Indonesia

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On 16th June 2020, Indonesia Government has increased the state budget for handling of COVID-19 and the National Economic Recovery (PEN in its Indonesia initial) Program through the announcement of the largest economic stimulus package of Rp695.20 trillion. However after several revision on the package on November 2020, the amount has now reached to Rp744.28 trillion for the handling COVID-19 outbreak. At the same time, the Indonesia government has issued a government regulation and MoF regulations to regulate large-scale social restriction and the protocol for specific area/region isolation.  

As of November 2020, Indonesia Government announced total state spending for the 2020 State Budget in handling COVID-19 outbreak is Rp744.28 trillion (originally proposed Rp405.1 trillion on March’20). Fiscal deficit in Q3 has contracted to 3.49% (YoY). It is expected in Q4,  the fiscal deficit would reach 1.6% (YoY). Relaxation of the State Budget deficit policy above 3 percent of the GDP will apply for only 3 fiscal years (2020, 2021 and 2022). The Indonesia Government expect to impose a fiscal discipline of below 3 percent deficit starting in 2023.

Category	Budget	Allocation
Healthcare Sector	Rp97.26 trillion	9.7 trillion has been added for the procurement of COVID-19 vaccine The purchase of medical equipment such as test kits and ventilators will be prioritized Incentives for medical workers including doctors and nurses Subsidy of Social Security Agency (BPJS Kesehatan) premium
Social Protection	Rp243.33 trillion	The budget will prioritize the vaccination program and 10 million families in the family hope program as well as the 20 million families in the staple food program. The budget for the preemployment card program will be raised to Rp20 trillion from the initial Rp10 trillion, which will be sufficient to cover 5.6 million laid-off workers, informal workers and micro and small business owners. Free electricity for 24 million customers using 450 KVa and 7 million customers using 900 KVa. Support for low-cost housing (Rp1.5 trillion to cover financing for 175,000 new homes under subsidized housing program) Basic logistical support and basic needs (Rp25 trillion)
Tax Incentives and Credit for Business	Rp120.61 trillion	Workers in the manufacturing sector with incomes below Rp200 million per year will be exempt from income taxes for six months. Import tax payments will be deferred for six months in 19 manufacturing sectors. Acceleration of VAT refunds in 19 manufacturing sectors The corporate income tax will be reduced from 25 percent to 22 percent. Debt payments will be delayed by six months for micro loan credit for businesses affected by COVID-19. (Refer to “Tax Measures” for further detail)
Stimulus for SMEs	Rp123.46 trillion	Interest subsidies for microcredit (KUR), MSME financing, guarantees, and placement of funds in banks.
Stimulus for SOE & Corporation	Rp53.57 trillion	As of 30 Oct 2020, the realization was still minimum. Only two SOEs received the disbursement, PT Permodalan Nasional Madani (PNM) and PT Hutama Karya, IDR 1 trillion and 3.5 trillion respectively..
Support for Ministries & regional administration	Rp106.05 trillion	Aimed at boosting tourism sector, food security and fisheries, industrial estates, ICT development, Central Government loan to regional governments, and anticipating economic recovery.

Other non-fiscal measures which have been introduced by the Government:

• Import restrictions to be reduced for goods under the 749 Harmonized System (HS) code, including in the fisheries and forestry industries. Health certificate and V-legal documents will no longer be required.
• Import restrictions to be simplified for raw materials, including steel and alloy steel as well as several food commodities including sugar. The government will also simplify regulations on agriculture, animal products, medicine and food imports.
• Export-import processes to be sped up for reputable traders.
• The government enforced the elimination of surveyor reports (LS) on mandatory commodities. Up to 735 companies with good reputations : 109 AEO / Authorized Economic Operators and 626 MITA / Main Partner of Customs.
• National logistics ecosystem development to be improved.

