Tax flash February 2021

TAX FLASH
‘Go Big’ stimulus, a phrase that has been trending after the appointment
of Janet Yellen to be the new Secretary of Treasury in United States. She
has repeated the phrase several times, emphasizing the gravity of the
situation as the world economy braked to a standstill due to the
pandemic despite the ongoing vaccination drives. Her credential being
a former head of the Federal Reserve add a huge support on this ‘Go
Big’ stimulus. ‘Go Big’ with a US$1.9 trillion stimulus or 9% of the US’s
GDP. That’s a mind-boggling figure on top of US$3 trillion fiscal stimuli
last year.
Last year, Indonesia has launched large fiscal and monetary stimuli to
support its economy against the COVID 19 pandemic. The figures shown
below are based on the Jakarta Post and KPMG’s research.
‘Go Big’ Stimulus for Indonesia?
KIB E-newsletter February 2021
In This Issue:
- ‘Go Big’ Stimulus for
Indonesia?
- The Implementing
Regulations of Job
Creation Law
- Easier for having a
legal business entity
at Indonesia
- Indonesia Investment
Authority
- KIB consulting can
accelerate business
demand in Public
Policy
- New tax regulation
(PMK-8/PMK.03/2021)
345,0
166,2
155,0
97,3
243,3
120,6
123,5
53,6
106,1
-
100,0
200,0
300,0
400,0
500,0
600,0
700,0
800,0
Fiscal Monetary
Trillion
(Rupiah)
Indonesia 2020 Stimulus
Support for Ministries & Regional
Stimulus for SOE & Corporation
Stimulus for SMEs
Tax Incentive and Credit for business
Social Protection
Healthcare sector
Cut in rupiah reserve requirement
Monetary expansion

Indonesia is also contemplating a ’Go Big’ stimulus plan which is based on 2021 National Economic
Recovery plan, estimated to be around Rph 695.2 trillion, approximately 4.2% of Indonesia’s GDP. We can
guess that if Indonesia’s economy does not show promising signs of recovery, we could expect a similar
size or smaller for the next round of stimulus. This will go well with the ongoing monetary stimulus that
Bank Indonesia has implemented last year to provide liquidity in the market.
One of the stimulus plans that have been implemented will be the discount for luxury tax (PPnBM) on
automobiles, starting from March 2021 onward for 9 months. A closer detail is shown below.
The cars that are eligible would be shown below, based on a CNBC Indonesia article.
Low Cost Green Car (LCGC) Low Multi-Purpose Vehicle (MPV) Low Sport Utility Vehicle (SUV)
 Toyota Agya
 Honda Brio Satya
 Daihatsu Ayla
 Toyota Avanza
 Honda Mobilio
 Daihatsu Xenia
 Mitsubishi Xpander
 Toyota Rush
 Daihatsu Terios
 Mitsubishi Xpander Cross
It might help the economy further as these cars are majorly made or assembled locally. Furthermore, it
will indirectly support local banks and car dealers too. The question at hand will be whether the middle
class wants to buy it or not. A lot of families are worried about splurging their savings as the pandemic
has not ended yet despite the ongoing vaccination in Indonesia. Some would rather save more for the
worst to come or for better investment opportunities.
Consumption patterns and behavior have changed greatly amidst the pandemic. Indonesian spending
habits have been replaced with saving and frugal habits. We also expect that not a lot of consumers buy
cars due to limited choices for the luxury tax discount shown above.
In addition to that, we firmly believe that this luxury tax discount is not suitable in the current environment
too. Indonesia is a top 10 greenhouse gas producer in the world according to Carbon Brief’s 2019 country
profile. It is not too late to reduce for Indonesia to implement more economic policies that reduce
greenhouse gas emission as the world is embarking on a more sustainable economy.
Time Period
• March to Mei 100% discount
• June to August 50% discount
• Septembet to November 25% discount
Conditions
• The engine capacity should be below 1500cc
• 70% components locally made or Complete
Knock Down
• Non Completely Built Up Sedan with engine
capacity below 1500cc

