Indonesia Incometax System

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Indonesia Incometax System Powered By Docstoc
					                      By
         Djangkung Sudjarwadi, SH. LLM.
Deputy Director General For Human Resources Development


Presented on Indonesian Investment Seminar
        Kitakyushu, Osaka and Tokyo
             March 16-18, 2005                            1
  TAX INCENTIVES IN INDONESIA



I.   INTRODUCTION
II. INCOME TAX INCENTIVES
III. VALUE ADDED TAX AND SALES TAX
     INCENTIVES
IV. LAND AND BUILDING TAX
     INCENTIVES
V.   LAND AND BUILDING ACQUISITION
     INCENTIVES
VI. OTHER TAX FACILITIES
                                     2
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a. TAX HOLIDAY
b. TAX AMNESTY
c. FOREIGN INVESTMENT TAX
   INCENTIVES
d. INVESTMENT TAX CREDIT
e. FREE TRADE AREA / FREE TRADE
   ZONE
                                  4
      a. TAX HOLIDAY



  A period of exemption from income tax
for new industries, granted by developing
 countries in order to develop or diversify
their industries. The Exemption is usually
  given for a term of years to pioneer or
              infant industries.
                                              5
     b. TAX AMNESTY



   Special provisions offered to
    taxpayers at a time when the
 government is endeavoring to stop
tax evasion and/or raise additional
  revenue. Tax amnesty is usually
   offered to give tax payers the
   opportunity to pay previously
  unpaid taxes, on the basis that
  they will be guaranteed freedom
  from penalties and prosecution.
                                      6
c. FOREIGN INVESTMENT TAX
         INCENTIVES


   Tax incentives designed to encourage
 inward investment from outside a country
comprises exemption from customs duties,
   VAT, income tax, tax rate reduction, tax
 deductible contributions to investment, or
   by giving accelerated depreciation and
                amortization
                                              7
d. INVESTMENT TAX CREDIT



 A certain percentage of the price of
    acquisition of such investments
  may be credited against the private
  individual’s tax liability or deducted
            from the tax base

                                           8
   e. FREE TRADE AREA/
     FREE TRADE ZONE



 Special territories in which imported
goods are free from custom duties, VAT
    and income tax on importation


                                         9
   Universally tax incentives exist and
 needed almost all countries in the world
to facilitate business development and to
 maintain the tax system itself to become
     more efficient, justice and able to
      generate sustainable revenues

                                            10
II. INCOME TAX INCENTIVES

1.   Non Taxable Object
2.   Tax Incentives for Investor
3.   Tax Incentives For Deb Restructuring
4.   Uncollectible Debts Deductions
5.   Small Debt Wright off Exemption
6.   Interest and discounts Exemption
7.   Income Tax Born by Government
8.   Withholding Tax Article 22 Exemption
                                        11
          1. Non Taxable Object
a.   Aid, donation, gifts received by relatives
     provided that there is not any business, work,
     ownership, nor control relationship between
     the parties concerned.
b.   Assets including cash received by an entity
     in exchange for shares or capital contribution.
c.   Remuneration in the form of benefits in kinds in
     respect of employment or services received
     from Tax payer or the Government.
d.   Payment in connection with health, accident,
     life, or education insurance.
e.   Income received or accrued by a venture capital
     company                                         12
  2. Tax Incentives for Investor
A Tax payers who invest capital in certain sectors
and or in certain regions may be granted tax
incentives in the form of :
  a. Up to 30 % (thirty percent) investment
     allowance
  b. accelerated depreciation and amortization;
  c. extended loss carried forward but shall not
     exceed 10(ten) year;and
  d. ten percent tax on dividends referred to in
     Article 26 , unless the tax rate under the
     relevant treaty is lower.
                                                     13
    3.    Tax Incentives For Debt
               Restructuring
Tax payers who takes part in debt
restructuring program through a special
institution established by the government
may enjoy a limited tax incentives, in term
of the period and its type which will be
granted, in the form of tax relief of income
tax payable on :
   a. discharge of indebtedness
   b. debt to asset swap
   c. debt to equity swap.
                                               14
  4. Uncollectible Debts Deductions

Resident Tax payers and Permanent Establishments
are entitled deduction of debts which are actually
uncollectible, provided that :
    1.   it has been charged to commercial financial
         statement
    2.   the case has been filed to court of BUPLN or there is
         a written agreement on the discharge of
         indebtedness between debtor and creditor
    3.   it has been published in media; and
    4.   the Taxpayer shall submit the list of bad debt to the
         Directorate General of Taxes,
the procedure of which shall be stipulated further
by the Director General of Taxes Decree.
                                                             15
5. Small Debt Write off Exemption



 Under Government Regulation No. 130
 of 2000, small debt write off could be
 income tax exempt, including :
   a. Business Loan for Poor Family
      (KUKESRA)
   b. Business Loan for Farmer (KUT)
   c. Simple Home Loan (KPRSS)
   d. Small Business Loan (KUK)
   e. Other Small Loan
                                          16
6.   Interest and discounts Exemption




  Interest and discounts which are
     received or accrued by bank
     established in Indonesia or
overseas bank branches in Indonesia
    are exempted from Income Tax.

