Page 2 - Newsletter (Reduction of Income Tax Rates for Publicly Listed Companies and Establishment of VAT Withholder Criteria for E-Commerce Businesses)

DDTC Newsletter Vol.04 | No.01 I July 2020 Page 2 of 13

Reduction of Income Tax Rates for Publicly Listed Companies and
Establishment of VAT Withholder Criteria for E-Commerce Businesses

Reduction of Resident Corporate Income Tax Treatment for
Income Tax for Publicly Listed Scholarships that Meet Specific
Companies Requirements and Surplus Received
by Non-Profit Institutions
The government has issued an implementing
regulation of Article 5 paragraph (3) of Law No. 2 of
The Ministry of Finance has issued a regulation on
2020 concerning the reduction of resident corporate
income tax treatment for scholarships that meet certain
income tax rates for publicly listed companies. The
requirements and surplus received by non-profit
rate reduction policy is outlined in the Government
institutions. These provisions are regulated under
Regulation No. 30 of 2020 concerning the Reduction
Minister of Finance Regulation No. 68/PMK.03/2020
of Income Tax Rates for Resident Corporate Taxpayers
regarding Income Tax Treatment for Scholarships that
in the Form of Publicly Listed Companies (Gov. Reg.
Meet Certain Requirements and Surplus Received or
30/2020).
Earned by Non-profit Bodies or Institutions Engaged
Income tax rates on taxable income of resident in Education and/or Research and Development (MoF
corporate taxpayers and permanent establishments Reg. 68/2020).
are gradually reduced. In 2020 and 2021, a rate of
This regulation is aimed at improving the quality of
22% will be imposed and a rate of 20% will come into
Indonesian human resources and enhancing education
force in 2022.
and/or research and development. This policy has
Resident taxpayers are entitled to a 3% lower rate if come into force as of 16 June 2020. Broadly speaking,
three conditions are met. First, such a taxpayer is in the two main aspects are regulated under this regulation,
form of a publicly listed company. Second, a minimum i.e. the income tax treatment on scholarships that
of 40% of the total number of shares is traded on meet certain requirements and surplus received by
the Indonesian stock exchange. Parties not included non-profit institutions.
in the first and second categories consist of publicly
First, in light of the income tax treatment of scholarships
listed company taxpayers that repurchase their shares
that meet certain requirements. Scholarship costs can
and/or have a special relationship with publicly listed
be deducted from gross income to calculate taxable
company taxpayers. The special relationship for
income. Residents and/or non-residents’ income in the
publicly listed company taxpayers includes controlling
form of scholarships that meet certain requirements is
shareholders and/or major shareholders.
exempted from being income tax objects. Exemptions
Third, meeting certain requirements. To obtain the from these provisions include as follows.
tax rate reduction, 40% of shares must be owned by
i. Corporate taxpayers providing the scholarships
at least 300 parties (excluding issuers and controlling
have business relationships, ownership
shareholders/major shareholders).
relationships, or control relationships;
The number of shares owned by each party does not
ii. The owner, commissioner, board of directors,
exceed 5% of the total issued and fully paid shares.
or management of the corporate taxpayers that
This requirement must be fulfilled in a minimum of
grant the scholarship have family relationships
183 days within one year. These requirements are
in the direct lineage of two degrees or in lineage
fulfilled by publicly listed company taxpayers by
to the side of one degree or by marriage.
submitting a report to the Directorate General of Taxes
(DGT). In the event that the requirements to obtain a iii. The individual taxpayer granting the
3% lower rates are not met, the income tax payable is scholarships has a business relationship.
calculated using normal rates.
Certain requirements include the scholarships being
The list of publicly listed company taxpayers that received by Indonesian citizens and intended for the
meet certain requirements is regulated in ministerial recipients to attend formal and non-formal domestic
regulations. When this government regulation comes and/or overseas education.
into force, Government Regulation No. 56 of 2015 (Gov.
Formal education refers to structured and leveled
Reg. 56/2015) is revoked and declared invalid and the
education consisting of primary education, secondary
implementing regulations of Gov. Reg. 56/2015 remain
education, and higher education. Conversely, non-
valid insofar as they do not contradict this regulation.
formal education refers to education channels outside
of formal education that can be implemented in a
structured and leveled manner.