Climate change has brought historical drought and bushfire that ravaged Australia in 2019. Westpac
estimated that the economic damage around A$5 billion within that period. If the economic damage figure
is not enough to reflect the surreal threat of climate change, the current Arctic storm that has rampaged
across Canada and the United States will. Texas, a renowned state with a hot climate, is covered in snow,
suffering from power failure and people are struggling to get warm as of now.
Australia 2019 Bush Fire (BBC) Texas 2021 Artic Storm (BBC)
Instead of PPnBM discount on cars with an internal combustion engine, it would be better to implement
these on electric vehicles (EVs), encouraging more consumers to buy them. EVs tend to be more expensive
on average as most of them are imports. Moreover, this will encourage domestic auto firms to quickly
transition their production to EVs, reducing the greenhouse gas emission overall. These methods have
worked well in Europe and United States where consumers are eligible to get a tax credit from purchasing
EVs. In the United States, consumers are eligible to get up to $7500 tax credit.
Hyundai KONA Electric (Hyundai Indonesia) Cadillac LYRIQ (Cadillac USA)
Nevertheless, people would argue that these ‘Go Big’ stimulus spending could bankrupt nations in the
future. This growing debt level would harm the economy and increasing the burden on the shoulder of
average Indonesians. Although the increasing debt to GDP ratio is scary, it is now or never.

Fig 2 G7 10 year notes (Source: S&P Global Market Intelligence)
Oliver Blanchard, a former chief economist at IMF, explains that if the debt can be used to increase the
GDP faster than the stock of debt level, it won’t matter anymore as it will reduce the ratio itself in the long
term, as long as the debt is invested to increase productivity. Moreover, the yield of government debts
has been ultra-low, near-zero, or negative zones in the developed countries due to QEs that have been
implemented since the 2008 Financial Crisis shown in Fig 2. This implies a lower cost for developed
countries to borrow debt, enabling them to spend it as if tomorrow never comes.
Fig 3 Indonesia 10 year notes (Source: S&P Global Market Intelligence)
Indonesia has conducted its first QE during the pandemic. Bank Indonesia has purchased and conducted
repo as much as 500 trillion Rph in 2020 alone as seen in Fig 3. Moreover, it has also reduced the weekly
repo rate to 3.75% at the same time. The major issue is that yields on the Indonesian government’s notes
have not decreased to levels observed in G7 countries, posing a burden for Indonesia to increase its
stimulus spending or launch another ‘Go Big’ stimulus. It could be done by larger QEs in the future.
However, another major concern that arises from this ‘Go Big’ stimulus would be inflation. Major fiscal
and monetary stimulus could overheat the economy while saving it simultaneously. Indonesia’s economy
might not bear a high inflation rate regardless being temporary or not. The G7 countries, especially the
United States seems convenient to have higher inflation rate in the future.
In our life, there is a pivotal moment where we believe greatly in ‘Go Big or Go Home’. This is it. Economists
around the world have given green light to go ahead, even the head of major central banks.
(1,00)
0,00
1,00
2,00
3,00
RATE/YELD(%)
18 FEB 2020 - 18 FEB 2021
G7 countries' 10 years note yield
US Germany France Japan Italy UK Canada
0,00
2,00
4,00
6,00
8,00
10,00
Rate/Yield(%)
18 feb 2020 - 18 Feb 2021
Indonesia 10 year notes

