INSIGHT

HHR Updates
2021-01-07 00:00:00

Newsletter - Doing Business During The Pandemic: Indonesia’s Government Support in Countermeasuring The Corona Virus Disease-19 (“COVID-19”) Outbreak

Author: Corporate and Investment Practice Group

 

 

The spread of COVID-19 outbreak has significantly disrupted the economic stability of almost all nations around the globe, not excluding Indonesia. Shortly after the first two cases of COVID-19 in Indonesia were confirmed by the Government of Indonesia (“GoI”) back in March 2020, the GoI declared the COVID-19 outbreak as: (i) the public health emergency through the Presidential Decree No. 11 of 2020 on Stipulation of Public Health Emergency COVID-19 (“Presidential Decree No. 11/2020”); and (ii) the non-natural national disaster through Presidential Decree No. 12 of 2020 on Stipulation of Non-natural Disaster of the Spread of COVID-19 as National Disaster (“Presidential Decree No. 12/2020”). Following the health emergency in Indonesia, the GoI implemented the Large Scale Social Restrictions (Pembatasan Sosial Berskala Besar – “PSBB”) which has caused most business sectors to down-size and/or shut down as well as implement travel restriction within, from and to Indonesia. To date, the GoI has implemented less restriction of activities by introducing the concept of PSBB transition (PSBB transisi). However, it must be noted that the status of public health emergency and national disaster have not been revoked by the GoI to date.

 

In anticipation of a prolonged turndown in economic activities due to COVID-19 outbreak, the GoI has launched numerous stimulus packages in various business sectors to respond the current economic situation in Indonesia. This article will briefly elaborate the GoI’s incentives to the investment, industrial, and taxation related sectors since the occurrence of COVID-19 outbreak in Indonesia. 

 

  1. EASE OF BUSINESS LICENSING IN CERTAIN SECTORS

 

The Investment Coordinating Board (Badan Koordinasi Penanaman Modal – “BKPM”) has issued the Decree of the Head of BKPM Number 86 of 2020 on Providing Ease of Business Licensing for Certain Business Fields Related to the Handling of COVID-19 (“Decree of Head BKPM No. 86/2020”), which has given an ease in business licensing on certain business fields, i.e. industry of medical devices and pharmaceuticals, in the form of:

 

  1. Reduction and/or simplification on the requirements of business licensing;
  2. Acceleration on the process of business licensing; and
  3. Special assistance services.

 

The Decree of Head BKPM No. 86/2020 has been effective as from 1 April 2020 and will be valid until the end of the emergency response status of COVID-19 to be declared by the Indonesian National Disaster Management Agency (Badan Nasional Penanggulangan Bencana – “BNPB”). In this regard, it its necessary to take note that based on the Circular Letter Head of BNPB No. 6 of 2020 on the Status of Emergency Situation Non-natural Disaster COVID-19 as National Disaster, the status of non-natural emergency situation will be ended once the Presidential Decree No. 12/2020 has been revoked.               

 

  1. OPERATIONAL OF BUSINESS INDUSTRIES WITH COVID-19 HEALTH PROTOCOL

 

The Ministry of Industry Republic of Indonesia (“MoI”), under the MoI’s Circular Letter Number 7 of 2020 on Guidelines on the Submission of Applications for Licenses for the Implementation of Industrial Activities During a Public Health Emergency of COVID-19 (“Circular Letter No. 7/2020”), has allowed the industry companies and companies within the industrial zones to resume its business activities during the COVID-19 outbreak, provided that such companies must comply with the following requirements:

 

  1. Obtain the Industrial Operational and Mobility License (“IOM License”) which shall be submitted through the National Industry Information System (Sistem Informasi Industri Nasional – “SIINas”). The IOM License covers activities conducted within the industrial zones, among others office administration and industrial mobility activities related to raw materials, supporting materials, finished goods, and/or manpower. The Circular Letter No. 7/2020 further stipulates that the IOM License will be valid during the community emergency period due to COVID-19 outbreak; and

 

  1. Obtain the Industrial Operational and Mobility License (“IOM License”) which shall be submitted through the National Industry Information System (Sistem Informasi Industri Nasional – “SIINas”). The IOM License covers activities conducted within the industrial zones, among others office administration and industrial mobility activities related to raw materials, supporting materials, finished goods, and/or manpower. The Circular Letter No. 7/2020 further stipulates that the IOM License will be valid during the community emergency period due to COVID-19 outbreak; and

 

  1. Comply with the obligations required under the MOI’s Circular Letter Number 4 of 2020 on the Implementation of Factory Operational During a Public Health Emergency of COVID-19, among others the initial screening of the workers’ body temperature, ensuring good air circulation and proper cleaning facilities. In addition, the MoI also provides obligations to be complied with the workers, among others to always wearing face masks and gloves in the factory area, practicing the physical distancing, and avoiding any physical contact.