Banking and Financial Sector

Banking (OJK Regulation No 11/POJK.03/2020)

• one-year postponement of credit or leasing payments for loan up to Rp10 billion for MSMEs and informal workers
• postponement of credit or leasing payments without ceiling limits in accordance with the debtors’ ability to pay the credit and the agreement with banks or leasing companies. (applicable for SME and non-SME)

This  relaxation is applicable for up to 31 March 2021.

Customs formalities

• There is flexibility in submitting Certificate of Origin (SKA Form) according to Circular Letter of the Director General of Customs and Excise No. SE-10 / BC / 2020. For temporary replacement of original document, copy/scan of SKA Form can be submitted online to claim preferential tariff, Form, no later than 30 (ninety) calendar days after registration date of Import Declaration.

Excise

• Factories or storage areas of ethyl alcohol may be given excise exemption for social purposes as raw material for the manufacture of hand sanitizers, surface sanitizers, antiseptics, in the context to prevent and control COVID-19, by submitting request and attach statement letter from government agency stating that ethyl alcohol is only used for the prevention and control COVID-19 in the case that orders are made by government agencies or recommendation letter from government agencies who deal with disaster management in terms of orders made by non-governmental organizations.

Duty relief

• In order to facilitate entry of goods by obtaining the exemption of customs duty, excise, and/or tax in the framework of import and the exemption to the provisions of the import trade system to avoid and resolve COVID-19 can be carried out by the specific steps and procedures.
• Income Tax Art. 22 on importation performed by specific importer shall be exempted upon request of Exemption Certificate, applicable only to specific Business Classification Codes (721 industry fields as of attachment H of of MoF No. 86/PMK.03/2020 ) and/or Company under Importation Easiness for Export Orientation (“KITE”) license;
• VAT: On specific taxpayers can be given preliminary refunds as low risk taxable entrepreneur.

Main sources of Information:

• Circular Letter of the Director General of Customs and Excise No. SE-10 / BC / 2020 regarding Technical Instructions for Invoice Declaration
• Circular Letter No. SE-04/BC/2020 dated 17 March 2020 regarding Ethyl Alcohol Excise Exemption in order to follow up the Prevention of COVID-19 Spread
• National Standard Procedure between the Directorate General of Customs and Excise and the National Disaster Management Authority (“BNPB”) No. 01/BNPB/2020, No. KEP-/13/BC/2020 dated 20 March 2020 regarding the Acceleration Service of Importing Goods for Resolving COVID-19
• MoF Regulation No. 86/PMK.03/2020 on Tax Incentives for Taxpayer Affected by the COVID-19 pandemic.
• MoF Regulation No. 110/PMK.03/2020 on the amendment to Minister of Finance Regulation No. 86/PMK.03/2020 on Tax Incentive for Taxpayers affected by the COVID-19 pandemic.
• Regulation of The Government In Lieu of Law No.1 of 2020
• Law No. 2 Year 2020 on The Stipulation Of Regulation Of The Government In Lieu Of Law Number 1 Of 2020 On State Financial And The Stability Of The Financial System Policies For The Mitigation Of Coronavirus Disease 2019 (Covid-19) Pandemic and/or To Deal With Threats That Are Potentially Harmful To The National Economy and/or The Stability Of The Financial System
• MoF Regulation No. 83/PMK.04/2020 on the amendment to Minister of Finance Regulation No. 34/PMK.04/2020 on the facilitation of Customs and/or Excise and Tax on the import of goods for the purpose of mitigating the COVID-19 pandemic,
• MoF Regulation No. 125/PMK.010/2020 on import Value Added Tax (VAT) for newsprint paper and/or magazine paper,
• Government Regulation No. 48/2020 on the amendment to Government Regulation No. 81/2015 on the import and/or submission of taxable strategic goods that are exempted from added value taxes.
• MoF Regulation No. 96/PMK.010/2020 on the amendment to Minister of Finance Regulation No. 11/PMK.010/2020 on Income Tax Facilitation for Investment in Certain Business Fields and/or Certain Regions
• The Director-General of Tax Regulation No.PER-12/PJ/2020 of 2020
• MoF Regulation No. 48/PMK.03/2020 on Procedures for Appointment of Collection, Collection and Deposit, As well as Reporting Value Added Tax on Utilization of Intangible Taxable Goods and / or Taxable Services From Outside the Customs Area Within the Customs Area through Trade through Electronic Systems.

