Within this Act, several new provisions as well as changes regarding taxation are summarized as follows;
Starting with several changes to the General Provisions of Taxation (Ketentuan Umum Perpajakan or KUP):
- Changes to the Taxpayer Identification Number (NPWP) for Individual Taxpayers (WPOP) for Indonesian residents will use the Population Identification Number (NIK)[1] . This is in accordance with the objectives of the establishment of the UUHPP, namely reforming tax administration and increasing voluntary compliance of taxpayers. Even though using a NIK, the imposition of taxes or tax obligations of a domestic Individual Taxpayer remains active only if the Objective and Subjective requirements in accordance with general taxation provisions have been met. There is no new regulation regarding NPWP for corporate taxpayers. Regarding the implementation of this provision, we are still waiting for implementing regulations and the submission of population data from the Ministry of Home Affairs to the Ministry of Finance [2] .
- Some of the more detailed arrangements related to the ability of taxpayers to apply for tax return corrections and what the impact is. Likewise, the ability of the Director General of Taxes (DGT) in issuing Tax Assessment Letters and Tax Collection Letters.
- There are additional arrangements regarding the mutual consent procedure which are usually listed in the Double Taxation Avoidance Agreement between Indonesia and other countries, this time it can be done even though an objection and/or appeal is being filed.[3] . This is expected to make it easier for taxpayers to apply for or use agreements between countries so as to avoid double taxation.
- In increasing integration between countries in the field of tax collection, the UU HPP contains an article that regulates the DGT’s cooperation with partner countries or partner jurisdictions in the form of international agreements. With this provision, the DGT can coordinate with other countries to exchange information regarding domestic taxpayers who have assets or income abroad.
Changes related to Income Tax (PPh):
- Individual taxpayers who have certain gross turnover businesses whose gross turnover is up to IDR 500,000,000 in 1 tax year, not subject to income tax[4] . This provides tax relief facilities for entrepreneurs who are just starting their business.
- Changes related to the provision of Natura which becomes a Tax Object which also means as a deductible fee to calculate Taxable Income[5] . However, there are still Natura which are still excluded. This has a good impact, because the employer can use in-kind as a deduction fee in calculating taxable income.
- Arrangements related to Depreciation and Amortization of expenditures to acquire assets whose useful lives exceeded 20 years[6] .
- The increase in the value of the first layer of WPOP taxable income which was previously Rp. 50,000,000 to Rp. 60,000,000, there is also the last layer, namely those with income of more than Rp. 5,000,000,000 subject to 35% rate[7] .
- The income tax rate for domestic corporate taxpayers or permanent establishments is set to be 22%. This tariff is higher than what the government promised based on the provisions of Article 5 paragraph (1) of Law Number 2 of 2020 concerning Stipulation of Government Regulation in Lieu of Law Number 1 of 2020 concerning State Financial Policy and Financial System Stability for Handling the Corona Virus Disease Pandemic (COVID-19), which is 20% in 2020[8] .
- There is a reduction in the income tax rate reduction facility for Public Company, which is at least 40% (forty percent) of the total number of paid-up shares traded on the stock exchange in Indonesia and fulfills certain other requirements, from the previous 5% to 3%[9] .
- Further regulation regarding the DGT’s authority in preventing tax evasion in taxpayers who have special relationships or transact with companies domiciled in countries that provide tax protection[10] . It is very important to pay attention to taxpayers who have business entities that transact with each other both domestically and abroad.
From the aspect of Value Added Tax (VAT):
- Expansion of the basis for the imposition of VAT on goods and services, by eliminating the exception of VAT tax objects[11] .
- Increase the single VAT rate to 11% in April 2022 and 12% by January 1, 2025[12] .
- Although the government provides facilities in the form of not imposing taxes on certain types of goods and services, these facilities increase the administrative burden on Taxable Entrepreneurs (PKP). Because the input tax from the facility can still be credited[13] .
Taxpayer Voluntary Disclosure Program
- An interesting thing that needs attention is the return of the Tax Amnesty program to this UU HPP. However, this time the facility is called the Taxpayer Voluntary Disclosure Program.
- As in the past, the Government’s goal of carrying out this program is to increase awareness of taxpayers in disclosing their assets, and also in the interest of the government to increase state revenues in order to rebuild the Indonesian economy after the COVID-19 pandemic.
- WPOPs or entities that have not disclosed their net assets from January 1, 1985 to December 31, 2015 can disclose them at a final income tax rate.