The Implementing Regulations of Job Creation Law
Minister of Law and Human Rights, Yasonna Laoly, hopes that the implementation of derivative
regulations on the Job Creation Law can speed up the recovery of the national economy as soon as this
will open up many jobs for the community. A total of 49 implementing regulations for the Job Creation
Law have been officially promulgated in the State Gazette of the Republic of Indonesia. This regulation
consists of 45 Government Regulations and 4 Presidential Regulations.
The following is a list of 49 Implementing Regulations for the Job Creation Law:
1. Government Regulation Number 5 of 2021
concerning Implementation of Risk-Based Business
Licensing.
concerning the Implementation of Business
Licensing in Regions.
concerning Ease, Protection and Empowerment of
Cooperatives and Micro, Small and Medium
Enterprises.
concerning Authorized Capital of Companies and
Registration of Establishment, Amendment and
Disbanding of Companies that Meet the Criteria for
Micro and Small Businesses.
concerning Tax Treatment to Support Ease of Doing
Business.
concerning Regional Taxes and Regional Levies in
order to Support Ease of Doing Business
andRegional Services.
concerning Village Government-Owned
Enterprises.
concerning Amendments to Government
Regulation Number 14 of 2016 concerning
Implementation of Housing and Settlement Areas.
concerning the Implementation of Flats.
concerning Amendments to Government
Implementation Regulations of Law Number 2 of
2017 concerning Construction Services.
concerning Implementation Regulations of Law
Number 6 of 2017 concerning Architects.
concerning Implementation Regulations of Law
Number 28 of 2002 concerning Buildings.
concerning the Fourth Amendment to Government
Regulation Number 15 of 2005 concerning Toll
Roads.
concerning Management Rights, Land Rights,
Apartment Units, and Land Registration.
concerning Implementation of Land Acquisition for
Development for Public Interest.
concerning Control of Neglected Areas and Lands.
concerning the Implementation of Spatial Planning.
18. Government Regulation Number 22 Year 2021
concerning Implementation of Environmental
Protection and Management.
concerning Forestry Implementation.
concerning Procedures for Imposing Administrative
Sanctions and Procedures for Non-State
RevenueTaxes originating from Administrative
Fines in the Forestry Sector.
concerning the Implementation of the Sector of
Energy and Mineral Resources.
concerning the Implementation of the Agricultural
Sector.
concerning the Implementation of the Marine and
Fisheries Sector.
concerning the Implementation of the Industrial
Sector.
concerning the Implementation of the Trade Sector.
concerning Implementation of the Road Traffic and
Transportation Sector.

concerning the Implementation of the Shipping
Sector.
concerning the Implementation of the Aviation
Sector.
concerning the Implementation of the Railway
Sector.
concerning the Use of Foreign Workers.
concerning Specific Time Work Agreements,
Transfer of Resources, Working Hours, Working
Relationships and Rest Periods, and Termination of
Employment.
concerning Wages.
concerning the Implementation of the Job Loss
Guarantee Program.
concerning Accompanying Account for Umrah
Pilgrimage Travel Expenses.
35. Government Regulation Number 39 Year 2021
concerning Implementation of the Halal Product
Guarantee Sector.
concerning the Implementation of Special
Economic Zones.
concerning the Implementation of Free Trade Zones
and Free Ports.
concerning the Ease of National Strategic Projects.
concerning Settlement of Inconsistencies in Spatial
Planning, Forest Areas, Permits and / or Land Rights.
concerning Implementation of the Prohibition of
Monopolistic Practices and Unfair Business
Competition.
concerning the Implementation of Geospatial
Information.
concerning Post, Telecommunication and
Broadcasting.
concerning the Implementation of Hospitalization.
concerning Third Amendment to Government
Implementation Regulations of Law Number 6 of
2011 concerning Immigration.
concerning Taxation Treatment of Transactions
Involving Investment Management Institutions and
/ or the Entities They Own.
46. Presidential Regulation Number 9 of 2021
concerning the Agency for the Acceleration of
Housing Management.
concerning the Investment Business Field.
48. Presidential Regulation No. 11/2021 concerning
Cooperation between the Central Government and
State-Owned Enterprises in Implementation of
Basic Geospatial Information.
concerning Amendments to Presidential Regulation
Number 16 of 2018 concerning Government
Procurement of Goods / Services.
The 49 implementing regulations adds
to the number of derivative regulations
that have been promulgated.
Previously, there were already two
Government Regulations that were
stipulated as regulations, namely PP
number 73 of 2020 concerning
Investment Management Institutions
and PP number 74 of 2020 concerning
Initial Capital of Investment
Management Institutions. Overall, the
derivative regulations that will become
the implementation of the Job Creation
Law are planned to be stipulated as
many as 49 PP and 5 Presidential
Regulation

