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Tax Flash Feb 2020

Tax Flash 2020

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Tax Flash Feb 2020

  1. 1. TAX FLASH “Not everyone can get tested, since there are not enough testing kits.” ~ Li Lanjuan, China’s Na- tional Health Commis- sion’s coronavirus commit- tee ~ NY Post In This Issue • COVID-19 threats to Global Economy • Jakarta Flood- affected Retailers seek compensation • Omnibus law & tax planning • Updates on VAT Credit—SE-02/ PJ/2020 • Our Involvement Source: Thomas Peter | REUTERS “No body knows when things will begin to return to normal.” A decade and a half ago, when the severe acute respiratory syndrome outbreak known as SARS ra led the world. China accounted for a rela vely small part of the global economy. Today, it is responsible for almost a fi"h of global gross domes c product when adjusted for incomes—more than the U.S.’s 15% by the same measure, adding a morbid twist to the economic adage that when Ameri- ca sneezes, the world catches a cold. Source: The Wall Street Journal — Coronavirus Closes China To The World, Straining Glob- al Economy KIB E-newsletter Feb 2020 In picture: A mother and her son arrive from Hubei province, where the coronavirus was first iden fied, at a checkpoint on the Jiujiang Yangtze River Bridge.
  2. 2. COVID-19 Threats to the Global Economy From carmakers to airlines and hotels, the impact of the outbreak is punishing firms worldwide “ The world is a book and those who do not travel read only one page.” -St. Augustine Supply Chain About 17% of Chi- nese exports are considered as inter- mediate goods to the world. Tourism Accounts for 10.4% of Global Gross Domes- tic Product (GDP) and 10 % of Global em- ployment. International tourist arrivals (overnight visi- tors) worldwide grew 4% in 2019 to reach 1.5 billion 2017 (+7%) ; 2018 (+6%); 2019 (+4%) Increase in all regions : The Middle East (+8%) , Asia Pacific (+5%). International arrivals in Europe and Africa (+4%); USA (+2%) Based on current trends, economics pro- spects and the UNWTO Confidence In- dex, UNWTO forecast a 3—4% growth in international tourists arrivals worldwide in 2020
  3. 3. Jakarta Floor-Affected Seek Compensa on “I had seen people who had lost everything and everyone they loved to war, famine, and natural disasters.” -Chelsea Clinton Background: Indonesian Retail Merchants Associa on (APRINDO) es mated that retailers in Greater Jakarta have incurred losses amoun ng to more than one trillion rupiah (US$71.6 million). The total amount does not include losses faced by ten shopping malls and several tradi onal markets in the affected areas. The Na onal Development Planning Agency (Bappenas) es mates that losses due to the Greater Jakarta area floods have reached around Rp 5.2 trillion Consequently, several business owners have called on the Jakarta administra on to compensate them for the losses they have suffered from the disaster. Business owners expected the administra on to provide compensa on in the form of tax reduc ons, instead of direct financial coverage of their losses. Sources: IDN Financial | TTG Asia | The Jakarta Post Sellers move a mannequin and clothing rack out of the Cipinang Indah shopping center in East Jakarta during massive flooding that hit across the city on Jan. 1. Source: Antara/Galih Pradipta | The Jakarta Post. Minister of Finance Regula on No. 81/PMK.03/2017 Land & building tax reduc ons may be granted to taxpayers experiencing liquidity issues due to commercial loss- es of up to 75% of unbound L&B tax; and if the taxpayer experiences natural disasters, fire, disease outbreaks, riots or anarchist acts, the L&B tax reduc on of up to 100 % may be given The DGT may also deduct a land & building tax administra ve fine of 25% from the taxable principal stated in the Tax Assessment Le er of the land & building tax; or a 2% monthly administra ve fine set in the L&B Tax Collec- on Le er; if the taxpayer forgets, has liquidity difficul es, is exposed to natural disasters or other causes which are not the taxpayer's fault.
