Harmonization Of Taxation Regulations – The Law on Harmonization Of Taxation Regulations Act are part of tax reform with the aim of supporting the acceleration of national development and economic recovery. The HPP Law is used to reorganize the tax system resulted in restrengthen the people’s economy during pandemic conditions that have occurred in the last two years.

In the law there are new tax regulations that are considered more in favor of the general public. Included in the HPP Law is the change in personal tax PPh and MSMEs.

Administratively, the HPP Law serves to cover loopholes in tax regulations that are still common and adapt the progress of the times, one of which is the number of businesses with digital platforms. The HPP Law is expected to be part of tax justice, especially in terms of the burden that must be borne by the community including efforts to strengthen the MSME sector.

Briefly, the HPP Law is the Tax Harmonization Act which is part of the tax reform system with the aim of strengthening the economy and accelerating national development.

In the HPP Law there are changes in tax regulations that are considered more in favor of the people and lighter than previous laws and regulations. Changes to the tax regulations of private persons and MSMEs including points contained in the Tax Regulation Harmonization Law.

Judging from the tax scheme contained in the HPP Law, it can be understood that the regulation is one of the efforts to encourage the rise of the community economy after the pandemic.

Meanwhile, about when the time of the HPP law is effective, the government regulates it through Article 17. The contents of Article 17 of the HPP Law are:

1. The provisions of article 3 of the HPP Law regulate PPh or Income Tax that came into force in the 2022 Tax Year.
2. The provisions of Article 4 of the Harmonization Of Taxation Regulations (HPP Law) which regulate VAT or Value Added Tax and Luxury Goods Sales Tax (PPnBM) will come into force as of April 1, 2022.
3. Carbon tax as stipulated in Article 13 of the HPP Law will be applied as of April 1, 2022 where coal power plants become the first objects to be taxed at a rate of Rp. 30 / kg of carbon dioxide equivalent.

The three points above are only a small part of the contents of the Tax Change Harmonization Act that has been set by the House of Parliament in October 2021 ago.

The government through the Tax Regulation Harmonization Act has made several changes to tax regulations. There are several rules that were changed from before through the HPP Act. In addition to the change of some government regulations also stipulate what are the rules that are removed from the HPP Law that were once listed in the Tax Law. Tax regulations that have undergone changes through the HPP Law include:

1.

Value Added Tax Free (VAT) for Basic Needs

Through the Tax Regulation Harmonization Law (HPP Law) the government has taken a policy that is considered more in favor of the community, namely with the exemption of VAT on basic goods.

The release of VAT is one form of government concern for small communities, especially after being affected by the pandemic. Not only basic needs are exempt from the imposition of VAT because the government also applies it to education services, health services and other services and services that obtain VAT exemption facilities.

2.

VAT on a Single Rate

The amount of the rate for Value Added Tax (VAT) is set at a single magnitude. The increase in VAT rates is done gradually through consideration of economic conditions. The amount of VAT tax rate according to the HPP Law which is 11% is enforced from April 1, 2022. The application is no later than January 1, 2025.

3.

MSME Tax Relief

The government also eased taxes for MSMEs to boost economic growth. The government stipulates MSMEs with gross or gross income worth Rp, 500 million per year excluding taxable.

In addition, the government also provides relief in the form of a 50% discount on Income Tax (PPh) for MSMEs who get turnover up to Rp. 4.8 billion per year.

4.

Individual Taxpayers’ Income Taxes are Taxed at a Progressive Rate

The government also reformed the rules governing the progressive income tax rate for individual or individual taxpayers through the HPP Law, which was officially implemented in October 2021.

Individual taxpayers will be subject to income tax with a monthly cap of IDR 5 million, equating to IDR 60 million per new year. This law differs from the previous one, which required individual taxpayers to have a taxable income (PKP) of at least IDR 4.5 million per month or IDR 54 million per year.

