The Indonesian Ministry of Finance (MoF) has issued Regulation No. 69/2024 (PMK-69) to amend MoF Regulation No. 130/PMK.010/2020 related to the provision of corporate income tax reduction facilities (a ‘tax holiday’) to improve the Indonesian investment climate in order to help job creation and technological advancement.
Companies with an investment value above IDR 500 billion are eligible for a tax reduction of up to 100% over a period of five to 20 years under the special provisions. Investments below this figure will receive a tax reduction at a lower rate and over a shorter period. Furthermore, the regulation simplifies the application process and requirements to facilitate businesses in obtaining this tax holiday facility.
If a domestic taxpayer directly owns the shares of another taxpayer, a new requirement mandates the possession of an automated fiscal certificate. Moreover, the regulatory amendment mandates online application submission through the OSS system, necessitating the digital upload of necessary documents. Consequently, the submission of applications offline has been abolished.
PMK-69 also regulates the imposition of domestic minimum additional tax for taxpayers in multinational enterprise groups that have obtained tax facilities in Indonesia. This provision ensures that even though taxpayers have obtained income tax relief or reduction facilities, they are still required to comply with domestic additional tax so that their effective tax rate reaches the global minimum standard of 15%. This rule applies to companies with global consolidated income of at least €750 million, as defined by the OECD global minimum tax standard.
This additional tax imposition will apply not only to new taxpayers receiving facilities after the enactment of this regulation but also to recipients of income tax reduction facilities that were previously in effect.
PMK-69 also states that the Minister of Finance must receive proposals for corporate income tax reductions no later than December 31 2025.
PMK-69 became effective on October 9 2024.
Amended regulation related to deductibility of bad debt expenses
The MoF has issued Regulation No. 74/2024 (PMK-74) to amend MoF regulations No. 81/PMK.03/2009 and No. 219/PMK.011/2012 regarding provision for uncollectible receivables (bad debt expenses). PMK-74 became effective on October 18 2024.
Article 3 of PMK-74 states the types of taxpayers that can deduct the write-off of bad debt expenses, such as banks, finance companies, and cooperatives that have been registered with, and/or obtained a permit from, the Indonesian Financial Services Authority.
The above taxpayers are required to submit certain documents if they wish to deduct their provision for bad debt expense, as follows:
A list of receivables that are clearly uncollectible; and
A copy of evidence of fulfilment of receivables that are clearly uncollectible.
These required documents should be attached to the annual corporate income tax return.
The templated format of the list is specified in the appendix of PMK-74, and the columns concerning copies of evidence that shows that the receivables are uncollectible should be filled in with the document type code, as follows.
Code | Type of document |
Case submission | Copy of proof of submission of the case to a district court. |
Written agreement | Copy of a written agreement regarding the write-off of receivables that has been legalised by a notary. |
Publication | Copy of proof of publication in a general or special publication. |
Debtor's acknowledgement | Copy of a letter containing an acknowledgement from the debtor that their debt has been written off and that is approved by the creditor. |
Besides providing form templates, the appendix of PMK-74 also gives examples of calculations.
Implementation of the Core Tax Administration System: overview and key changes
On October 14 2024, the MoF issued Regulation No. 81/2024 (PMK-81), which will take effect on January 1 2025. This regulation impacts 42 other regulations, including the revocation of several regulations, amendments to various articles, and provisions that shall remain in effect provided they do not conflict with one another.
This regulation serves as the legal basis for the implementation of the Core Tax Administration System (Pembaruan Sistem Inti Administrasi Perpajakan), which allows the tax administration process to be conducted electronically to be more integrated and efficient. The scope and key changes include the following.
Scope | Key changes |
Implementation of tax rights and obligations | The implementation of tax rights and the fulfilment of tax obligations shall be conducted electronically through the taxpayer portal, web pages, or other applications integrated with the Directorate General of Tax administration system and Contact Centre. This process includes the submission of documents, signing, and sending tax decisions electronically, aimed at accelerating the administrative process. |
Registration of taxpayers and tax objects | PMK-81 regulates various aspects of the registration procedures for taxpayers, the confirmation of taxable entrepreneurs, and the registration of tax objects for land and building tax conducted digitally. This provision aims to ensure that every taxpayer and tax object is registered quickly and accurately. |
Tax payments, deposits, and refunds | There are changes in the deadlines for tax payment, whereby taxes owed must be paid before the due date, generally by the 15th of the month following the end of the tax period. Tax payments and deposits are made through an electronic system and can be made using a tax deposit. The refund process includes automatic verification to expedite the flow of tax refunds to taxpayers with a low-risk profile or those with high tax compliance. |
Submission and processing of tax notifications | PMK-81 regulates the procedures for the submission and processing of tax notifications, as well as the implementation of withholding and collection of income tax and VAT. There is a change in the process of input tax crediting, whereby input tax for one tax period is credited against output tax in the same tax period. Specifically, for other documents treated as equivalent to tax invoices, they can be credited in the following tax period, no later than three tax periods after the end of the tax period. |
Provision of tax administration services | PMK-81 regulates the procedures for asset transfers in the context of mergers, consolidations, expansions, or business acquisitions, allowing taxpayers to use book values with the approval of the Directorate General of Tax. The use of book values aims to support business restructuring without a heavy fiscal impact, provided it meets the business purpose test criteria to ensure legitimate business objectives. Limitations are imposed on the compensation of fiscal losses of transferred companies. This regulation also requires reporting of foreign assets if involved in the transfer. |
Implementation of the Core Tax Administration System | PMK-81 provides comprehensive technical guidelines related to the implementation of tax rights and obligations within the Core Tax Administration System. The exercise of rights and the fulfilment of taxpayers' tax obligations for one or more places of business from January 2025 and for the 2025 tax year will be carried out centrally using the tax identification number registered according to the taxpayer's residence or domicile. |
Format of tax documents | There are examples of document formats and procedures for filling out various tax forms used in the calculation, collection, and reporting of taxes. This aims to ensure uniformity and clarity in tax documentation, minimising errors and uncertainties. |