  4. 4. Director General of Tax Decision (KEP 537/PJ./2000) Calcula ng tax installment (tax income art. 25) in certain condi ons “Of all the hardships of a person had to face, none was more punishing than the simple act of waiting” -Khaled Hosseini In respond to the flood repercussion that has been affected businesses’ operational, substan- tial cost surge, and diminishing profit, while anticipating the on-going COVID-19 impact throughout the year 2020 to businesses, it is only wise for businesses to start projecting their losses and apply for tax installment (pph 25) reduction. About PPh 25. Monthly tax instalments (article 25 income tax) constitute the first part of tax payments to be made by residents taxpayers and Indonesian Pes as a prepayment of their current year Cor- porate Income Tax liability. A monthly tax instalment is generally calculated using the most recent Corporate Income Tax Return. KEP-537/PJ/2000 art 1 point 6 says: “Occurring changes that happen to taxpayers’ busi- nesses and operational” and art. 7 point 1. suggesting that taxpayers who have undergone situational changes on their businesses and if the amount of income tax is less than 75% of the income tax payable in three months or over in a tax year are permitted to submit an appli- cation for reducing the amount of income tax pph. 25 What’s next ? Submit your Annual Corporate Income Tax Return 2019 as soon as possible Do your own business projection (potential losses) Write a letter of application for pph. 25 reduction to the DGT office (KPP) where your business is registered
  5. 5. Omnibus Law & Tax Planning “Real lobbying reform must end the practice of corporate lobbyist writing our laws” - Marty Meehan Background: On Wed, Feb 5, 2020, The government submi ed the controversial omnibus bill on job crea on to the House of Representa ves. The bill is expected to start delibera ons on law reforms that are intended to accelerate busi- ness, a ract investors, boost economic growth and create jobs. One of the key points worth considering is the reduction in corporate income tax, which requires a proper Tax Planning. More details regarding the draft of Omnibus Law can be referred on the previous issue of KIB Tax Flash– December 2019. Tax planning helps you to plan ahead in alloca ng your company’s taxable income as prescribed by the Omnibus Law
  6. 6. Tax Planning “ “The avoidance of taxes is the only intellectual pursuit that carries any reward.” -John Maynard Keynes Defini on: Tax Planning is minimizing your tax liability by making the best use of all available deduc ons, allowances, rebates, thresholds, etc as permi ed by income tax laws, rules s pulated by the government of a country. Benefits: • The main core of tax planning is to reduce the amount of tax you pay by taking full benefit of all availa- ble deduc ons. • It helps in saving some extra bucks out of your monthly earnings which you can use to invest in other lucra ve investment opportuni es and generate a handsome amount of returns over that surplus money. • Eliminate unnecessary stress and uncertainty by knowing just what your tax liability will be and make informed decisions, ul mately obtaining peace of mind. • The earlier in your professional/business journey you start tax planning, the more strategies you can explore to maximize the effects of tax planning. • They help in learning about the ps and tricks of tax laws, different tax minimiza on techniques which ul mately helps in tax compliance and effec ve adherence to tax laws as s pulated by the govern- ment. • Tax planning when clearly dis nguished with tax avoidance/tax evasion leads to lesser interac on with tax authori es and unnecessary li ga ons as well. • Help you to plan submi:ng your corporate annual tax return to be in line with your overall compa- ny’s performance —— saving tax payment through tax installment (pph. Art. 25) Start to implement a strategy to minimize your tax burden
  7. 7. Omnibus Law “A law is valuable, not because it is a law, but because there Is right in it .” -Henry Ward Beecher Main Provisions of Omnibus Tax Bill,” by Suryo Utomo, DGT , 26 February 2020 National Economic Development Strengthening The Economy Investment Funding 1.Gradual re- duction in Cor- porate Income Tax rates by 22% (2021 & 2022) and 20% (2023 etc.) 2.Reduction of Income tax rates for Go Public Companies (general rates—3%) 3.Elimination of Income Tax on Domestic Divi- dends 4.Adjustment of Income Tax Arti- cle 26 Rate on Interest Territorial Tax System for Offshore Income Subject De- termination for Personal Income Tax Encourage Tax Compliance Promote Equal Treat- ment for Business Tax Incen- tive Provi- sions in Tax- ation Law 5. Offshore in- come (including dividends) is not subject to in- come tax as long as it is invested in In- donesia 6. Resident ex- patriates are only taxed on income derived from Indonesia 7. Indonesian citizens living for less than 183 days in Indone- sia may become Non-resident Taxpayers. 