As the largest economy in Southeast Asia and with a growing market, global profile, and affordable labor incentives, Indonesia should be one of the most popular investment destinations. Yet Indonesia only ranks in 73rd place on the 2019 ease of doing business survey prepared by the World Bank.
In order to improve its ranking, the Indonesian government continues to create new regulations that ease investment procedures and provide more incentives for investors. Recently the government drafted the Bill on the Taxation Provisions and Facilities for Strengthening the Economy, commonly known as the taxation omnibus bill. The bill is still under discussion in the legislative body, but once approved and issued as a new law, it will provide unification as the regulatory framework for taxation in Indonesia.
The contents of the bill look promising for investors as it: (1) aims to minimize overlapping regulations in the field of taxation; and (2) provides many incentives, including adjustments on the corporate income tax rate and the dividend tax rate.
Taxation regulations are spread out in any applicable laws and regulations in Indonesia. The general provisions regarding taxation are regulated under Law No. 6 of 1983 concerning General Procedures and Provisions for Taxation, last amended by Law No. 16 of 2009 (Taxation General Provisions Law); (2) Law No. 7 of 1983 on Income Tax Law, last amended by Law No. 36 of 2008 (Income Tax Law); and (3) Law No. 8 of 1983 on Value Added Tax of Goods and Services and Sales Tax on Luxury Goods, last amended by Law No. 42 of 2009 (VAT Law).
In addition to these regulations, there are a few other implementing regulations that are governed under the regulation of the Ministry of Finance and the Directorate General of Tax, within the Ministry of Finance.