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Tax flash Aug 2020

TAX FLASH KIB CONSULTING AUG 2020

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Tax flash Aug 2020

  1. 1. Quarter II 2019 Quarter I 2020 Quarter II 2020 Indonesia Economy At A Glance TAX FLASHKIB E-newsletter August 2020 BPS-Statistics Indonesia has announced Indonesia's economic growth or GDP for the second quarter of 2020. Indonesia’s economy in the second quarter of 2020 against the second quarter of 2019 experienced contraction or negative growth of 5.32 percent (y-on- y) and a growth contraction of 4.19 percent (q-to-q). This negative economic growth is the first since 1998 when Indonesia experienced Asian financial crisis. This BPS announcement confirmed that the Q2 2020 contraction was deeper than the Ministry of Finance predicted in the range of minus 3.8 percent. “Given the nature of the crisis, all hands should be on deck, all available tools should be used. We are providing support, as attractively as we can, so that from the household to the large big corporate account, all economic players can access financing through their banks” Largarde. In This Issue: - Economic Condition - PMK 86/PMK.03/2020 - PMK 89/PMK.010/2020 - E-objection - VAT Collection on Foreign Digital Companies Contraction on Indonesia’s Economy, Recession? -5.32% -4.19%
  2. 2. “Economy is the method by which we prepare today to afford the improvements of tomorrow.” - Calvin Coolidge One of the reason on the economy contraction was the decrease in household consumption by -5.51%. It can be seen in the explanation below which was reported by the BPS Statistics Indonesia that the majority of household consumption decreased. The selling of food, drink and tobacco; clothing; other household supplies; vehicle fuel; cultural and recreational goods; as well as other items shrunk. If we pay attention to the housing & household equipment sector as well as health & education sector, it increased due to the increasing number of needs. For example: the volume of sales of PLN electricity to households increases. People are starting to wonder what will happen in the future. The word of recession haunt people in many ways possible. It cannot be denied that economic sector has a significant role in the development and progress of a country. A country is considered to be advanced if it has a high level of economic growth, which is indicated by the value of gross domestic product or national income. However, economic growth is influenced by many uncontrollable external factors, such as market mechanisms and others. As for now, the spreading of COVID-19 which restrict people’s activity is influencing the market and caused the country's economy enters a recession. A recession or slump is a condition when a country's Gross Domestic Product (GDP) decreases or when real economic growth is negative for two or more quarters of a year. A number of countries from the continent of Europe, America, to ASEAN are now trapped in recession. It can turn into a domino effect on economic activity. When investment level decreased, the level of Food & Beverages - 0.71% Clothing & Footwear - 5.13% Housing & Home Appliances 2.35% Restaurant & Hotel - 0.71% Health & Education 2.02% Transportation & Communication - 0.71%
  3. 3. “Economy is not baseball, where the game is always played by the same rules.” - Nate Silver production of the product or commodity will also decrease. Unemployments and layoffs might occur and caused the purchasing power to decline. Philippines economy has been declining for two consecutive quarters where in Q1 the economy contracted by -0.7% and in Q2 by -16.5% (y-on-y). The country has carried out two lockdowns to contain COVID-19. America - Uncle Sam's country economy experienced -32.9% of contraction in the period April - June. This contraction was much sharper than the first quarter which was recorded at -5%. Hong Kong has experienced four consecutive quarters of contraction. Where economic activity has shrunk since mid-2019, when massive anti-Beijing protests took place. Currently, Hong Kong's economic condition is declining -9% in the second quarter of 2020 on a year-on-year basis (YoY). Reuters, the Central Bank of South Korea, stated that on the in the first quarter, the economy condition is - 1.3%. Second Quarter -3.3% (Q-to-Q). Meanwhile, on an annual basis (Y-on-Y), the country's GDP is minus 2.9% from the same period last year.
  4. 4. “Economy is the method by which we prepare today to afford the improvements of tomorrow.” - Calvin Coolidge According to the Singapore Ministry of Trade and Industry (MTI) on Tuesday (14/7/2020), Singapore officially experienced a recession after its economy was sinking deep enough. On a quarterly basis, Singapore's economy in the second quarter of 2020 contracted or minus 41.2%. Meanwhile, on an annual basis, GDP fell 12.6%. Germany's federal statistics said that this is the sharpest decline of GDP for Germany since 1970. The country recorded another contraction in its economy in Q2 2020. On a quarterly basis (Q-to-Q) the economy is minus -10.1%. Earlier in the first quarter of 2020, the economy was minus 2.2%. On an annual basis (YoY) the German economy also experiencing minus 11.7%.
