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Super Tax Deductible Regulation Update

With regards with the Super Tax Deductible incentive, Minister of Finance (MoF) has issued Regulation No. 128/PMK.010/2019 (MoF-128) relating to deduction facility to gross revenue for Organizations providing work practice, internship and/or learning activities in order to develop human resources based on certain competence which entered into force as of 9 September 2019.

Based on MoF-128, taxpayer can be granted to deduct its gross revenue with the maximum of 200% from expenses related to the activities of work practice, internship and/or learning activities. The 200%  deduction as mentioned above consist of:

  1. 100%  deduction to gross revenue on the actual expenses incurred for work practice, internship and/or learning activities; and
  2.  Additional 100%  deduction to gross revenue based on the actual expenses incurred for work practice, internship and/or learning activities as mentioned in point (1) above.
Taxpayer will be able to utilize the additional deduction as mentioned in point 2 above if they meet the requirements as below:
  1. Has carried out work practice activities, internship and/or learning activities in regards with human resources development based on certain competence;
  2. Has Co-operation agreement;
  3. Not in fiscal loss position during the fiscal year where this facility is utilized; and
  4. Has submitted the Fiscal Statement Letter (Fiscal Statement Letter is a letter issued by Tax Office in regards with the taxpayer’s obligation fulfilment during certain period).
Costs allocated for work practice, internship and/or learning activities in order to develop human resources based on certain competence which is entitled to the super tax deduction facility, includes:
  1. Provision of special physical facilities in the form of training venues along with its related expenses including electricity, water, fuel, maintenance costs, and other related costs for the purpose of implementing work practice and/or internship activities;
  2. Instructor or teacher in relation with the work practice, internship and/or learning activities;
  3. Goods and/or materials for the purpose of carrying out work practice, internship and/or learning activities;
  4. Honorarium or similar payments provided to students, college students, trainees, individuals who are not bound by the work relations with any party, educators/trainers, education staff/trainers and/or instructors who are participants of work practice and/or internship; and/or
  5. Competency certification costs for students, college students, trainees, individuals who are not bound by the work relations with any party, educators/trainers, education staff/trainers and/or instructors who are participants of work practice and/or internship by institutions who have the authority to conduct competency certification in accordance with statutory regulations. 
Please be informed that honorarium or similar payments, which are provided to participants in work practice and/or internship who are:
  • blood related family in one-degree straight line (i.e. parents and/or children);
  • business related; and/or
  • related by way of ownership or control.
Owner, commissioner, director and/or management of the Taxpayer shall not be entitled for the additional deduction. 

Additional 100%  deduction facility can be utilized as long as it does not cause fiscal loss for the relevant year. In case where the additional 100%  deduction will cause a fiscal loss position, the taxpayer will only be able to utilize some portion of the additional deduction and end up with zero fiscal profit/loss.

To obtain additional deduction facility, the taxpayer shall submit notification through the OSS system by attaching 2 documents below before the activities is started:
  • Cooperation Agreement; and
  • Valid Fiscal Statement Letter.
In case there is a problem with the OSS system, manual submission can be done via the Regional Tax Office.

Taxpayer who has utilized this deduction facility is required to submit reports on the costs of work practice, internship and/or learning activities in order to develop human resources based on certain competence on an annual basis to the Director General of Tax through the Head of the Tax Office where the taxpayer is registered at the latest along with the submission of the Annual Corporate Income Tax Return for the relevant fiscal year.

In addition, this PMK-128 also provides the list of certain competences which are entitled for this facility, further requirement on the activities and its participants and detail implementation on the facility.