Tax incentives introduced to mitigate COVID-19 impact

9 months ago . 1 min read
MP
Marella Putri
Writer at Forbes Indonesia
Tax incentives introduced to mitigate COVID-19 impact
Sri Mulyani Indrawati, Minister of Finance. Photo courtesy of Sri Mulyani Indrawati.

by Elisa Valenta

The government officially announced tax incentives for 19 affected industrial sectors due to the coronavirus pandemic. The announcement includes income tax exemptions for employees who earn below Rp 200 million per year (better known as PPh21) starting from April to September this year and a gradually decreasing corporate income tax rate to 22% in 2022 from 25% in 2019.

Under the new policy, the tax incentives which are currently given to particular manufacturing industries will be extended to sectors such as food, trade, telecommunication, forestry, logistics, construction, tourism, transportation, and renewable energy.

The tax office would waive the income tax paid monthly (PPh 25) in the manufacturing sectors. The government will also subsidize and ease loan interest payments for micro, small and medium enterprises (MSMEs)-the backbone of Indonesia’s economy-as they struggle to survive the coronavirus pandemic, as well as loan interest payments ranging from two to six percent.

Some 26 million borrowers of the government’s Ultra-Micro Financing Program and the Women-based Financing Program will be allowed to delay their loan repayment for the next six months. The government will cover six percent of the interest. Another 28.3 million borrowers of the Micro-credit Program with loans between Rp 10 million and Rp 500 million will have their loan repayments suspended for the next six months.

The government will also cover six percent of the interest for the first three months and three percent for the next three months. SMEs with loans between Rp 500 million and Rp 10 billion will be eligible for interest subsidies covering three percent for three months and two percent for the next three months.

Lastly, six million farmers and 1 million cooperatives will benefit from interest subsidies of six percent for six months.

MP
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Marella Putri
Writer at Forbes Indonesia
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