Tax exemptions in Indonesia are allowed by the government to taxpayers for them to exclude or deduct a specific amount of tax that are to be due.
Boosting the economic performance of a certain area or region, as well as lowering or eliminating the tax burden of specific organisations in the country, are examples of such justifications. Tax exemptions also make it easier for organisations that promote public welfare to do so more effectively.
What are the Tax Exemptions in Indonesia?
On August 13, 2019, the Indonesian government, through the Minister of Finance, announced a regulation that included the exemption of import duty on products to be brought into the nation. The elimination of the Value Added Tax (VAT) made goods much more affordable to bring into the country.
If not all of the requirements are met, the imported products that may be eligible for tax relief can be transferred, re-exported, or even destroyed. After two years from the most recent period of issue of a transfer authorisation by the customs office and declaration made by the customs import, any imported items that have received facilities can be transferred.
Only when a customs export declaration has been submitted to the customs office may such products be re-exported. There is also a possibility that such imported goods might be destroyed.
Why Do Indonesian Government Offer Tax Exemptions
There are a few reasons why the Indonesian government offer tax exemptions. Some of these include:
The fundamental purpose of such incentives is to entice more foreign investors to permanently locate their firms in the country. Furthermore, because the government has provided tax exemptions, local firms and industries will be able to better manage their cash flows and expand their operations.
How Do I Claim Tax Exemptions in Indonesia?
Corporate tax rates of 22% apply to corporations and other businesses operating in Indonesia. However, there are several exceptions to this rule.
For one to claim tax exemptions related to individuals in Indonesia, one has to be considered as a resident in Indonesia who pays taxes as required. The individual should be living in Indonesia, present in Indonesia for at least 183 days of a given year, present in Indonesia during the fiscal period, and have the intention of remaining in Indonesia on either an extended or permanent basis.
FAQs
Indonesian resident taxpayers are subject to tax on worldwide income. Non-residents are subject to tax on Indonesian-source income only. Diplomats and representatives of certain international organizations are excluded from Indonesian tax if the countries they represent provide reciprocal exemptions.
Recently, there have not been any major discussions on the possible removal of any tax exemptions in Indonesia. Therefore, none of them are expected to be removed.
There are no laws which prevent any individual in Indonesia who is eligible for multiple exemptions from claiming all of them. This means that a person can be eligible for more than one exemption at the same time.
Just as is the case with people, there are no laws which prevent any company in Indonesia who is eligible for multiple exemptions from claiming all of them; thus, a company can be eligible for more than one exemption at the same time.
