Indonesia to Introduce New Tax Reforms

Nov 2021

The Indonesian government has approved new tax measures aimed to boost 2022 revenues. The move aims to capitalize on increased spending demands following the contractions caused by the Covid-19 pandemic. There are five notable revisions, namely in the area of Value added tax (VAT), Income Tax Bracket, Tax Amnesty, Corporate Tax and Carbon Tax.

For VAT, the government is implementing a phased increase to 11% in April 2022 and to 12% in 2025. Estimations project a 1% hike in the VAT rate could potentially increase the country’s revenues by about 0.2 – 0.3% of GDP. With regards to the income tax bracket, a new bracket for those with annual earnings of more than IDR 5 billion (USD 345 million) was created. Additionally, the minimum taxable income has been increased by 5%.

Between January and June 2022, a fresh tax amnesty scheme will be introduced. Assets accumulated up to 2015 will be taxable at a 6 – 11% tax rate, while those acquired from 2016 onwards will be taxed at 12 – 18%. The prevailing corporate tax cut stands still at 22% and there is no update as to when an upcoming reduction to 20% will be carried out.

Lastly, a carbon tax of USD 2.1/metric ton will be applicable, starting with the coal power plants. According to estimates cited by Bloomberg, the amount is lesser than what is imposed by Singapore (USD 3.7/metric ton) and several European countries (USD 30 – 70/metric ton). Significant increases in revenues will be more likely when more industries are included under this scheme.

(Source: DBS)

About Us

Orissa International helps companies that want to develop a market entry strategy for Southeast Asia or implement their business expansion into the region. We have very strong domain knowledge of markets and industry sectors, and a business network of over 16,000 companies that includes distributors, resellers, system integrators and local manufacturers, that we have built through advising and guiding more than 5,000 companies with their market expansion into the ASEAN region over the last 25 years.

Orissa International is headquartered in Singapore, with additional offices in Malaysia, Indonesia, Thailand, Vietnam, and the Philippines.

Our Services