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January 25, 2009

Indonesia to cut taxes on listed firms, service companies
The deepening global economic slump has forced the Indonesian government to act fast to implement its pledged stimulus package to limit adverse impacts on local companies, reported the Jakarta Post.

Finance Minister Sri Mulyani Indrawati recently issued a regulation making publicly listed companies eligible for a 5 percent cut in income tax to help them reduce their costs.

Finance Ministry Regulation No. 238/2008, effective since December 30, 2008, says companies are eligible for this if their shares are at least 40 percent owned by the public, with at least 300 parties holding shares and no single shareholder having more than 5 percent of total holdings.

Under the regulation, companies must meet this requirement for at least six months within any one year if they want to get the concession.

The companies are also required to attach a letter from the Stock Administration Bureau when submitting their tax report.

Audit director at the Finance Ministry's directorate general of taxation Riza Noor Karim said the regulation, giving lower tax rates to some businesses, would encourage publicly-listed companies to release more shares to the public.

"Aside from the cuts, the policy will also encourage companies to release more of their shares to the public," Riza said. Income tax for corporations is set at 28 percent flat this year, and 25 percent flat next year.

The ministry also issued another regulation, No. 244/2008, making service sector companies eligible to a 2 percent cut in tax liability based on a calculation of gross revenue.

There are 27 service sector firms now enjoying the discount, effective since Jan. 1. This includes several outsourcing companies, installation companies, event organizers, cleaning service companies and food catering companies.

Service firms having no tax registration number (NPWP) will have to pay double. The normal tax rate taken from gross revenue for such industries is set at 4.5 percent.

Indonesia, Southeast Asia's largest economy, has unveiled a massive stimulus package to help push the economy by promoting domestic demand as business activities linked to international trade slump.

The government has set aside 12. 5 trillion rupiah ($1.1 billion) in this year's state budget, including for tax cuts and subsidies. This figure will likely grow as government plans to add 37.5 trillion rupiah more for this.

Several tax incentives are also in the pipeline which will be issued in less than three months. This include taking over liabilities for workers income tax from companies which normally subsidize the income tax contributions of their workers.

Unlike in developing countries, most companies here subsidize the income tax contributions of their workers as part of a benefit package.

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