Indonesia

Corporate - Significant developments

Last reviewed - 20 December 2019

The government has recently announced that it will seek to introduce two 'Omnibus' Laws. The first (related to tax) will seek to promote investment, voluntary tax compliance, and equality between domestic and foreign business. The second is targeting the ease of doing business in Indonesia and will include an updated positive investment list. In this case, the omnibus tax law (entitled 'Tax Provisions and Concessions for Economic Consolidation') is proposing to amend the General Tax Provisions and Procedures Law, the Income Tax Law,  the Value Added Tax (VAT) Law, the Regional Tax and Retribution Law, and the Customs Law. The key proposals include a proposal on the expansion of the definition of 'permanent establishment' (PE) to accommodate the taxation of the digital economy.

Additionally, the Minister of Finance also provided an update on the Controlled Foreign Companies (CFCs) rules. The new rules shift the determination of CFC income from previously CFC profits to only certain income, namely dividends, interest, rentals, royalties, and gains from sales or transfer of assets, with certain limitations.

Separately, the government also has a vision to establish Indonesia as a country with proven digital capacity in Southeast Asia’s largest economy by 2020. Therefore, the government has highlighted the need for a road map for the development of national e-commerce and regulations related to e-commerce, including tax incentives to support the development of digital small, micro, and medium enterprises.

Noting the increase of large-scale projects in Indonesia, the government has updated tax holiday and tax allowance incentives to be more simple and attractive for investors. The government also provides 'super deduction' tax incentives consisting of facility for labour-intensive industries, facility for human resources development in certain competencies, as well as facility for certain research and development (R&D) activities in Indonesia.