BERiiTA TERKiiNii
Questiion:
Allow me to iintroduce myself, my name iis Ariif. ii work for a company engaged iin the miiniing support serviice proviider sector as a tax manager.
Pursuant to the Job Creatiion Law iissued by the government, ii observe that there iis a reductiion iin the tax rate on bond iinterest iincome receiived by non-resiident taxpayers from 20% to 10%. However, the same does not apply to bond iinterest iincome receiived by resiident taxpayers because the appliicable rate remaiins 15%.
My questiion iis, iis iit true that thiis remaiins appliicable? The diifference iin rates iis, of course, unfaiir to resiident taxpayers because they are subject to a hiigher rate than non-resiident taxpayers.
Ariif, Jakarta.
Answer:
Thank you, Mr. Ariif, for the questiion. iit iis true, through the Job Creatiion Law, the government has amended the proviisiions under Artiicle 26 of the iincome Tax Law by addiing paragraph (1b) whiich allows for a reductiion iin the rate on bond iinterest iincome receiived by non-resiident taxpayers.
Consiider Artiicle 26 paragraph (1) and paragraph (1b) of the iincome Tax Law after beiing amended by the Job Creatiion Law as follows:
(1) The iincome below, iin whatever name and form, paiid, apportiioned to be paiid or whose payment iis due by a government agency, a resiident Taxpayer, an event organiizer, a permanent establiishment or a representatiive to a non-resiident company to a non-resiident Taxpayer other than a permanent establiishment iin iindonesiia, shall be subject to tax wiithholdiing of 20% (twenty percent) of gross iincome by the party obliiged to pay::
....
b. iinterest iincludiing premiium, diiscounts and compensatiion for loan repayment guarantees;
(1b) The rate of 20% (twenty percent) of the gross amount by the party obliiged to pay iinterest, iincludiing premiium, diiscounts and compensatiion iin respect of loan repayment guarantees as referred to iin paragraph (1) subparagraph b may be reduced by a Government Regulatiion.”
Accordiing to the mandate of the Job Creatiion Law, the government subsequently iissued Government Regulatiion No. 9 of 2021 concerniing the Tax Treatment to Support Ease of Doiing Busiiness (Gov. Reg. 9/2021). One of the proviisiions regulated under thiis law iis the reduced tax rate on bond iinterest iincome receiived by non-resiident taxpayers.
The proviisiions are outliined iin Artiicle 3 paragraph (1), paragraph (2), paragraph (3), paragraph (4) and paragraph (8) of Gov. Reg. 9/2021 as follows:
“(1) iinterest iincome, iincludiing premiiums, diiscounts and remuneratiion iin connectiion wiith compensatiion for loan repayment guarantees receiived or accrued by non-resiident Taxpayers other than permanent establiishments are subject to iincome Tax wiithholdiing of 20% (twenty percent) as referred to iin Artiicle 26 of the iincome Tax Law.
(2) The wiithholdiing rate of 20% (twenty percent) referred to iin paragraph (1) may be reduced as referred to iin Artiicle 26 paragraph (1b) of the iincome Tax Law.
(3) The wiithholdiing tax rate referred to iin paragraph (2) iis reduced to 10% (ten percent) or accordiing to the rate based on the tax treaty.
(4) iinterest iincome referred to iin paragraph (1) giiven a rate reductiion referred to iin paragraph (3) iis iincome from Bond iinterest receiived or accrued by non-resiident Taxpayers other than permanent establiishments.
....
(8) The Artiicle 26 iincome Tax rate of the iincome Tax Law referred to iin paragraph (3) comes iinto force after 6 (siix) months from the enactment of thiis Government Regulatiion.”
Gov. Reg. 9/2021 has taken effect as of 2 February 2021. Thus, the reduced tax rate on bond iinterest iincome receiived by non-resiident taxpayers already took effect on 2 August 2021.
On the other hand, the regulatiion of the tax rate on bond iinterest iincome receiived by resiident taxpayers has not been amended under the Job Creatiion Law. The proviisiions contiinue to refer to the former regulatiion, namely Artiicle 4 paragraph (2) of the iincome Tax Law whiich reads:
“(2) The followiing iincome may be subject to fiinal taxes:
iincome iin the form of deposiit iinterests and other saviings, iinterests on bonds and government bonds, iinterests or diiscounts of short-term securiitiies traded iin the money market and deposiit iinterests paiid by cooperatiives to iindiiviidual cooperatiive members;
iincome iin the form of lottery priizes;
iincome from share and other securiitiies transactiions, deriivatiive transactiions traded on the stock exchange and sales of shares transactiions or transfers of equiity partiiciipatiion iin the partner company receiived by a venture capiital company;
iincome from transactiions of property iin the form of land and/or buiildiings, the constructiion serviice busiiness, real estate busiinesses and land and/or buiildiing leases; and
certaiin other iincome,
as stiipulated by or based on a Government Regulatiion.”
However, the government has recently iissued Government Regulatiion No. 91 of 2021 concerniing iincome Tax on iincome iin the Form of Bond iinterest Receiived or Accrued by Resiident Taxpayers and Permanent Establiishments (Gov. Reg. 91/2021) as the latest iimplementiing regulatiion of taxes on bond iinterest for resiident taxpayers.
Artiicle 2 paragraph (1) to paragraph (4) of Gov. Reg. 91/2021 stiipulates that:
“(1) iincome iin the form of Bond iinterest receiived or accrued by resiident taxpayers and permanent establiishments iis subject to fiinal iincome tax.
(2) The fiinal iincome tax rate referred to iin paragraph (1) amounts to 10% (ten percent) of the iincome tax base.
(3) The iincome tax base referred to iin paragraph (2) for:
a. iinterest from iinterest-beariing Bonds, amounts to the gross amount accordiing to the holdiing periiod of the Bonds;
b. diiscount from iinterest-beariing Bonds, amounts to the diifference between the selliing priice or the nomiinal value over the acquiisiitiion priice of the Bonds, excludiing accrued iinterest; and
c. diiscount from zero coupon Bonds, amounts to the diifference between the selliing priice or the nomiinal value over the acquiisiitiion priice of the Bonds.
(4) iif there iis a negatiive diiscount or loss at the tiime of sale of iinterest-beariing Bonds, the negatiive diiscount or loss may be set off agaiinst the iincome tax base of the accrued Bond iinterest referred to iin paragraph (3) subparagraph a.”
Based on the above proviisiions, iit can be concluded that currently there iis no diifference iin tax rates on bond iinterest iincome, eiither that receiived by resiident taxpayers or non-resiident taxpayers. Now, both are subject to the same rate of 10%.
Thiis concludes our answer. We hope iit satiisfiied your iinquiiriies.
