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September 3, 2008

Indonesia: House passes income tax bill

The Indonesian House of Representatives (DPR) passed an income tax bill into law at its plenary meeting in Jakarta Tuesday, reported state news agency Antara.

All the 10 House factions in their final comments favored the passage of the bill into law.

Chief of the House's Special Committee on the Income Tax Bill Melchias Markus Mekeng said the amendments to the income tax law affected a number of important matters.

They included exemptions from income tax, untaxable income, tax rates, exit tax exemption and tax privileges for small- and medium-scale businesses.

The objects exempted from income tax are divided into two groups. The first group is assistance/contributions including alms received by alms collectors endorsed by the government and compulsory contributions paid by adherents of religious faiths recognized in the country.

The second group is grants received by religious, educational, social bodies including foundations, cooperatives and individuals engaged in small and micro businesses.

Under the new income tax law, the amount of untaxable income for an individual taxpayer is raised to 15.84 million rupiah ($1,726) from 13.2 million rupiah a year. The figure will be raised by 1.32 million rupiah if the taxpayer is married.

Income tax on individual taxpayers is subject to progressive tariffs divided into four. The taxable income of up to 50 million rupiah is subject to a 5 percent tariff, 50 million rupiah to 250 million rupiah a 15 percent tariff, 250 million rupiah to 500 million rupiah a 25 percent tariff and more than 500 million rupiah a 30 percent tariff.

Both the House and the government agreed to lower the tariff of income tax on resident corporate taxpayers and permanent establishments from the current 30 percent to 28 percent in 2009 and 25 percent in 2010.

The new income tax law also stipulates that a 21-year-old resident individual taxpayer who does not have a taxpayer code number and intends to travel overseas is required to pay tax to be provided for in a government regulation. The provision will take effect December 31, 2010.

Under the law, small and medium micro businesses would also deserve tariff reduction as much as 50 per cent of the normal tariff imposed on the taxable income from portion of the gross turnover of up to 4.8 billion rupiah, Melchias said.

Finance Minister Sri Mulyani Indrawati meanwhile said the government was preparing the implementation regulations on the law. "Hopefully, the law will take effect on January 1, 2009," she said.

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