The government of Indonesia issued Regulation No. 46/2013 on 12 June 2013 named as The Regulation for Taxation of Small and Medium Enterprises. This will be effective from 1 July 2013.
As per the regulation issued a final tax rate of 1% will be imposed to both individual and corporate taxpayers with gross income within the predetermined limits except permanent establishments. Only the income from business activities will be applicable, not from employment or a profession. To be applicable the yearly gross income must not exceed IDR 4.8 billion (approximately USD 483,630).
Individual taxpayers who have a makeshift facility that could be dismantled and use a public place for business or sales will be excluded from the final tax rate of 1%.
According to the Regulation, companies which have not commenced commercial operations; and companies whose income exceeds IDR 4.8 billion in one fiscal year after starting commercial operations will be excluded from the tax.
The final 1% tax shall no longer applicable if the taxpayer’s gross income exceeds IDR 4.8 billion in one fiscal year. Article 17 of the Income Tax Law shall be the basis for the tax rate applicable for the next financial year and the tax compliance for the income will be based on the monthly income of the tax payer. The taxpayer will not be able to offset losses of one year with profits of another year in case of 1% tax.
