The Indonesian government has announced its plans to adjust income tax rates to stimulate economic recovery. In 2022 there will be two adjustments. The first will be a 2% reduction in income tax for domestic tax payers and businesses that are permanently situated in Indonesia.* Second, income tax for qualifying public companies will be reduced by 3%.

The Government then plans to increase the VAT rate in 2022 in order to cover the national expenses of COVID-19. There are two VAT increase schemes the Government is currently debating. The first is a potential increase in the current VAT of between 10% – 15%.* The second VAT scheme under discussion is a multi-rate VAT scheme – with different goods attracting different levels of VAT.

The hope is that the tax relief provided by income tax reduction will stimulate spending and increase government revenues through increased VAT.

* Government Regulation Number 30 of 2020 Concerning Income Tax Rate Reduction For Domestic Taxpayers That Are Public Companies.

* Law Number 42 of 2009 The Third Amendment To Law Number 8 Year 1983 Concerning Value Added Tax For Goods And Services And Sales Tax On Luxury Goods.