Corporate - Significant developments

Last reviewed - 22 June 2022

On 29 October 2021, the government issued the Harmonisation of Tax Regulations (Harmonisasi Peraturan Perpajakan or HPP) Law No. 7 Year 2021. The HPP Law brings several changes to existing sections of tax laws (General Tax Provisions and Procedures/Ketentuan Umum Perpajakan/KUP, Income Tax, VAT, and Excise) whilst also adding a new tax law section on the carbon tax. Some of the important changes to these laws include, but are not limited to, the changes of the corporate income tax (CIT) and value-added tax (VAT) rates, as well as elimination of several existing non-taxable goods/services.

The new VAT provisions are to be effective from 1 April 2022. Under the HPP Law, the VAT rate is increased from 10% to 11% from 1 April 2022. Aside from the increase in the VAT rate, the HPP Law also introduced a 'final' VAT regime with an effective VAT rate lower than the standard rate.