Government Plans Regional Tax Restructuring

Government Plans Restructuring

The government plans to restructure the types of Regional Taxes from 16 types to only 14 types. Not only changes in the types of regional taxes, but the objects of regional levies also underwent a restructuring of the objects of regional levies, which initially contained 32 types of services, to 18 types of services. This is as contained in the Draft Law (RUU) on Financial Relations between the Central Government and Regional Governments (HKPD) which was submitted by the Ministry of Finance. What are the detailed provisions? Check out the following description!

Getting to Know Local Taxes

Regional taxes hereinafter referred to as taxes, are mandatory contributions to regions owed by individuals or entities that are coercive in nature based on the law, without receiving direct compensation, and are used for regional purposes for the greatest prosperity of the people. There are 16 types of local taxes before restructuring, namely:

  • Motor Vehicle Tax (PKB)

PKB is a tax on ownership and/or control of motorized vehicles. With a rate of 1% to 2% for the first ownership and 2% to 10% for the second ownership.

  • Motorized Vehicle Transfer Fee (BBNKB)

BBNKB is a tax on the transfer of ownership of a motorized vehicle as a result of an agreement between two parties or a unilateral act or a situation that occurs due to buying and selling, exchanging, grants, inheritance, or entry into a business entity. The first submission is subject to a 20% tariff and the second submission is subject to a 1% tariff. Meanwhile, heavy equipment motorized vehicles are subject to a tariff of 0.75% for the first delivery and 0.075% for the second delivery.

  • Motor Vehicle Fuel Tax

Motor Vehicle Fuel Tax is a tax on the use of motor vehicle fuel. With a maximum rate of 10%.

  • Surface Water Tax

Surface Water Tax is a tax on the extraction and/or utilization of surface water. With a maximum rate of 10%.

  • Cigarette Tax

Cigarette Tax is a levy on cigarette excise that is levied by the Government. Cigarette tax rates are set at 10% of cigarette excise.

  • Hotel Tax

Hotel tax is a tax on services provided by the hotel. The rate charged is 10% of the amount paid or that should be paid.

  • Restaurant tax

Restaurant tax is a tax on services provided by restaurants. The Restaurant Tax Rate is set at the maximum of 10%.

  • Entertainment Tax

The entertainment tax rate is set at a maximum of 35%. Especially for entertainment in the form of fashion shows, beauty contests, discotheques, karaoke, nightclubs, agility games, massage parlors, and steam baths/spa, the entertainment tax rate can be set at a maximum of 75%. Especially for folk/traditional arts entertainment, the entertainment tax rate is set at a maximum of 10%.

  • Advertisement tax

Advertisement Tax is a tax on the administration of advertisements. The Advertising Tax rate is set at a maximum of 25%.

  • Street Lighting Tax 

Street Lighting Tax is a tax on the use of electricity, either self-generated or obtained from other sources. The rate of Road Lighting Tax is set at a maximum of 10%.

  • Non-Metal and Rock Mineral Tax 

Tax on Non-Metal Minerals and Rocks is a tax on the extraction of non-metallic minerals and rocks, both from natural sources within and/or the earth’s surface for use. The non-metallic mineral and rock tax rate is set at a maximum of 25%.

  • Parking Tax

Parking tax is a tax on the operation of off-street parking spaces, whether provided in connection with the main business or provided as a business, including the provision of a place for storing motorized vehicles. The parking tax rate is set at a maximum of 30%.

  • Groundwater Tax 

Groundwater Tax is a tax on the extraction and/or utilization of groundwater. The groundwater tax rate is set at a maximum of 20%.

  • Swallow’s Nest Tax 

Swallow’s Nest Tax is a tax on the activities of taking and/or operating swallow’s nests. The Swallow’s Nest Tax rate is set at a maximum of 10%.

  • Rural and Urban Land and Building Tax (PBB P2)

PBB P2 is a tax on land and/or buildings that are owned, controlled, and/or utilized by individuals or entities, except for areas used for plantation, forestry, and mining business activities. Rural and Urban Land and Building Tax rates are set at a maximum of 0.3%.

  • Land and Building Rights Acquisition Fee (BPHTB)

BPHTB is a tax on the acquisition of land and/or building rights. The Tariff for Acquisition of Rights on Land and Buildings is set at a maximum of 5%.

Then in the proposed restructuring, the types of regional taxes changed to only 14 types by combining 5 types of regional taxes into one but with a new name, namely Tax on Certain Goods and Services (PBJT). The types of local taxes incorporated in the PBJT are hotel tax, restaurant tax, entertainment tax, parking tax, and street lighting tax. Then, the change has the aim of harmonization with the object of Value Added Tax (VAT) because it is a type of tax that is equally imposed on consumption.

Furthermore, changes to the object of regional retribution are carried out because some of the objects of retribution are types of public services that must be provided by local governments, for example, namely:

  • Retribution for printing Resident Identity Cards (KTP) and Civil Registry Deeds,
  • Calibration/recalibration service,
  • fire extinguisher testing,
  • funeral service,
  • Terminals, and more.

The purpose of this change is to increase efficiency in administrative matters and compliance costs. 

We Tax.io provide several features that can help you to more easily manage your company’s tax obligations. For those of you who are already PKP, only with a premium package of IDR 5,000,000 per year, you can use the eFaktur and eBupot Unification features with monthly issuance of up to 500 Invoices & 500 Bupot, Taxomatic PPh Unification up to 50 Bupot per month. Then, free tax management (company tax PPh and monthly VAT) DOES NOT INCLUDE the management of PPh 21 Employees.

But for companies that have PKP and the number of transactions is very large, the premium package of IDR 10,000,000 per year is suitable for you! With this package, you can issue up to 1000 Invoices & 1000 Bupot per month, Taxomatic PPh Unification up to 100 Bupot per month. Then, free tax management (company tax PPh and monthly VAT) INCLUDING the management of PPh 21 employees and annual corporate tax returns.

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