Easier for having a legal business entity at Indonesia
Yasonna Laoly, the minister of Justice and Human Right, has announced to the public that they can set up
limited liability company (PT) without the use of notary deed on the 22nd
February 2021.
He explained it that this enables a single person to form a PT Perseroan Perorangan easily. The new
process of forming this new legal entity: 1) entrepreneurs need to submit their establishment of legal
business entity form electronically 2) the legal business entity can operate as PT once they have received
proof of registration
The question that we have is the length of the process to do so. Nevertheless, we believe this process is
shorter than the previous one which could take weeks to do so.
Despite that, it is difficult to compete with our neighboring country, Singapore, in this field. It takes one
day to form a company in Singapore, which is one of the myriad factors that allows it to be rank 18th
in
the world and 2nd
in Asia for ease-of doing business and 1st
in the most competitive economy worldwide
last year.
This is intended to improve the ease of business for local micro and small enterprises (UMK). In addition
to simplifying the process, this would shield sole founder from bankruptcy threat on his/her personal
wealth and allow easier access to financial services. This will benefit greatly for micro and small
entrepreneurs in Indonesia.
Lastly, the tax expenses associated with PT Perseroan Perorangan will be lesser compared to PT and
individual income tax.
This new policy has been incorporated in the PP Number 8 year 2021 on initial capital of Perseroan and
Registration, Amendments and Dissolution of Perseroan that fulfill the criteria for micro and small
enterprises (UMK). This is also included in the Omnibus law passed down last year.
Yasonna said that this shows the government commitment to simplify ease of business and aims to
improve Indonesia’s World Bank ease of business ranking from 73 to low forties.

Indonesia Investment Authority
Indonesia sovereign wealth fund (SWF), Indonesia Investment Authority (INA) has officially operational
after the selection of its leaders by the President this week. The fund will have an initial capital of $5
billion, which consists of shares in BUMNs and seed capital from the Indonesian government. Luhut, the
minister of maritime affairs and investment went to the United States and other developed countries to
raise a fund of $15.5 billion last December.
Sovereign wealth funds have become a force to be reckoned with as their asset under management (AUM)
range from a couple of billions of dollar to a trillion-dollar. SWFs managed $7.94 trillion of assets as of last
December.
Currently, the two largest sovereign wealth funds are the Norwegian Government pension fund and China
Investment Corporation. The former is the largest in the world with $1.2 trillion AUM as it has invested
most of Norway’s oil revenue in more than 9000 companies in 74 countries. If the pension fund is
liquidated and distributed evenly in Norway, each Norwegian will get at least US$200 thousand.
Meanwhile, the China Investment Corporation is the second-largest in the world with $1 trillion AUM.
Comparing with other SWFs, INA is unusual as it is open to foreign investors. Most SWFs invest using the
country’s commodities revenue or foreign exchange reserve as a rainy day investment and tend to be
closed for outside investment. Moreover, it seems INA focuses more on domestic rather than overseas
investment as it will be used to finance domestic infrastructure investment.
Rather than an SWF, INA could be seen as a state-owned Private Equity firm. One of the reasons is the
acceptance of outside investment. It is as if INA raised an infrastructure fund similar to other large PE
firms such as KKR, Carlyle, and Blackstone. The other reason is that the newly appointed CEO of Indonesia
Investment Authority, Ridha Wirakusumah, former CEO of Bank Permata, has wide-ranging experience in
banking, private equity, and insurance. According to a Financial Times article, OCBC’s Wiranto explained
that the CEO’s experience in KKR would be useful in setting up a private equity-type structure at the new
fund. This statement reinforces more on our view that INA is a PE firm rather than an SWF.
There is a lot of optimism that the creation of INA would herald a new age in Indonesia as it would support
Indonesia’s economic growth and development. Jokowi is hoping it would become a $100bn fund in the
future. But fears remain as the memory of the 1MDB corruption scandal lingers on till now. Hopefully, by
choosing professionals and the existence of foreign investors, the probability of embezzlement would be
nil due to strong corporate governance. Nevertheless, we cannot judge its potential as it is still in infancy.
Only time can judge how far can INA support Indonesia’s dream to escape the middle-income trap.
The newly appointed leaders of INA:
 Ridha Wirakusumah, Chief Executive Officer
 Arief Budiman, Deputy Chief Executive Officer
 Stefanus Ade Hadiwidjaja, Chief Investment Officer
 Eddy Porwanto, Chief Financial Officer
 Marita Alisjahbana, Chief Risk officer

