New regulations in Indonesia provide for a 50% increase to the standard amounts of income that, for individual taxpayers, are not subject to tax.
The regulations were issued in late June 2016, with the increases to the non-taxable amounts of income being effective retroactively from 1 January 2016. Because the changes are effective retroactively, employers must recalculate the amount of Article 21 income tax payable for their employees. There may be instances when this recalculation shows a tax overpayment for the employee. Such overpayments are to be used to offset the following month’s amount of tax payable. Also, this change may have implications for employers with employees who stopped working during the applicable period.
While the increased amounts of non-taxable income will result in the potential loss of tax revenue, the expectation is that this loss will be offset by more consumption spending by individuals. Thus, there would be increases in the collection of other tax revenues—such as the value added tax (VAT), the sales tax on luxury goods, and corporate income tax. The loss of tax revenue also is to be compensated through other initiatives, such enhanced tax collection by means of individual tax audits and a tax amnesty program.
Read a July 2016 report [PDF 774 KB] prepared by the KPMG member firm in Indonesia: Further increase to non-taxable individual income
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.