Indonesia – An Introduction To The Proposed Omnibus Law.

No.

Issue

Current Provisions

Proposed Change

2.

Income Tax on Dividends

Dividends from local companies received by:

• –  Local corporate shareholders with shares ≥ 25% are not subject to income tax;

• –  Local corporate shareholders with shares < 25% are subject to the normal rate of income tax;

• –  Local individual shareholders are subject to 10% income tax.

  Dividends from offshore companies received

by local corporate or individual shareholders are subject to the normal rate of income tax.

Dividends from local companies received by:

• –  Local corporate shareholders with shares ≥ 25% are not subject to income tax;

• –  Local corporate shareholders with shares < 25% are subject to the normal rate of income tax, unless invested in Indonesia for a certain period;

• –  Local individual shareholders are subject to 10% income tax, unless invested in Indonesia for a certain period.

  Dividends from offshore companies received

by local corporate or individual shareholders are subject to the normal rate of income tax, unless invested in Indonesia for a certain period.

3.

Income Tax payers

Income Taxpayers in Indonesia:

• –  Indonesian citizens; and

• –  foreign citizens who reside in Indonesia for more than 183 days.

  Collection principle: Worldwide Income.

Income Tax payers in Indonesia are Indonesian citizens and foreign citizens who reside in Indonesia for more than 183 days, but limited to income generated in Indonesia.

Collection principle: Territorial.

Income tax on income from domestic interests received by payers of foreign taxes (subjek pajak luar negeri) will also be reduced from the current 20% rate under a separate government regulation.

4.

Input VAT

• –  Input VAT which was obtained before the company obtained a VAT ID cannot be credited.

• –  Input VAT which was not reported in the VAT return but is found during a tax audit cannot be credited.

• –  Input VAT which was obtained before

the company started producing VAT-payable goods/ services can only be credited if they are capital goods.

• –  Input VAT which was obtained before the company obtained a VAT ID can be credited based on the tax invoice.

• –  Input VAT which was not reported in the VAT return but is found during a tax audit can be credited based on the tax invoice.

• –  Input VAT which was obtained before

the company started producing VAT-payable goods/services can be credited.

– Input VAT of a Taxable Entrepreneur (Pengusaha Kena Pajak / “PKP”) who obtained goods/services from a non-PKP currently cannot be credited. In the future, the government proposes that they can still credit input VAT up to a maximum of 80%.