8. Expatriates living for more than 183 days in Indonesia become Resi- dent Taxpayers 11.Taxation on Electronic Trans- actions: • digital plat- forms are as- signed to col- lect VAT. • Non-resident companies deriving profits from electronic transactions in Indonesia may be taxed. 12. Rationalization of Local Taxes: • Determination of regional tax rates that ap- ply nationally • Evaluation of Regional Reg- ulations on Local Tax towards na- tional fiscal policy. 13. Relaxed deter- mination of types of excisable goods 9. Relaxation of Input Tax Cred- iting Rights for Taxable Entre- preneurs 10. Re-setting of: • Tax, Cus- toms, and Excise Ad- ministrative Sanctions • Interest compensa- tion 14. Tax Incen- tives: • Tax holiday • Super de- duction • Income Tax Facilities for Special Eco- nomic Zones • Income tax for govern- ment securi- ties • Regional Tax Relief/ ex- emption by the Heads of Local Gov- ernments Affected Laws: Income Tax, VAT, GPTP, Custom & Excise, PDRD, Local Government
  8. 8. SE-02/PJ/2020 Credi ng Value-Added Tax Input on Different Tax Period “ Taxes are paid in the sweat of every man who labors.” - Franklin D. Roosevelt Purposes a. to give uniformity in understanding VAT credit mechanism (input VAT) as regulated on UU no. 8/ 1983 ar cle 9 regarding Value Added Tax on Goods and services and VAT on luxurious goods, which was last updated in 2009 by UU no. 42/ (UU PPN); and b. to give a sense of fairness to VAT registered Entre- preneurs in exercising rights of VAT input credit on taxable goods and service. Objec ve to reaffirm discrepancies of VAT input credit against its periodical tax (Masa Pajak) as regulated on UU PPN ar cle 9 (9) Subjects Defini on VAT—registered businesses Must charge VAT on their goods or services and may reclaim any VAT they have paid on business-related goods or services. VAT Output VAT charged on sales VAT Input VAT charged on purchases VAT tax return Monthly (Masa) No. Affirmations 1 VAT input recorded in a certain Masa must be credited with VAT Output in the same Masa 2 VAT input which has not been credited with VAT output on the same Masa, then can be credited in the next Masa within 3 (three) months a"er the presiding Masa ends. Pending credit on VAT input is possible due to late Tax invoice receipt. 3 In the event when the 3 (three) months period passes (no. 2) then VAT input credit can then be proceeded through the SPT Masa PPN amendments. 4 The VAT Input credit as s pulated on no. 1 and 2 will also comply to VAT input as stated on certain documents which equivalent with Tax Invoice - as regulated on UU PPN art. 13 (6) 5 The VAT Input as s pulated on no. 1, 2, and 4 is only applicable in : A. the event of VAT Input has not been posted as expenses or it is not being capitalized into the Taxable Goods & Services B. There has not been any audit on the VAT-registered Entrepreneur
  9. 9. InTalk #1 on reforming the insurance industry - Jiwasraya case Our Involvement The Deputy Permanent Commi ee (Komtap) for the Asia-Pacific Chambers of Commerce and Indus- try (Kadin), Bambang B. Suwarso said to Thursday night (02/07/2020): “It is necessary to proceed reforma on in the Indonesian insurance industry”. Nevertheless, Bambang emphasized that the stem problem in the insurance industry did not just emerged recently, instead it has been lingered for a while. In response to the troubled state-owned insurer PT Asuransi Jiwasraya, and the newest PT Asabri (Persero), Bambang reiterates President Widodo’s recommenda on to OJK that significant reforma on and changes are crucial to be implemented in the non-banking financial in- s tu ons i.e. insurance, and pension funds. We also need to transform fit-and-proper test within the ins tu ons, embrace changes in human resources, and technology and most importantly that the law and regula on must be upheld while transparency should not be compromised at all me.
  10. 10. At a meeting forum with Indonesian Steel Industry Association and PT. PLN (Persero) Our Involvement
  11. 11. As a member of Indonesian delegation team at the CYBERTECH GLOBAL TLV 2020 | Tel Aviv, Israel | Jan 28-30, 2020. Contact Us Phone: (62-21) 2929 5870-73 Bambang B. Suwarso bambang.suwarso@kib- Rachmat Kurniawan rachmat@kib- Yosefine Amelia yosefine@kib- Raden Roro Ratna Indah Wulandari wulan@kib- Addresses: North Jakarta —144550 Indonesia The Koppel Building Suite IB. Jalan Pluit Selatan Raya no. 10 Gold Coast Tower Eiffel Unit N Pantai Indah Kapuk 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 institu- tions for which the contributing authors work. Although every part of content has been taken to ensure the accuracy of the information contained within this publication, 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 anyway for any advice, action taken or decision made on the basis of the facts, surveys, and opinions stated or expressed within this publication. Promoting Singapore—Indonesia Investment Cooperation (KADIN) Our Involvement