KIB consulting can accelerate business demand in Public Policy
Business change and move faster than Government regulations.
KIB Consulting, being a boutique advisory firm, we advise our existing clients in various fields, especially
in business, finance, accounting and tax. In addition to that, we have strong public policy research team
to help regulators creating new and effective regulations that address businesses’ concerns. Our team is
dedicated to improve to help Indonesia and its entrepreneurs to develop stronger and sustainable.
One of the public policy research that we have done has been implemented by the Ministry of Finance
recently. It is related to the new tax regulation PMK-8/PMK.03/2021.

New tax regulation (PMK-8/PMK.03/2021)
A new tax regulation, PMK-8/PMK.03/2021, has been implemented by the Ministry of Finance at the
beginning of February. It is regarding the collection and payment of luxury good tax (PPnBM) and VAT
(PPN) for goods and services by the State-owned Enterprises (BUMNs).
This regulation aims to simplify the process of collecting PPN for BUMNs and their subsidiaries and
combining two regulations, PMK-37/PMK.03/2015 and PMK 85-136/PMK.03/2012.
Among dozens of BUMNs, the Ministry of Finance has chosen 28 of them for the collection, record, and
payment of the PPN according to Directive Number 30/KMK.03/2021.
 PT Pupuk Sriwidjaja Palembang
 PT Petrokimia Gresik
 PT Pupuk Kujang
 PT Pupuk Kalimantan Timur
 PT Pupuk Iskandar Muda
 PT Telekomunikasi Selular
 PT Indonesia Power
 PT Wijaya Karya Beton Tbk
 PT Rajawali Nusindo
 PT Krakatau Wajatama
 PT Elnusa Tbk
 PT Semen Tonasa
 PT Semen Padang
 PT Pembangkitan Jawa-Bali
 PT Kimia Farma Apotek
 PT Badak Natural Gas Liquefaction
 PT Kimia Farma Trading & Distribution
 PT Tambang Timah
 PT Terminal Petikemas Surabaya
 PT Indonesia Comnets Plus
 PT Bank Syariah Mandiri
 PT Adhi Commuter Properti
 PT HK Realtindo
 PT Wijaya Karya Realty Tbk
 PT PP Properti Tbk
 PT Waskita Karya Realty
 PT Bank BNI Syariah
 PT Bank BRIsyariah Tbk
This regulation stipulates that these firms need to collect, store and report the PPN and PPnBM once they
received taxable goods (BKP) and services (JKP). According to our associates, this new regulation would
reduce the complications of the old regulation concerning the BUMNs.
Moreover, entities that provide goods and services to these BUMNs obliged to make tax invoice when the
goods and services have been handed over, receiving the payments in full before providing the goods and
services, or paid in installments. The 28 BUMNs need to attach SPT Masa PPN with Nominative list of tax
invoices and Surat Setoran Pajak or other administrative forms to complement with Surat Setoran Pajak.
In addition to that, for certain transactions, the SOEs will be exempted from collecting, record and pay the
PPN. The duty to collect, record and pay the PPN falls to the firms that provide goods and services to SOEs.
The exempted transactions are:
 Transactions with the maximum nominal size of 10 million Rph
 Air delivery by airlines.
 Telecommunication services.
 Purchase of fuel oil and gas from PT Pertamina (Persero).
 Specific transactions that are exempted under various tax regulations.

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Tax flash February 2021

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Tax flash February 2021