Page 2 - Newsletter (New Super Tax Deduction for Corporate Taxpayers)

DDTC Newsletter Vol.01 | No.10 I July 2019 Page 2 of 6

New Super Tax Deduction for Corporate Taxpayers

Super Tax Deduction for Vocational The aforementioned R&D activities are research and
and R&D Activities development activities carried out in Indonesia to produce
inventions, innovations, master new technologies, and/
or transfer the technology for industrial development to
The government has released a legal basis for the provision
enhance national industrial competitiveness.
of tax incentives in the form of ‘super tax deduction’
aimed at labor-intensive industries, vocational activities, The Government Revised the CFC
as well as certain research and development activities
in Indonesia. This regulation was signed by Indonesian Rules
President, Joko Widodo, at the end of June 2019.
The government has finally revised the tax provisions
The provision of such fiscal facility is regulated in related to foreign companies controlled by domestic
Government Regulation No. 45/2019. The legal basis taxpayers or Controlled Foreign Company (CFC) Rules.
is a revision of Government Regulation No. 94/2010 The latest provisions are contained in MoF Regulation
concerning the Calculation of Taxable Income and No. 93/PMK.03/2019 promulgated on 26 June 2019.
Repayment of Income Tax in the Current Year.
This regulation revises MoF Regulation No.107 /
The regulation is aimed at encouraging investment in PMK.03/2017 concerning the Acquisition Time of
labor-intensive industries, supporting the creation of Dividends and Calculation Basis by Resident Taxpayers
employment programs and absorption of Indonesian for Investments in Foreign Business Entities other than
labor, encouraging the involvement of businesses Publicly Listed Companies.
and industries in preparing quality human resources,
The revision of the CFC rules is intended to encourage
increasing competitiveness, and encouraging the role of
transparency, provide legal certainty and fairness in the
businesses and industries in conducting R&D activities.
imposition of taxes on resident taxpayers for investments
in foreign business entities other than publicly listed
In essence, Government Regulation 45/2019 stipulates
companies.
four categories of tax incentives. First, this regulation
sets forth the tax holiday incentives or exemption or
The changes to the provisions are related to deemed
deduction of income tax (pajak penghasilan/PPh) for
dividend schemes. A deemed dividend is a dividend
corporate taxpayers. Corporate taxpayers investing in
obtained by a resident taxpayer for investments in a
pioneer industries and do not obtain the facilities of
directly controlled non-stock exchange foreign business
Article 31A of the Income Tax Law shall be given a tax
entity (badan usaha luar negeri/BULN terkendali
holiday facility according to Article 18 paragraph (5) of
langsung).
the Investment Law.
The previous regulation stipulated the deemed dividend
Second, the tax allowance for corporate taxpayers making
calculations based on after-tax profits. Thus, income
new investments or business expansion in labor-intensive
was not differentiated into active and passive income. In
sectors and have not received incentive facilities in Article
contrast, in the latest regulation, the calculation is based
31A of the Income Tax Law. Such taxpayers shall be given
on after-tax net income derived from passive income.
a tax incentive in the form of a net income deduction of
60% of the total investment in the form of tangible fixed After-tax net income is defined as the gross amount of
assets, including the land used for business activities. certain income after deducted by two variables. First, the
costs to obtain, collect, and maintain certain income.
Third, the super tax deduction incentives for businesses
that carry out internship and vocational activities. Such Second, the portion of income tax payable, paid or
taxpayers may be given a gross income deduction of deducted from certain income if there exists income tax
a maximum of 200% of the total costs incurred for the payable, paid, or deducted from said income.
internship, vocational, and/or learning activities.
Passive income includes dividends, interest, rent
Fourth, a super tax deduction incentive for resident obtained from the controlled non-stock exchange foreign
corporate taxpayers conducting certain R&D activities business entity for the use of land or buildings as well as
in Indonesia. Business players of this criterion may be leases for property other than the property originating
given a gross income deduction of a maximum of 300% from transactions with related parties, royalties, and
of the total costs incurred for certain R&D activities in profits from sales or transfers of property.
Indonesia within a certain period of time.