New rulings on tax laws announced
New rulings on tax laws announced
JAKARTA (JP): The government issued here yesterday 18 more rulings regarding the new tax laws, including a provision that will significantly reduce the tax rate applied to corporate interest earnings.
Corporate taxpayers are subject only to a final tax of 15 percent on any earnings obtained from savings, time deposits or Bank Indonesia Certificates, according to one of the rulings.
Tax Director General Fuad Bawazier said that the new tax on interest income is expected to stimulate fund mobilization in the local banking system and to curb capital flight.
Previously, the 15 percent tax on interest earnings was only imposed on individuals and social organizations, while business institutions were subject to tariffs of 15, 25 and 35 percent as stipulated in article 17 of the old income tax law.
"The new tax on interest earnings is another incentive for business institutions," Fuad told newsmen at a press briefing, which was also attended by Trenggono Purwosuprodjo, the chairman of the Federation of Private Domestic Banks (Perbanas), and C. Harinowo, the chief of the money market division of Bank Indonesia, the central bank.
Trenggono said that the new tax system will make savings and time deposits in local banks much more attractive than ever.
"Many people have invested their money in overseas banks to partly evade tax payment," he said, adding that the new fiscal measure will also effectively curb capital flight as depositors will not only have higher interest rates but also pay less tax when depositing money in local banks.
The new tax on interest earnings is stipulated in Presidential Decree No. 51/1994, one of the 18 rulings issued yesterday that will affect the new income tax laws.
Last week, the government issued 28 similar rulings, including nine presidential decrees and 19 ministerial decrees.
Overseas
Fuad said the new tax on interest incomes will also be imposed on interest earnings from savings or time deposits in overseas banks placed through an Indonesian bank or a representative of a foreign bank.
The rate of the interest earnings obtained by non-residents from banks operating in Indonesia is set at 20 percent or at rates made under bilateral tax treaties.
Interest earnings of non-residents running permanent business establishments in the country are, however, subject to the 15 percent tax rate, the same rate imposed on resident taxpayers.
The interest income tax payments for residents and non-residents are all final, preventing them from being credited to the income tax that must be paid during the taxable year.
Interest earnings obtained from savings and deposits placed directly in overseas banks without passing through their local branches, and income from other business activities should be included in the total incomes during the same tax year, according to Decree No. 640.KMK.04/1994 of the Minister of Finance.
However, losses from overseas business activities cannot be incorporated into taxable income.
The new income tax rates are 10 percent for the income bracket of up to Rp 25 million, 15 percent for that above Rp 25 million to Rp 50 million and 30 percent for the income of over Rp 50 million.
The other 17 rulings issued yesterday are in the form of ministerial decrees, some of which cover provisions on the use of book values on the transfer of assets in mergers, business restructuring and expansion activities, a new format in calculating net income of non-resident taxpayers involved in trade, shipping and air transportation in the country.
Banks or companies that are planning an initial public offering (IPO) of shares are allowed to transfer their assets to affiliated firms by using their book values if the transfer of the assets is made within the framework of consolidation, mergers or expansion, according to Decree No. 637/KMK/.04/1994 of the Minister of Finance.
Fuad explained that the use of book values will encourage mergers between banks and encourage companies to go public.
"Previously, banks had to pay high taxes when merging due to big difference between the market price and the book value of their assets," he said.
The net income of non-residents operating a trade representative office in Indonesia is set at one percent of the gross export value, the revenue received from the sales of goods to Indonesian residents, according to the Decree No. 634/KMK.04/1994 of the Minister of Finance, while the tax payment is 0.44 percent of the gross export value and final.
According to Decree No. 632/KMK.04/1994 of the Minister of Finance, net incomes of non-residents involved in sea and air transportation activities for international routes are fixed at six percent of the gross revenue, as compared to five percent previously. The tax payment is final and the rate is set at 2.64 percent of the gross revenue.
Fuad said that the standardization of the formulas in fixing the net incomes is important in determining the taxable incomes of "special" taxpayers.(hen)