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Indonesian tax reform gets the green light

A reform of Indonesia’s tax system is imminent after the country’s house of parliament passed a bill that will introduce several key changes:

  • VAT will be increased as part of a two-stage plan.
  • VAT exemptions will be removed for many goods, leaving only those that are necessary for the community, health, education and certain other services.
  • A new carbon tax will be introduced in April 2022 and based on market pricing of CO2 per kilogram.
  • A planned cut to corporate tax will be cancelled.
  • A new top rate of personal income tax will be introduced.

The two-stage change to VAT means Indonesia’s standard rate will rise from 10% to 11% in April 2022, before increasing again to 12% by 1st January 2025.

Other updates announced within the bill refer to a new top rate of personal income tax of 35% for those above a threshold of IDR 5bn and a continuation of corporate tax at a rate of 22%.

With multiple amendments to tax laws in the nation due to come into effect in the coming months and years, it’s a good time for businesses to consider whether their tax configuration is set up to ensure accurate, reliable and automated determination of relevant rates and rules.

For more information on how we can help to deliver this – and much more – in Indonesia and more than 150 other countries across the world, get in touch now.