- The tariff is 6% for domestic and foreign net assets to be invested in business activities in the natural resource processing sector or renewable energy sector within the territory of the Unitary State of the Republic of Indonesia and/or state securities.[14] .
- 8% for domestic and foreign net assets that will not be invested in business activities in the natural resources processing sector or renewable energy sector within the territory of the Unitary State of the Republic of Indonesia and/or state securities.
- Finally, 11% for net assets abroad that will not be transferred to the territory of Indonesia.
- Furthermore, for net assets that have not been disclosed for the period January 1, 2016 to December 31, 2020, voluntary disclosure facilities are also provided, but only for WPOP.
- The rate offered is 12% for domestic and foreign net assets to be invested in business activities in the natural resource processing sector or renewable energy sector within the territory of the Unitary State of the Republic of Indonesia and/or state securities.
- 14% for domestic and foreign net assets that will not be invested in business activities in the natural resource processing sector or renewable energy sector within the territory of the Unitary State of the Republic of Indonesia and/or state securities.
- Finally, 18% for net assets abroad that will not be transferred to the territory of Indonesia.
- Both programs will take place on January 1, 2022 until June 30, 2022, with later taxpayers who wish to participate in this program must attach a Notice of Asset Disclosure.
Carbon Tax
For the sake of the environment, the government has begun to issue regulations related to carbon taxes. Broadly speaking, the government regulates the lower limit of the imposition of a carbon tax, which cannot be below Rp. 30,000 per kilogram of carbon dioxide equivalent (CO2e) or equivalent units[15] .
Excise
The new provisions that appear in this UUHPP are regulations related to e-cigarettes becoming excisable goods. So that in the future if someone enters goods including e-cigarettes, they will be subject to excise[16] .
These are some of the provisions that have changed and have just been regulated in the UUHPP. Most of the new provisions are still waiting for implementing regulations, both Government Regulations and Minister of Finance Regulations. Therefore, in the future there will still be new things that regulate in detail the provisions mentioned above.
[1] Article 2 Paragraph (1a) of Law Number 6 of 1983 concerning General Provisions and Procedures Taxation (State Gazette of the Republic of Indonesia of 1983 Number 49, Supplement to the State Gazette of the Republic of Indonesia Number 3262) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[2] Article 2 Paragraph (10) of Law Number 6 of 1983 concerning General Provisions and Procedures Taxation (State Gazette of the Republic of Indonesia of 1983 Number 49, Supplement to the State Gazette of the Republic of Indonesia Number 3262) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[3] Article 27c of Law Number 6 of 1983 concerning General Provisions and Procedures Taxation (State Gazette of the Republic of Indonesia of 1983 Number 49, Supplement to the State Gazette of the Republic of Indonesia Number 3262) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[4] Article 7 Paragraph (2a) of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[5] Article 6 Paragraph (1n) of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[6] Articles 11 and 11a of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[7] Article 17 Paragraph (1) Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia) Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[8] Article 17 Paragraph (1b) of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[9] Article 17 Paragraph (2b) of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[10] Article 18 of Law Number 7 of 1983 concerning Income Tax (State Gazette Republic of Indonesia Year 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[11] Article 4a of Law Number 8 of 1983 concerning Value Added Tax of Goods and Services and Sales Tax on Luxury Goods (State Gazette of the Republic of Indonesia of 1983 Number 51, Supplement to the State Gazette of the Republic of Indonesia Number 3264) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[12] Article 7 Paragraph (1) of Law Number 8 of 1983 concerning Value Added Tax of Goods and Services and Sales Tax on Luxury Goods (State Gazette of the Republic of Indonesia of 1983 Number 51, Supplement to the State Gazette of the Republic of Indonesia Number 3264) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[13] Article 16b Paragraph (2) of Law Number 8 of 1983 concerning Value Added Tax of Goods and Services and Sales Tax on Luxury Goods (State Gazette of the Republic of Indonesia of 1983 Number 51, Supplement to the State Gazette of the Republic of Indonesia Number 3264) as amended several times, most recently by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[14] Article 5 of Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
[15] Article 13 Paragraph (9) of Law Number 7 of 2021 concerning Harmonization of Tax Regulations
[16] Article 4 Paragraph (1c) of Law Number 11 of 1995 concerning Excise (State Gazette of the Republic of Indonesia Indonesia of 1995 Number 76, Supplement to the State Gazette of the Republic of Indonesia of 1995 Number 3613) as amended by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.