On 3 September 2019, the Minister of Finance, Sri Mulyani Indrawati, announced Government’s tax reform plan through a draft bill. The draft bill proposed following measures:
- Gradual decrease in corporate rate from 25% to 20% starting from 2021. Companies with at least 40% public share ownership, the rate will be subject to 17%.
- The tax on dividends received from both domestic and foreign companies will be exempted if the recipient of the dividend holds at least 25% of the share capital of these companies. In addition, exemptions are available for dividends that are re-invested in Indonesia.
- The definition of a permanent establishment rule will be amended and digital companies may be deemed to have a permanent establishment in Indonesia without any physical presence.
- It will also include simple penalties on underpayment and late submission of tax returns.
- This bill summarizes all tax incentives the government currently provides to encourage investment.
- This bill will make tech firms to pay value added tax (VAT). Such companies will be treated as a permanent establishment liable for VAT in Indonesia regardless of whether they have a physical office in the country or not.
