Tax Cut Plans for Investors in Indonesia

September 4, 2019

            Amid a global slowdown, the plants to cut tax on corporates to draw more foreign investment onto Indonesia’s investment project that has been increasing to date. It will be gradually lowered, starting 2021 to 20% from 25% and companies listing their shares will be subjected to lower rate of 17% for a period of five years, said Finance Minister Sri Mulyani Indrawati.

The new taxes may help Indonesia compete with regional rivals in luring companies seeking to relokate “We will continue to focus our tax policy to be in line with international best practices,” Indrawati said. “We have calculated the possible impact on budget” and tax changes will be managed to “not put it under too much pressure,” she said.

For Lower Penalty, the minister said that the Goverment will reduce penalties on taxpayers regarding correction of their returns after submitting and owing the finance minister. Changing taxation laws require the approval of parliament and the president, Jokowi. As previously reported, Jokowi has said that approval of changes to the tax law will be a priority in his second term starting next month.

The companies have been waiting for these tax changes to help them improve business, which in turn will make Indonesia more competitive compared to its peers,” said Dian Ayu Yustina, an economist at PT Bank Danamon in Jakarta. “Investment is one economic growth component that has been slowing. Attracting multinational companies with export-oriented activities can help Indonesia boost exports.”

In 2025, Indonesia’s Internet economy is estimated to swell to US $ 100 billion. Changes to tax regulations which have already been approved by parliament and the president will require foreign companies such as Google and Inc. to pay corporate taxes and collect, report and submit value added tax, said Indrawati. “It will also ensure a level playing field for digital players with local companies,” she said.

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