 

  1. TAX INCENTIVES

 

The Ministry of Finance Republic Indonesia (“MoF”) issued the MoF Regulation No. 86/PMK.03/2020 on Tax Incentives for Taxpayer affected by COVID-19 Pandemic as amended with the MoF Regulation No. 110/PMK.03/2020 on the Amendment of MoF Regulation No. 86/PMK.03/2020 on Tax Incentives for Tax Payer affected by COVID-19 Pandemic (“MoF Regulation No. 86/2020”). The MoF Regulation No. 86/2020 supersedes the two previous MoF regulations regarding tax incentives that had been issued during COVID-19 pandemic, namely: (i) the MoF Regulation No. 23/PMK.03/2020 on the Tax Incentives for Taxpayer affected by Corona Virus Outbreak; and (ii)  the MoF Regulation No. 44/PMK. 03/2020 on the Tax Incentives for Taxpayer affected by COVID-19 Pandemic. Under the MoF Regulation No. 86/2020, the GoI has continuously granted several taxes incentives, among others as illustrated in the table below:  

 

Tax

Remarks

Article 21 Income Tax (“Income Tax 21”)

  1. Exemption of Income Tax 21 to the employees in 1189 specified business sectors.

 

  1. Employees who are eligible to receive exemption of Income Tax 21 shall fulfill the following criteria:

 

  1. Receive or obtain income from the employer/company which:
  1. has been declared as Ease of Import for Export (Kemudahan Impor Tujuan Ekspor – “KITE) Company; and
  2. has obtained licenses regarding Bonded Zone Administrator (Penyelenggara Kawasan Berikat – “KB Administrator), Bonded Zone Entrepreneur (Pengusaha Kawasan Berikat – “KB Entrepreneur) or Bonded Zone Entrepreneur and Administrator (Pengusaha Dalam Kawasan Berikat Merangkap Penyelenggara – (“KB Entrepreneur and Administrator”).

 

  1. Own Taxpayer Number (Nomor Pokok Wajib Pajak); and

 

  1. On the tax period concerned, the employees receive or obtain annual fixed and regular gross income of not exceeding Rp. 200.000.000,- (two hundred million Rupiah).

 

  1. The application for the exemption of Income Tax 21 shall be submitted to the head of Tax office where the employer registered as tax payer through www.pajak.go.id.

 

  1. The exemption of Income Tax 21 will be utilized since the tax period of the application made by the employer until December 2020.

 

  1. The employer is obliged to periodically submit realization on the exemption of Income Tax 21 at the latest on 20th of the following month after the expiration of the relevant tax period.

Article 22 Import Income Tax (“Import Income Tax”):

  1. Whilst for the Import Income Tax, the GoI provides exemptions to the taxpayer in 721 specified business sectors which fulfill the requirements, as follows:
    1. Has been declared as KITE Company; and
    2. Has obtained licenses regarding: KB Administrator, KB Entrepreneur or KB Entrepreneur and Administrator.

 

  1. To obtain exemptions in the Import  Income Tax, the taxpayer must apply for the Statement Letter on the Free of Import Income Tax Collection (Surat Keterangan Bebas  Pemungutan Pajak Penghasilan Impor -  “Statement Letter”) through www.pajak.go.id.

 

  1. The exemptions of Import Income Tax will be valid since the date of issuance of the Statement Letter for the taxpayer concerned until 31 December 2020.

 

  1. Once exempted from the Import Income Tax, the GoI also requires the taxpayer to periodically report the realization of such exemptions at the latest on 20th of the following month after the expiration of the relevant tax period.

Value Added Tax

(“VAT”)

  1. Incentives for the VAT are granted in form of acceleration of VAT restitution to the low risk Taxable Entrepreneur (Pengusaha Kena Pajak – “PKP”) in 716 specified business sectors which fulfill the following requirements:
  1. Has been declared as KITE Company; and
  2. Has obtained licenses regarding KB Administrator, KB Entrepreneur, or KB Entrepreneur and Administrator.

 

  1. To obtain the VAT incentives, the PKP must submit the Notification Letter of VAT Period – Overpay Restitution (Surat Pemberitahuan Pertambahan Masa Pajak Pertambahan Nilai – Lebih Bayar Restitusi) with overpay amount at the maximum Rp. 5.000.000.000,- (five billion Rupiah) to the relevant Tax office.

 

 

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Note:
This article is designated to provide only general information and is not intended to be a comprehensive advice; and the reader may not act on the basis of any information contained in this brochure without seeking professional advisor.