  5. 5. “The last thing you want to do is raise taxes in the middle of the recession because that would just suck up and take more demand out of the economy and put businesses in a further hole.” – Barack Obama PMK 86/PMK.03/2020 Director General of Taxes stated that there are expansion of tax incentives to the business world through the revision of the Minister of Finance Regulation (PMK) No.23 / PMK.03 / 2020, PMK No.44 / PMK.03 / 2020 to the latest regulation, PMK. 86/2020 to support for more optimal economic recovery. Incentive PMK 44 PMK 86 Income Tax Article 21 borne by government (DTP).  Certain sectors (1,062 KLU), WP KITE & Bonded Zone (KB).  Incentives up to. September 2020.  Report to center & branches.  Certain sectors (1,189 KLU), WP KITE & KB  Incentives up to. December 2020  Report to center & branch (WP KITE & KB)  Report is delivered only to center office & valid for all branches (specific sector WP / KLU) Final Tax SME borne by government  Taxpayer of PP 23 of 2018  Taxpayer must submit a Letter of Statement & submit a Realization Report to take advantage of the incentives  Realization report every month at the latest on the 20th of the following month  Incentives up to September 2020  Taxpayer of PP 23 of 2018  Taxpayers do not need to submit letter of statement, only submit Realization Report  Realization report every month at the latest on the 20th of the following month  Incentives up to December 2020 Exemption of Article 22 Import Income Tax  Certain sectors (431 KLU)  WP KITE & KB  Incentives up to September 2020  Quarterly reporting  Certain sectors (721 KLU)  WP KITE & KB  Incentives up to December 2020  Reporting: April-June: latest on July 20, 2020 July-Dec: every month at the latest on the 20th of the following month 30% Reduction of Article 25 Income Tax  Certain sectors (846 KLU)  WP KITE & KB  Incentives up to September 2020  Quarterly reporting  Certain sectors (1,013 KLU)  WP KITE & KB  Incentives up to December 2020  Reporting: April-June: latest on July 20, 2020  July-Dec: every month at the latest on the 20th of the following month Preliminary refund of VAT for low risk taxpayers who submit periodic VAT overpayments of refunds of up to 5 billion rupiah.  Certain sectors (431 KLU)  WP KITE & KB  Incentives up to September 2020 Certain sectors (716 KLU) WP KITE & KB Incentives up to. December 2020
  6. 6. “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” – Ronald Reagan PMK 89/PMK.010/2020 The Ministry of Finance issued a new regulation that regulates other values as the basis for imposition of taxes (DPP) in the imposition of value added tax (PPN) which is regulated in PMK 89 / PMK.010 / 2020. The head of the Fiscal Policy Agency (Head of BKF), Febrio Kacaribu, said that the agricultural sector contributed a big amount of percentage to Indonesia's GDP, averaging 13%. However, the agricultural sector's tax contribution is relatively small. Therefore, a balanced proportion of the tax contribution is needed. Farmers are given the choice of Other Value Tax Base (DPP). DPP Other Value is the basis for the imposition of VAT determined by the Minister of Finance and is intended for certain transactions / deliveries. The products included are stated at the attachments of PMK 89 / PMK.010 / 2020. If the taxable entrepreneur (PKP) chooses to use another value as DPP, the other value used is 10% of the selling price. With a VAT rate of 10%, effectively the amount of VAT collected is only 1% of the selling price. However, the input tax on the acquisition of taxable goods / taxable services associated with the delivery of certain agricultural products cannot be credited. Although PKP has stated that it uses DPP of another value in collecting VAT, PKP can also reuse the selling price as a basis for imposing taxes on the delivery of certain agricultural products. However, the use of the selling price as DPP can only be done during the tax period after the tax year of using the value DPP ends by filing a notification first. If the PKP decides to return to using the selling price as the DPP, the PKP can no longer use the DPP with another value for the next tax period and tax year.
  7. 7. "Make sure you pay your taxes; otherwise you can get in a lot of trouble." –Richard M. Nixon E-Objection The Directorate General of Taxes Regulation Number PER-14 / PJ / 2020 releases the procedure for submitting objection letters electronically (e-filing). Provisions regarding the submission of an objection letter electronically (e-filing) have been regulated in Article 9 of the Minister of Finance Regulation Number 9 / PMK.03 / 2013 concerning Procedures for Submitting and Settling Objections as amended by the Minister of Finance Regulation Number 202 / PMK.03 / 2015 in order to provide Electronic Taxation Services to improve effectiveness and efficiency in submitting Objection Letters.  E-Objection can only be used by taxpayers who already have an electronic certificate.  The e-Objection application is one of the channels for submitting objection letters.  Apart from using the e-Objection application, the objection letter can be submitted directly to the tax service office where the taxpayer is registered, by post, or through a courier or courier service company in accordance with applicable regulations.  In submitting objection letters through the e-Objection application, validation will be carried out against the requirements for filing objections based on data in the DJP Information System.  The result of validation does not mean that the objection letter meets the formal requirements for filing an objection.  In the event that the validation results indicate the objection filing requirements are not met, the taxpayer can contact the tax service office where the taxpayer is registered for further clarification. Before accessing the e-objection application, the taxpayer must first activate the service feature by selecting the e-objection application on the menu available in the profile tab and it will appear on the service tab. The objection letter is filled in according to the instructions listed in the application and in accordance with the laws and regulations in the taxation sector which can be seen at https://www.pajak.go.id/id/punjuk-pengentuk-aplikasi-e- objection.