• Recovery plan : National Economic Recovery Program (PEN in its Indonesia initial)
• Budget : Rp744.28 trillion (equivalent to US$52.68 billion), 58.8% utilized as of 18 November 2020
• Announcement : 16 June 2020
• Main orientations : Social Protection, Healthcare, Business Incentives, Micro, small & medium enterprises (MSME), SOE & Corporation, and Ministries & Regional Governments.

A cross-ministerial task force (also known as PEN Task Force) has announced that it will fully utilize the national economic recovery budget by the end of 2020 for the following priority categories:

Healthcare (Rp87.55 trillion)
Rp18.45 trillion for the procurement of vaccines, health facilities and infrastructure, laboratories, research and development, and premium assistance of government healthcare program (run by BPJS) for Non-Salaried Employees.

Social Protection Program (Rp203.90 trillion)
Rp134.45 trillion has been allocated for the middle to lower class society through the aspiring family program, staple food cards, pre-employment cards, and cash social assistance.

Business or taxation Incentives (Rp120.61 trillion)
Rp22.23 trillion of incentives have been allocated through taxes borne by the government such as reduction in article 25 (corporate income tax), exemption from income tax Article 21 (employee income tax), Article 22 on imports tax, and preliminary VAT refunds.

MSME – Micro, Small and Medium Enterprise (Rp123.46 trillion)
Rp58.74 trillion of support has been prepared for MSMEs through interest subsidies for microcredit (KUR), MSME financing, guarantees, and placement of funds in banks.

SOE & Corporation (Rp53.57 trillion)

Rp4.5 trillion has been allocated to SOE and Corporation sector. But currently only two SOEs received the disbursement, PT Permodalan Nasional Madani (PNM) and PT Hutama Karya amounting IDR 1 trillion and 3.5 trillion respectively.

Ministries & Regional Governments (Rp106.05 trillion)

Rp36.06 trillion has been allocated to boost tourism sector, food security and fisheries, industrial estates, ICT development, Central Government loan to regional governments, and anticipating economic recovery.

Key measures

• To qualified for these incentives, companies or individual need to obtain an Ease of Import for Export Purposes (KITE) under certain Business Classification Code (KLU) in the Attachment M of MoF No. 110/PMK.03/2020.
• 50% deduction of Article-25 (monthly corporate income tax installment) for taxpayers that conduct activities in 1,013 specific business fields, applicable until December 2020.
• Exemption of Income Tax Article 22 on Import Tax and purchases of the aforementioned goods by agencies/government institutions, referral hospitals, and other parties designated to assist in handling the COVID-19 outbreak as mentioned in appendix I of 86/PMK.03/2020 (PMK 86/2020).
• Preliminary VAT refund for low-risk Taxable Entrepreneur (PKP) who submits an overpayment of VAT Tax Return overpayment for April – December 2020 tax period up to IDR 5 billion per month.
• An exemption of Income Tax Article 21 on Employee Income Tax with annual gross income up to Rp200 million. Taxpayer should prepare e-billing with notes “employee income tax is borne by Government based on PMK 86/2020.
• 2 major programs are currently running for MSME: Interest Subsidy Program (Rp35 trillion) and Fund Placement Program (Rp79 trillion) has reached a realization of Rp36.3 trillion.

Sectors/Industries/Areas affected

• Food, trade, electricity, oil and gas, mining and coal, forestry, tourism and the creative economy, telecommunications, logistics, transportation and construction.

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