable for the July instalment if the taxpayer has already notified the Directorate General of Taxes (“DGT”) that the taxpayer wishes to utilize the incentive. Otherwise the 50% reduction will apply commencing the month that the taxpayer lodges the notification (e.g. for the August instalment, assuming the notification is lodged in August).
  • For tax borne by Government on P3 - TGAI construction services income, the incentive will apply automatically (i.e. no application is required) and the withholder is then required to submit monthly reports on realization no later than the 20th of the following month.

Comments & Actions

PMK-110 does not provide guidance for those taxpayers that already paid the July corporate income tax instalment based on the previous 30% reduction. The DGT may release a circular letter (as occurred for PMK-86) regarding the implementation of PMK-110. In the absence of specific guidance, the taxpayer could apply to overbook (“pemindahbukuan”) the overpayment from its July 2020 corporate tax instalment against another tax obligation.

For further reading :

Further Improvement of Tax Incentives for Taxpayers Affected by COVID-19