Indonesia introduced additional fiscal incentives in response to COVID-19.

On 10 June 2020, the Indonesian government announced additional income tax facilities for taxpayers who are directly helping the government to fight the coronavirus through the issuance of Government Regulation No. 29/2020 (GR-29).

In principal, there are five additional facilities regulated under the GR-29 as follows:

A. Additional 30% net income deduction in calculating taxable income

Taxpayers who produce health equipment, antiseptic hand sanitiser and disinfectant to combat the coronavirus are entitled to enjoy an additional net income deduction of 30% from the actual production cost incurred. These additional deductions should be expensed at the fiscal year when the actual cost is incurred. Taxpayers who would like to enjoy this facility must submit a list of production expenses online to the Director General of Tax, along with the latest corporate income tax return of the relevant fiscal year.

The health equipment as referred to in the GR-29 consists of:

  1. Surgical masks and N-95 respirators
  2. Protective outfit/clothes, such as medical coveralls, one-off medical gowns, heavy-duty aprons, caps, shoe covers, goggles, face shields and waterproof boots
  3. Surgical gloves
  4. Examination gloves
  5. Ventilators
  6. Diagnostic test reagent for COVID-19

B. Donation in relation with COVID-19 countermeasure which can be treated as deductible expenses

Taxpayers who provide donations in relation with the COVID-19 countermeasure in Indonesia are allowed to treat the donation as deductible expenses when calculating taxable income. However, this donation must be addressed to:

  1. BNPB (National Disaster Management Agency)
  2. BNPD (Regional Disaster Management Agency)
  3. Ministry which organises government affairs in the health sector
  4. Ministry which organises government affairs in the social sector
  5. Donation collection institution

Further, the donation must be supported with the official receipt and if provided to donation collection institutions, such institution must already be registered as a taxpayer (ie have a tax ID/NPWP). Such official receipts must at least consist the name, address and tax ID of the donors and the recipient, date, form of donation and amount. The above donation can be provided in the form of cash, goods, services and/or usage of assets without compensation. Taxpayers who would like to enjoy this facility must submit the nominative list of donation expenses online to the Director General of Tax, along with the latest corporate income tax return of the relevant fiscal year.

C. Additional income received or obtained by individuals in the health sector

Additional income from the government received by individuals who work in the health sector, providing healthcare services to handle the COVID-19 outbreak on health facility and institution, including the compensation received by the heir, is subject to final income tax at a rate of 0%.

D. Income from the compensation of asset usage

Income received by the taxpayer from the government due to the compensation in any kind or from the assets rental, including land and/or building and other types of assets, in relation with the handling of the COVID-19 outbreak, is subject to final income tax at a rate of 0%. However, the related expenses incurred to obtain such income should be treated as non-deductible expenses when calculating the taxable income.

E. Shares buyback on the stock exchange

Publicly listed companies who buyback their shares to maintain the stability of the stock exchange in accordance with the policy of the central government or other authorised institutions are deemed to fulfil the requirements to enjoy a 3% lower income tax rate. The repurchased shares should only be held by the company until 30 September 2022 at the latest. The taxpayer should submit a report for the shares buyback on the stock exchange in accordance with the law together with the annual corporate income tax return.

Activities conducted from 1 March 2020 to 30 September 2020 can enjoy the above incentives.

With the issuance of this regulation, the Indonesian government is encouraging taxpayers to participate in helping Indonesia fight the COVID-19 pandemic.

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