  8. 8. “Most venture capitalists like to bet on tech companies.” - Upkar S Sharma, Crea Worldwide VAT Collection on Foreign Digital Companies Starting from August 2020, the Director General of Taxes (DJP) officially imposes Value Added Tax (PPN) for digital products on electronic transactions which are technically regulated in the Minister of Finance Regulation Number 48 of 2020 and its derivative Regulation of the Director General of Taxes Number PER-12/PJ/2020. The purpose of appointing VAT collectors is because it only relies on collection and deposits by buyers/consumers who are retail and massive in today's digital economy. To increase effectiveness and simplicity, the government changed the VAT collection mechanism to be levied by foreign digital companies. The amount of VAT paid is 10 percent of the pre-tax price, and must be included on the receipt or invoice issued by the company as a proof of VAT collection. DJP has also appointed ten global companies that meet the criteria as value added tax collectors on digital goods and services sold to customers in Indonesia. 1. Facebook Ireland Ltd. 2. Facebook Payments International Ltd. 3. Facebook Technologies International Ltd. 4. Amazon.com Services LLC 5. Audible, Inc. 6. Alexa Internet 7. Audible Ltd. 8. Apple Distribution International Ltd. 9. Tiktok Pte. Ltd. 10. The Walt Disney Company (Southeast Asia) Pte. Ltd. VAT paid to foreign businesses on the purchase of goods or services used in business activities can be claimed as credit input tax by taxable entrepreneurs with three possible ways. First, the taxable entrepreneur notify their name and NPWP to the seller to be included on the VAT collection to qualify as a document equivalent to a tax invoice. Second, there is buyer’s registered email address (in the DJP system) at the proof of VAT collection. Last, there is a document showing that in the seller's electronic system contains the buyer's name and NPWP, or email address.
  9. 9. Tax and Custom Consulting Diagnostic Review Planning Compliance Dispute Audit Objection Appeal Tax ruling Tax Conciliation Business Consulting Business Matching Investigation Merger & Acquisition Financial Valuation Due diligence: Operational & Legal Accounting & Tax Outstanding debt collection Business & Asset Appraisal Transfer Pricing Documentation (TP-Doc) Company Setup & Liquidation Copyrights & Patent Dispute Copyrights & Patent Registration PT. Konsultan Indonesia Bersama is a boutique company serving Finance, Business, Accounting and Tax Advisory since 2008. KIB has been immensely successful in creating a local business network of small-medium-and-big businesses. We highly adept intelligent workforce that can help a company achieve their mission-critical projects and goals. Keeping pace with projects and being on the look- out for every opportunity to grow with our clients has become our mission statement. KIB commits to bring the best suited services for our clients and stakeholders. All of our resources are multifaceted and come with years of commended performance. Project completion rate of our consultants is 97%, 3% is attributed to unforeseen situations like changes of clients’ decision issues, natural disaster, etc. We appreciate the experience that our team bring and together we thrive to grow and prosper together. Accounting and Assurance Independent Audit Actuarial report (PSAK 24) Accounting SaaS Migration with Jurnal.id (Mekari) About Us Contact Us Phone: (62-21) 2929 5870-73 Bambang B. Suwarso bambang.suwarso@kib- consulting.com Rachmat Kurniawan rachmat@kib- consulting.com Yosefine Amelia yosefine@kib- consulting.com Raden Roro Ratna Indah Wulandari wulan@kib- consulting.com Addresses: North Jakarta -14450 The Koppel Building Suite IB. Jalan Pluit Selatan Raya no. 10 Gold Coast Tower Eiffel Unit N Pantai Indah Kapuk www.kib-consulting.com Disclaimer: The facts and opinions stated or expressed in this publication are for information purposes only, and are not necessary and/or must not be relied upon as being to those of the publisher or of the Institutions for which the contributing authors work. Although every part of content has been taken to ensure the accuracy of the information contained within thispublication, it should not be by any person relied upon as the basis for taking any action or making any decision. KIB Consulting and its representative, cannot be held liable or otherwise be responsible in any way for any advice, action taken or decision made on the basis of the facts, surveys, and opinions stated or expressed within this publication.

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TAX FLASH KIB CONSULTING AUG 2020

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