The ever-evolving landscape of international taxation has recently taken a significant turn, with Government Regulation No. 50 revoking both GR-74, which was issued in 2011, and all KUP provisions in GR-9, which was issued in 2021. While the relevant implementing regulations remain in effect, this GR-50 calls for a re-examination of the current tax framework – including international operations.
Gema Consult will look at the potential impacts of these changes and what they mean for international tax planning. Join us as we explore into the world of international taxation and GR-50.
2.9 Trillion Rupiah in Tax Revenue: How the Indonesian Government is Boosting its Economy
In the last few years, the Indonesian government has made several important steps to improve its economic performance and increase its tax revenue. In 2021, the government issued a series of new tax regulations that have resulted in higher tax revenues for the country. This trend is expected to continue in the coming years, and according to recent forecasts, the Indonesian government could potentially increase its tax revenue by 2.9 trillion Rupiah by 2023.
This increase in tax revenue is attributed to the government’s strategies to improve its tax compliance and collection system. In 2021, the government launched a new e-tax system, which has enabled the government to collect taxes more efficiently. The government has also improved its anti-tax avoidance measures, making it harder for companies to evade taxes. Moreover, the government has also implemented tax amnesty schemes in recent years, allowing companies to pay outstanding taxes without any penalty.
In addition to its tax reforms, the Indonesian government has also taken steps to reduce its reliance on oil and gas revenues. The country has shifted its focus to other sectors, such as manufacturing and services, which have helped to boost its economic growth. This has resulted in increased economic activity, which has in turn generated more taxes.
The government’s effort to increase its tax revenues is expected to have a positive impact on the country’s economy. Increased tax revenues will enable the government to invest in infrastructure projects, which will benefit the business sector.
The Indonesian government’s efforts to increase its tax revenues should be welcomed by all stakeholders in the country. It is important that the government continues to take steps to improve its tax compliance and collection system in order to ensure that the country’s economic growth is sustainable. The projected increase in tax revenues in 2023 is a positive sign that the government’s strategies are working and that the country’s economy is on the right track.
The positive impact of these tax reforms is already being felt in the country’s economic growth. Indonesia’s economic growth rate in 2020 was 2.6% higher compared to the global average of 3.6%. The projected increase in tax revenues in 2023 is a positive sign that the government’s strategies are working and that the country’s economy is on the right track.
Government Taking Bold Steps to Bolster Economic Growth with Greater FDI Attraction
In addition to the tax reforms, the government is also taking steps to attract more foreign direct investment (FDI) into the country. FDI is a key component of economic growth for many countries and is often seen as a major factor in global economic development. As a result, more and more countries are striving to create a favorable and enabling climate to attract FDI as a policy priority.
This involves liberalizing their FDI regimes, which includes reducing the restrictions on the entry of FDI and creating a more open and competitive environment to encourage foreign investors. Governments are also looking at ways to increase the attractiveness of their jurisdictions, such as offering tax incentives and other incentives to businesses seeking to invest.
Looking example from another soon-to-be benchmark country, the United Kingdom has recently increased their FDI regime by introducing a new FDI regime in April 2020, which has been designed to attract more foreign direct investment. This includes reducing the administrative burden for businesses, providing new incentives for foreign investors, and allowing for greater flexibility and control of the investment process.
In addition, the UK has also created a number of new tax incentives to support foreign investors, such as the UK Global Investment Scheme and the UK Residence Scheme. These schemes provide attractive tax benefits for foreign investors and can help them to reduce their taxes on income and capital gains.
Furthermore, the UK government is also looking at ways to make the UK a more attractive business destination, such as through the establishment of the UK Science and Innovation Network, which is designed to attract higher-value investments from overseas investors.
There is no doubt that more and more countries are striving to create a favorable and enabling climate to attract FDI as a policy priority. Governments are looking at ways to reduce the restrictions on the entry of FDI, as well as creating attractive tax incentives and other measures to make their jurisdictions more attractive to foreign investors. By creating a more open and competitive environment, countries can help to attract more foreign direct investment, which in turn can lead to economic growth and development.
Meanwhile, Indonesia Government put their best effort to stay ahead of the curve with navigating global tax updates through mutual agreement procedure.
Unlock the Benefits of Mutual Agreement Procedure (MAP) to Resolve Cross-Border Tax Disputes
The Mutual Agreement Procedure (or MAP) is an important mechanism for resolving disputes between taxpayers and tax authorities of different countries. The MAP is an agreement between two or more countries to resolve a tax dispute amicably between the parties and is established in the context of a double taxation treaty. It is a formal process that involves the respective tax authorities of the countries and is an alternative to the more traditional methods of resolving double taxation disputes.
The implementation of MAP has been an essential part of global taxation since its introduction in 2010. It is also has been actively introduced in Indonesia in 2017 through GR 74/2017, which sets out the procedures and criteria for implementation.
However, since then, the Indonesian Government has amended the MAP Decree several times and a new version was issued in 2018 through GR 18/2018. This regulation sets out the procedures and criteria for the implementation of the MAP and has been in effect since 1 January 2019.
The MAP is a useful tool for taxpayers who are in dispute with their respective tax authorities as it can provide a mutually agreeable resolution that is binding on both countries. GR-50, the latest MAP-related regulation in Indonesia, stipulates that a MAP Decree can be issued if the MAP has resulted in an agreement.
The Decree on the MAP will only be issued when both Indonesia and the Competent Authority of the treaty partner country have exchanged written notification confirming the completion of the MAP and that it can be implemented. In the case that the MAP has been completed before the final decision on ongoing domestic dispute processes which involve disputed items, the Decree will only be issued after the taxpayer has either adjusted or retracted the related application letters.
The MAP Decree is issued after the MAP has resulted in an agreement and is a binding agreement on both parties. Furthermore, taxpayers who receive a tax overpayment due to the MAP Decree will not be entitled to claim interest on the amount overpaid.
After settling the tax arrears, the taxpayer will be refunded the tax overpayment amount if the MAP Decree results in an overpayment; however, no interest will be paid on the amount. This ruling is taken into account to avoid taxpayers from claiming interest on the amount overpaid by the tax authority.
Overall, the MAP Decree is a constructive instrument for resolving double taxation disputes in a fair, swift and cost-effective manner. It is beneficial for the taxpayers as well as the tax authorities. The Decree is also significantly beneficial for administrative processes, such as amending a tax return to revise the tax loss amount based on the MAP Decree, to recover overpaid tax and interest payments, collect underpayments, or reduce administrative sanctions.
The government also facilitate the smooth transition to the new rules. The transitional rules stipulate that the implementation of MAP until 31 December 2022 is still carried out in accordance with GR-74.
The rules of GR-74 are applicable to all MAP cases that are initiated, concluded, or pending before 31 December 2022. They are designed to ensure that MAP is conducted in a timely, consistent and transparent manner, and that taxpayers receive the same treatment throughout the dispute resolution. A window period provided taxpayers more time to adjust to the new MAP Decree, while allowing the tax authorities to effectively manage their MAP cases.
Navigate the Mysteries of International Taxation and Gain Control of Your Global Operations
The world of international taxation is often mysterious and complex. Navigating the nuances of international tax regulations can be a daunting task for even the most experienced tax professionals. The concept of mutual agreement procedure, tax sparing, and expatriate tax regime can be intricate, but understanding the underlying principles can help organizations better manage their international operations.