16 Sept 2019
INDONESIA: Tax Bill Cuts Corporate Liabilities and Targets Overseas E-Commerce Companies
The country’s Corporate Income Tax (CIT) is to be cut from its current level of 25% to 22% in 2021, before settling at 20% from 2023 onwards. The move is part of a planned tax reform bill, which will also see listed companies with a public share ownership of at least 40% entitled to a further 3% CIT cut over a five-year period by 2023. At present, such businesses pay CIT at 20%, with this proposed reduced rate of 17% putting them on par with their counterparts in Singapore, who currently pay the lowest rate of tax in the ASEAN bloc.
The bill also makes provision for any dividends earned from either onshore or offshore investments to be exempt from a statutory tax of 10 % provided they are reinvested within the country’s borders. Additionally, investors – whether domestic or overseas – who own at least a 25% share of a domestic entity will be exempt from income tax payments on dividends earned from such entities regardless of whether they are reinvested locally or not.
Furthermore, the bill seeks to extend the country’s tax regime to overseas digital-service providers. This will see such providers obliged to collect VAT at a rate of 10% from Indonesia-domiciled customers regardless of whether the digital services company in question maintain a physical office in the country or not. It is expected that assessments of the tax liabilities of such overseas entities will relate to total transaction values and the amount of revenue generated within the country. All non-Indonesia-located companies obliged to comply with the country’s tax regime following any such assessment, however, will be required to open a local representative office.