​Uncovering The Tax Harmonization Omnibus Law on Job Creation: The Overview

​Stepping out of Industry 4.0 and into 5.0, the way and the ease of doing business in Indonesia is changing. The emergence of the COVID-19 pandemic has pushed us as a society to find a solution to be flexible about doing business online and offline. 

​The 2020 UU Cipta Kerja or Omnibus Law on Job Creation and this year’s UU HPP or Tax Harmonization has had an impact on foreign and domestic businesses alike. Certain industries that permit 100% foreign ownership would have expected a cut in corporate income tax rates, but must plan for them to remain stationary. 

​This webinar will focus on the direct and implied effects following the implementation of the tax aspects of the Omnibus Law on Job Creation paired with the new Tax Harmonization regulations. 

​Tax Regulations in Omnibus Law on Job Creation

​The 2020 Omnibus Law on Job Creation made changes on certain aspect of the Indonesian tax law. Indonesian citizens overseas could be considered foreign tax payers, and foreigners who are resident taxpayers could become tax exempt on their overseas income.

​In terms of dividends, this law rules that under certain conditions, dividends paid by either local & foreign entities could also be tax-exempt. 

​VAT implementation also faced some changes, such as delivery of consignment goods VAT-exempt, as well as companies without any commercial activity paying prepaid VAT yearly rather than monthly. 

​Evidently, all these aspect can change many operational aspects of a business.

​Tax Harmonization

​Where the 2020 Omnibus Law on Job Creation proposed decreasing corporate income tax rates in 2022, The Tax Harmonization regulations has determined that it will remain at 22% from 2022 onward.

​The recently enacted law calls for the increase in value-added tax rate from 10% to 11% by April of the next year, and 12% by 2025. Aside from VAT tax rates, another major change is the introduction Carbon Tax in 2022. 

​There is also an Increased non-taxable income rate to IDR 60 million, as well as Tax Amnesty phase II. While this law brings ambitious tax overhauls, all of these changes will not be imposed simultaneously, and some of them will require further implementing regulations.