Good News For Domestic Investors, Government Cuts Income Tax On Bond Interest

Illustration (Photo: Doc. Antara)

JAKARTA - The government through the Ministry of Finance (Kemenkeu) is committed to encouraging reform of the ease of doing business by creating an equal income tax burden between bond investors. This effort is shown by the issuance of Government Regulation (PP) Number 91 of 2021.

Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said that this new policy is intended to create an equal income tax burden between bond investors, and to further encourage the development and deepening of the bond market.

“The issuance of this PP is proof that the government continues to carry out structural reforms in order to increase investment and productivity, one of which is implemented through the Job Creation Law. Previously, the government had also provided tax relief for foreign investors," he said in a press statement, Friday, September 3.

According to Febrio, this step is also a momentum for recovery through three policies, namely priority interventions aimed at tackling the health crisis, fiscal policy, especially the PEN program to maintain people's purchasing power and the sustainability of the business world, and structural reforms.

"In the ease of doing business cluster, the government provides tax breaks," he said.

To note, through this latest regulation, the government has reduced the interest income tax rate for domestic taxpayers (WPDN).

It is stated that the income tax rate of Article 4 paragraph (2) of the Income Tax Law on income from WPDN bonds has decreased from 15 percent to 10 percent. Now, the tariff is as light as foreign taxpayers (WPLN).

Febrio claims that this rate reduction reflects efforts to create a level of playing field and justice for all bond investors.

"The government's promise to revise PP No. 55/2019 regarding the Second Amendment to PP 16/2009 concerning Bond Interest Income Tax in order to create equality and justice for all groups of investors has been realized with the ratification of PP 91/2021," he stressed.

Previously, the government had previously lowered the Article 26 income tax rate on bond interest income received by WPLNs other than Permanent Establishments (BUT) from the previous 20 percent to 10 percent. The policy is in accordance with the Double Taxation Avoidance Agreement (P3B) which will take effect in August 2021.

“The Indonesian bond market is very potential. The government wants to ensure that investors can take advantage of this tax relief to invest in bond instruments, both SBN (state securities) and corporations," closed Febrio.