The Government of Indonesia has issued a wide-ranging regulation as part of additional steps to support the economy in the face of COVID-19. Government Regulation in Lieu of Law No. 1 Year 2020 (“Perppu-1/2020”) technically is a temporary measure that must then be approved by Parliament (“DPR”) in the next session of DPR otherwise it ceases to have effect. In such a case, the consequences for actions already undertaken would be determined in the law that is passed by DPR to revoke the Perppu-1/2020.
In addition to addressing finance policy and financial system stability in the handling of COVID-19, Perppu-1/2020 has brought forward several tax measures that were initially part of the proposed Omnibus Law Tax. These are:
- A reduction to the rates for corporate income tax
- Taxation of e-commerce
Perppu-1/2020 also extends the deadlines for both the taxpayer and the Tax Office to fulfil certain tax obligations and provides a framework for the Minister of Finance to make decision on reductions or exemptions from customs duty for imports related to the fight against COVID-19.
Some of these will reduce tax and tax compliance burdens, however, the inclusion of taxation of e-commerce is intended to address the fiscal hole arising from the reduction in business activities and profits.
Perppu-1/2020 is effective from 31 March 2020.
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