The Indonesian Government has issued a new rule for Income Tax or Pajak Penghasilan (“PPh”) for construction services, namely Government Regulation No. 9 of 2022 concerning the Second Amendment to Government Regulation No. 51 of 2008 concerning Income Tax on Income from Construction Services Business (“GR 9/2022”).
The classification and scope of construction services have changed, as have the final PPh rates imposed. The imposition of final PPh on construction services is limited to only three years. Promulgated on February 21, 2022, GR 9/2022 amends the provisions of Government Regulation No. 51 of 2008, and its first amendment is in Government Regulation No. 40 of 2009.
The following are several provisions that have changed with the issuance of GR 9/2022:
Article 10D of GR 9/2022 limits the imposition of final income tax for construction service businesses to only three years, which applies from the promulgation of GR 9/2022 and only for contracts made after the date of the enactment. In the previous government regulation, there was no time limit for the imposition of this final PPh.
In the third year of implementation of GR 9/2022, an evaluation will be carried out to consider the principles of justice and equality. From the evaluation results of these considerations, PPh for construction services may be subject to general provisions as stipulated in Article 17 of the Income Tax Law.Classification of construction services
GR 9/2022 changes and clarifies the classification of construction services into:
- Construction consulting service classification for general nature;
- Construction consulting service classification for specialist nature;
- Construction work classification for general nature;
- Construction work classification for specialist nature; and
- Integrated construction work classification.
Of the five classifications, construction service business activities are categorized into three scopes:
- Construction consultancy includes services in whole or in part activities that include assessment, planning, design, supervision, and management of the implementation of the construction of a building.
- Construction work, including the construction, operation, maintenance, demolition, and rebuilding of a building.
- Integrated construction work includes a combination of construction work and construction consulting services, including the integration of service functions in the planning, procurement and development integration model, as well as the planning and development integration model.
In GR 9/2022, construction supervision services are included in construction consulting service business activities.
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Author: Dewi Susanti