                                        17
7.Income Tax Born by Government



Income Tax due from income
    received or accrued by       Donation, Grants,
 contractors, consultants, or    Aids to Aceh and
   principle suppliers from
 Government project funded        North Sumatera
by foreign aid or foreign loan
are born by the Government.
                                 Tsunami Victims


                                                     18
8. Withholding Tax Article 22 Exemption




   Imported goods for further processing
    and will be exported are exempted
      from withholding Tax Article 22


                                           19
 III. VALUE ADDED TAX AND SALES TAX
               INCENTIVES

1.   VAT and Sales Tax on:
      a. Taxable goods import
      b. Utilization of Taxable Services
      c. Utilization of Intangible Taxable Goods
      d. Delivering of Taxable Goods or
         Services by Principal Contractor are
         not collectible for Government projects
         funded by foreign aid or foreign loan.

                                                   20
2. VAT and Sales Tax in Batam
          Bonded Zone



  Taxable goods import and utilization of
 Taxable Services in Batam which will be
used for export industry companies are not
 subject for VAT and Sales Tax Collection.



                                             21
 3. VAT and Sales Tax in Bonded
            Storehouse


Taxable goods imported or delivered from
  custom area to Bonded Storehouse are
   VAT and Sales Tax free of collection.
 However delivery taxable goods outside
thee Bonded Storehouse too be consumed
    shall subject to VAT and Sales Tax.
                                           22
      4. VAT Exemption on:

a. Capital good in from of machinery
   and factory tools
b. Cattle, chicken, and fishery food or
   its raw material
c. Seeds for cultivation of agriculture,
   plantation, forestry, husbandry, and
   fishery.
                                       23
       5. VAT and Sales Tax
        postponement on:



Delivery of taxable services or exploration
  and exploitation geothermal mining, to
   taxable person could be postpone its
payment until the day of production where
 there is remittance already to Minister of
    Finance account in Bank Indonesia.
                                          24
6. VAT exemption on
  importation of basic
  necessities goods such as :
  rice, corn, sago, soybean,
  and iodine salt.


                                25
7. VAT and Sales Tax not Collectible
  for Taxable Person in Bonded Zone
  or Taxable Person in Integrated
  Economic Development Zone for
  importation    taxable    goods   in
  relation to development to be
  processed for export and delivery to
  subcontractor industrial company in
  custom area.
                                     26
    8. Fiscal Stimulus 2003

Since February 1st 2003, the Government of
Indonesia has granted fiscal stimulus, consist of:
a. Removal Sales Tax on 23 products, such as:
   • Television up to 21 inch
   • Hand phone
   • Washing machine
   • Refrigerator up to 180 liter
   • Air conditioner up to 1 HP
   • Camera up to Rp 500.000,-
   • Microphone and others electronic products.
                                                     27
    8. Fiscal     Stimulus 2003
Since February 1st 2003, the Government of
  Indonesia has granted fiscal stimulus, consist of:
b. Reduction on Sales Tax applicable rate for mine
   products, such as:
     • VCR, VCD, DVD from 20% to 10%
     • Cassette radio from 20% to 10%
     • TV beyond 21 inch from 30% to 10%
c. Postponement implementation of VAT on:
     • Toll road
     • Electric for industry
     • Electric for household
     • Cattle food
     • Raw material/capital goods                      28
    IV. LAND AND BUILDING TAX
            INCENTIVES

1. Tax deduction for Personal and Corporate
   Taxpayer due to certain condition
2. Land and building Tax 50% reduction for new
   investor doing business in East Indonesia
   Region
3. Land and Building Tax 50% reduction for
   Private Hospital and Private universities
4. Land and Building Tax 50% reduction for
   condominium developed by Perum Perumnas

                                                 29
     V. LAND AND BUILDING TAX
     AQCUISITION INCENTIVES



1. Tax deduction 50% or 75% due certain
   condition
2. Tax reduction up to 100% for merger or
   restructuring company
3. Tax reduction up to 50% for company
   acquiring rights of management


                                            30
      VI. OTHER TAX FACILITIES

1. Income tax payable or Taxpayers who conduct business
   in the oil and natural gas, general mining sector and
   other mining sector under a Production Sharing Contract,
   Contract of Work or other cooperation agreement that
   remains valid at the time this law takes effect, shall be
   computed on the basis of the provisions contained in the
   Production Sharing Contract, Contract of Work or
   cooperation agreement until the termination of the
   contract or agreement.
2. Foreign taxpayer as well as foreign investor company
   may benefit tax incentives govern under Tax Treaty
   between Government of Indonesia and foreign country
   partner.
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