Legal Certainty for VAT Treatment of Imported Goods used for Activities to Utilise Offshore Taxable Service
In 2017, the Minister of Finance issued Regulation No. 178/PMK.04/2017 on Temporary Import ("Temporary Import Regulation"), which stipulates two types of temporary imported goods:
- temporary imported goods that are exempted from customs duty, where the customs authority would not collect value-added tax ("VAT") or value-added tax and luxury goods sales tax ("LST") and Article 22 Income Tax; and
- temporary imported goods that can receive customs duty relief, where the customs authority would only collect VAT or VAT and LST and no Article 22 Income Tax will be collected.
In relation to item 2 above, if the temporary imported goods relate to the utilisation of taxable service from outside the Indonesian customs area within the Indonesian customs area, i.e. in the form of asset rental, then the importer may apply for a statement letter (Surat Keterangan Pemanfaatan JKP dari luar Daerah Pabean di dalam Daerah Pabean or "SKJLN") to the Directorate General of Tax ("DGT"), which can then be used by the importer to claim non-collection facility for VAT or VAT and LST from the Directorate General of Customs and Excise.
After more than a year since the Temporary Import Regulation becomes effective, the DGT has now issued Regulation No. PER-12/PJ/2019 on Procedure to Obtain SKJLN (“SKJLN Regulation”), which applies not only for rental with temporary import mechanism, but also for rental without temporary import mechanism.
Legal Certainty for VAT Treatment of Imported Goods used for Activities to Utilise Offshore Taxable Service
In 2017, the Minister of Finance issued Regulation No. 178/PMK.04/2017 on Temporary Import ("Temporary Import Regulation"), which stipulates two types of temporary imported goods:
- temporary imported goods that are exempted from customs duty, where the customs authority would not collect value-added tax ("VAT") or value-added tax and luxury goods sales tax ("LST") and Article 22 Income Tax; and
- temporary imported goods that can receive customs duty relief, where the customs authority would only collect VAT or VAT and LST and no Article 22 Income Tax will be collected.
In relation to item 2 above, if the temporary imported goods relate to the utilisation of taxable service from outside the Indonesian customs area within the Indonesian customs area, i.e. in the form of asset rental, then the importer may apply for a statement letter (Surat Keterangan Pemanfaatan JKP dari luar Daerah Pabean di dalam Daerah Pabean or "SKJLN") to the Directorate General of Tax ("DGT"), which can then be used by the importer to claim non-collection facility for VAT or VAT and LST from the Directorate General of Customs and Excise. After more than a year since the Temporary Import Regulation becomes effective, the DGT has now issued Regulation No. PER-12/PJ/2019 on Procedure to Obtain SKJLN (“SKJLN Regulation”), which applies not only for rental with temporary import mechanism, but also for rental without temporary import mechanism.
Active Income Excluded from the Calculation of Deemed Dividends under the Controlled Foreign Company Rules
To encourage transparency, provide legal certainty and fairness in the imposition of tax to Indonesian resident taxpayers for their equity participation in a foreign business entity other than business entities listed on a foreign stock exchange, the Ministry of Finance recently amended Minister of Finance Regulation No. 107/PMK.03/2017 ("2017 CFC Rules") by issuing Minister of Finance Regulation No. 93/PMK.03/2019 on Controlled Foreign Company ("CFC") Rules ("New CFC Rules"). The New CFC Rules will apply for fiscal year 2019.
The New CFC Rules reflect the exclusion of active income and provide a definition for 'certain income' (penghasilan tertentu) from the calculation of deemed dividends for a directly- and indirectly-owned CFC.