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Indonesia: Tax Harmonization Law

By Admin Regulation

On October 29, 2021, the President of Indonesia ratified Law no. 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP), comprising nine chapters with six regulatory scopes. The key changes in the law include :

1. General Provisions and Tax Procedures (KUP):

  • Use of Population Identification Number (NIK) for individual Indonesian taxpayer identification numbers (NPWP).
  • Reduction of sanctions and imposition based on reference interest rates and uplift factors.
  • Equality in sanction imposition related to taxpayer objections or appeals.
  • Global tax collection assistance settings.
  • Implementation of the Mutual Agreement Procedure (MAP) simultaneous with objections or appeals.
  • Government authority to implement taxation agreements bilaterally and multilaterally.
  • Enforcement of tax criminal law, prioritizing ultimum remedium.

2. Income Tax (PPh):

  • Gifts to employees constitute income.
  • Gross turnover limit not taxable for entrepreneurs with turnover up to IDR 500,000,000.00.
  • Corporate Income Tax rate reduced to 22% starting Tax Year 2022.
  • Changes in layers and rates of taxable income.

3. Value Added Tax (VAT):

  • Removal of basic necessities, educational, and health services from VAT negative list.
  • Increase in VAT rate from 10% to 11% on April 1, 2022, and to 12% no later than January 1, 2025.
  • Reduction of VAT exemptions and facilities.
  • Ease and simplicity of VAT with final rates for certain goods or services.

4. Taxpayer Voluntary Disclosure Program:

  • Two policies implemented for six months from January 1, 2022, to June 30, 2022.
  • Voluntary disclosure for individual taxpayers who have not participated in Tax Amnesty (TA).
  • Disclosure of assets as of December 31, 2015, and assets acquired from 2016 to 2020.

5. Carbon Tax:

  • Carbon tax rate set at IDR 30 per kilogram of CO2e from April 1, 2022, for entities in coal-fired steam power plants.

6. Excise:

  • Confirmation and addition of excisable goods made from tobacco, including electronic cigarettes.
  • Changes in procedures for adding and/or subtracting types of excisable goods.
  • Enforcement of Criminal Excise Law, prioritizing recovery of losses to state revenues.

For further information, contact via email at cnp@chongsonpartners.com.

 

Source : peraturan.bpk.go.id