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Indonesian Lawmakers Approve Tax Reform Plans

Monday, October 18, 2021

Indonesia's lower house of parliament has signed off on a bill that provides for a two-stage hike to the headline value-added tax rate, the cancellation of a planned corporate tax cut, and the introduction of a new top rate of personal income tax.

As previously announced, the draft legislation will hike the value-added tax rate to 11 percent from April and to 12 percent by January 1, 2025.

The legislation also provides for the creation of a new top rate of personal income tax of 35 percent, for taxable income above IDR5bn (USD350,000), up from 30 percent, and an increase to the tax-exempt threshold to IDR60m from IDR50m.

The Bill sets the corporate income tax rate at 22 percent for the 2022 fiscal year onwards. It was set to fall to 20 percent under earlier plans.

The bill also provides for the introduction of a tax amnesty scheme, which will run from January 1 to June 30, 2022, and the replacement of the individual Taxpayer Identification Number (NPWP) with a Population Identification Number (NIK).