February 10, 2020 / 7:12 AM / 9 days ago

Factbox: Indonesia's parliament debates sweeping new tax bill

JAKARTA (Reuters) - Indonesia’s parliament will soon begin debating a sweeping new bill that proposes corporate tax cuts and seeks to make internet giants pay more taxes, as part of a wider plan to simplify laws and boost investments in Southeast Asia’s biggest economy.

FILE PHOTO: A view of Indonesia's Parliament building in Jakarta, Indonesia, November 23, 2017. REUTERS/Beawiharta/File Photo

President Joko Widodo, whose coalition controls nearly three quarters of seats in parliament, has asked lawmakers to finish debate and pass the bill within 100 days .

Here are details of the government’s proposal, based on a presentation by Finance Minister Sri Mulyani Indrawati over the weekend:

- To cut corporate tax to 22% in 2021 and 20% in 2023 from 25% now. The phased introduction will allow “breathing space” for the government to replace up to $6.3 billion of estimated lost revenue per year

- Publicly listed companies meeting certain criteria to get an additional 3 percentage point cut below the general rate

- Internet firms with a significant economic presence, regardless of where they are based, to be considered as resident taxpayers and will be subject to local rules, including paying 10% value-added tax (VAT). Minister Indrawati cited Spotify and Netflix as examples of companies that might be in this category. Both companies did not respond to request for comment

- Removing tax on dividends as long as they are reinvested

- Removing tax on some income from foreign businesses, including dividends obtained offshore, as long as they are reinvested

- Lowering the 20% withholding tax on interest paid by a taxpayer to a foreign tax resident (the new rate will be decided in a separate regulation)

- Foreign nationals to pay taxes only on income generated in Indonesia, instead of currently on world-wide income

- Reducing penalties on late or missed tax payments to the market rate plus 5 percentage points from a maximum of 48% of the amount that should have been paid

- To widen refundable payments under VAT

- Central government to be given the power to overrule regional tax rates

- To include under the new bill all current tax incentives, such as details on tax holidays and allowances, to ensure a stronger legal basis

Reporting by Gayatri Suroyo; Editing by Ed Davies and Aditya Soni

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