Indonesia president considers cutting corporate tax rate to 17%

Indonesia’s President Joko Widodo is considering cutting the corporate tax rate to 17% from 25% to match Singapore’s tax rate, he was quoted as saying on the cabinet secretary’s website on Wednesday. (As Reported by thestar.com.my)

“The thinking is simple. If Singapore’s corporate income tax is 17% and ours is 25%, everybody will go there,” Widodo told a tax amnesty roadshow on Tuesday night, according to the website. The government is mulling over whether to directly cut the current tariff to 17% or to do it in two stages, where the tariff is first lowered to 20% and then 17%, the website said. – Reuters

Indonesian taxation is based on Article 23A of UUD 1945 where tax is an enforceable contribution exposed on all Indonesian citizens, foreign nationals and residents who have resided for 183 cumulative days within a twelve-month period or are present for at least one day with intent to remain. Generally if one is present less than 120 days, then no tax is owed except on Indonesia source income. Some tax treaties may supersede this or defer to the Indonesia presence test for the year in question. Tax treaties deal with taxation of foreign source income for services rendered in Indonesia which are generally taxed if performed for 120+ days (depending upon treaty) even though one may not be a tax resident. Indonesia has a stratification of taxation including Income Tax, Local Tax (Pajak Daerah) and Central Government Tax.