Factbox: Indonesia’s parliament debates sweeping new tax bill

JAKARTA (Reuters) – Indonesia’s parliament will soon begin debating a sweeping new bill that proposes corporate tax cuts and seeks to make internet giants pay more taxes, as part of a wider plan to simplify laws and boost investments in Southeast Asia’s biggest economy.

President Joko Widodo, whose coalition controls nearly three quarters of seats in parliament, has asked lawmakers to finish debate and pass the bill within 100 days .

Here are details of the government’s proposal, based on a presentation by Finance Minister Sri Mulyani Indrawati over the weekend:

– To cut corporate tax to 22% in 2021 and 20% in 2023 from 25% now. The phased introduction will allow “breathing space” for the government to replace up to $6.3 billion of estimated lost revenue per year

– Publicly listed companies meeting certain criteria to get an additional 3 percentage point cut below the general rate

– Internet firms with a significant economic presence, regardless of where they are based, to be considered as resident taxpayers and will be subject to local rules, including paying 10% value-added tax (VAT). Minister Indrawati cited Spotify and Netflix as examples of companies that might be in this category. Both companies did not respond to request for comment

– Removing tax on dividends as long as they are reinvested

– Removing tax on some income from foreign businesses, including dividends obtained offshore, as long as they are reinvested

– Lowering the 20% withholding tax on interest paid by a taxpayer to a foreign tax resident (the new rate will be decided in a separate regulation)

– Foreign nationals to pay taxes only on income generated in Indonesia, instead of currently on world-wide income

– Reducing penalties on late or missed tax payments to the market rate plus 5 percentage points from a maximum of 48% of the amount that should have been paid

– To widen refundable payments under VAT

– Central government to be given the power to overrule regional tax rates

– To include under the new bill all current tax incentives, such as details on tax holidays and allowances, to ensure a stronger legal basis

(Reporting by Gayatri Suroyo; Editing by Ed Davies and Aditya Soni)

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