Individual taxpayers with a PKP of more than 5% will be charged a PPh of 5%. Individual taxpayers earning more than IDR 5 billion per year, on the other hand, face a maximum levy of 35 percent on the quantity of PPh.

5.

Changes in Corporate PPh Tax Rate

In the tax law previously mentioned that for business entities the PPh to be paid is 28%. The tax rate applies to domestic taxpayer groups where the person concerned has a fixed form of business. Changes in the regulation through the HPP Law are reducing the PPh rate to 22% for the same taxpayer class.

6. 

Natura Tax

In the Law on Harmonization of Taxation Regulations or HPP Law, the government also regulates Natura Tax. Regulated in the HPP Law Article 4 paragraph 1 point d, it is explained that the employer must provide natura as a form of employee income where it is not included as a tax object.  Natura that does not enter as a group of tax objects include:

• Food, beverages, food or drinks for all employees.
• Natura/ enjoyment to those who perform tasks in a particular area.
• Natura / enjoyment as a consequence of the assignment and implementation of activities or work such as uniforms.
• Natura / enjoyment whose financing comes from APBN and APBD.
• Natura with certain types and restrictions.

7.

NIK as NPWP

There was a misunderstanding by the public when the Minister of Finance stated that NIK (Citizen ID) functioned also as an NPWP (Tax ID) as stated in HPP Law 21. Although NIK also serves as an NPWP does not mean all Indonesian citizens have an obligation to pay income tax or PPh.

Only those NIK owners who have qualified and conditions to be subject to PPh only have the obligation to pay taxes. The owner of NIK with the amount of income per month or per year in accordance with the provisions that have been explained at the beginning alone must pay PPh.

8.

Changes in VAT Rates

Not only the article on Income Tax or PPh that has changed through the issuance of the HPP Law but also Value Added Tax (VAT). The regulatory changes to VAT are contained in Article 7 of the first paragraph (1) of the HPP Law whose contents are:

• From April 1, 2022 the applicable VAT rate is 11% of the previous regulation of only 10%.
• No later than January 1, 2025 the applicable VAT is 12%.

9.

Elimination and Exemption of VAT

The HPP Law also contains about the elimination and exemption of Value Added Tax in some sectors as a form of partisanship to small communities.

a. VAT Exempt Sectors

• Food and drinks served by food stalls, restaurants, hotels and the like.
• Gold bullion, securities and money.
• Services in the religious field.
• Services in the field of arts and entertainment.
• Hospitality services.
• Services provided by the government to run the system of government in general.
• Catering and boga services.

b. Sectors with Elimination of VAT

• Goods that are the result of drilling or mining activities whose origin is taken directly from the source.
• Mail delivery services that use stamps.
• Broadcasting services that are not advertising.
• A public telephone service that uses coins/ coins.
• Remittance services that use money orders.

c. Sectors with Limited Free VAT

• Basic goods that are needed by the community.
• Medical services.
• Social services.
• Financial services.
• Services in the insurance field.
• Services in the field of education.
• Public transportation services both land, sea and air in the domestic area.
• Services in the field of labor.

10.

Changes to Tax Sanctions

There are at least two (2) scheme changes regarding tax sanctions regulated through the HPP Law. Changes regarding tax sanctions from the previously used KUP are:

• Inspection sanctions and Taxpayers (WP) where the concerned do not submit a Tax Notice (SPT).
• Sanctions after legal efforts but the court and the decision of objection still propose a decree from the Director General of Taxes.
• Change the amount of sanctions given for losses suffered by the state.

The changes to the tax sanctions in question are:

• PPh paid with less amount is sanctioned in the form of interest per month using the benchmark of the amount of the benchmark interest rate that was currently valid in the market and also uplift factor of 20% which was previously 50%.
• Less PPh that is cut sanctions are the imposition of interest by reference and also uplift factor by 20% from the previous 100%.
• PPh was cut but but not deposited the sanction was 75% while previously 100%.

VAT and PPnBM underpaid sanctions on KUP is 100% to 75% in the HPP Law.