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Indonesia Clarifies Tax Measures In Tax Reform Law

Monday, December 6, 2021

The Indonesian Government has detailed its plans for a new carbon tax mechanism and a new tax amnesty scheme.

The new carbon tax is included in the Law on Harmonization of Tax Regulations (HPP Law), which was approved by parliament in October.

During an initial phase, Indonesia intends to place a nominal minimum rate of carbon tax of INR30 (USD0.2 cents) per kilogram of carbon emitted. Initially, the tax will apply only to coal-fired power plants. Meanwhile, the Government will work with the Financial Services Authority and the Indonesian Stock Exchange on the development of a cap and trade system.

The legislation also includes a tax amnesty scheme and a hike to the value-added tax rate to 11 percent from April and to 12 percent by January 2025.

In addition, the Government has confirmed that the tax amnesty scheme, also included in the legislation, will run from January 1, 2022, to June 30, 2022. Taxpayers regularizing their affairs for the period 1985 to 2015 will pay a tax rate on the disclosed assets of between 6 and 11 percent, while a higher rate of either 12, 14, or 18 percent will apply to amounts owing in the period 2016 to 2020. Concessionary rates will apply to those repatriating assets and investing them into preferred government projects.