Updates on the Latest Income Tax Regulation on Construction Services

Question:
Allow me to introduce myself, I’m Reza. I am the financial staff of a company engaged in construction services. I’ve recently heard of a new regulation concerning changes to the qualifications of construction service businesses and the final income tax rates for income from construction services. What are the changes Please inform me of this issue. Thank you.

Reza, Jakarta.

Answer:
Thank you, Mr. Reza, for the question. The government has issued the newest regulation on income tax on income from construction services. The regulation in question is Government Regulation No. 9 of 2022 concerning the Second Amendment to Government Regulation Number 51 of 2008 concerning Income Tax on Income from Construction Services Business (Gov. Reg. 9/2022).

Gov. Reg. 9/2022 amends the provisions of income tax on construction service businesses formerly regulated under Gov. Reg. 51/2008 in conjunction with Gov. Reg. 40/2009. The regulation revises several provisions, among others, concerning the classification of construction service businesses and changes in rates.

Pursuant to Article 2 paragraph (2) of Gov. Reg. 9/2022, construction service businesses are now classified into construction consulting, construction work and integrated construction work. The table below shows the differences in the classification of construction service businesses before and after the enactment of Gov. Reg. 9/2022.

In addition, there are changes in the income tax rates for construction service businesses as regulated under Article 3 paragraph (1) of Gov. Reg. 9/2022. To see changes in the final Income Tax rates for construction services businesses before and after the enactment of Gov. Reg. 9/2022, refer to the table below.

We hope our answer satisfies your inquiries.

On a side note, the Harmonisation of Tax Regulations Law Consultation article is presented every Tuesday to answer questions related to the Harmonisation of Tax Regulations Law and the derivative regulations thereto submitted to the following email address, [email protected]. Feel free to email any questions to the aforementioned email address.