Alfida Rizky Febrianna, Jakarta – The government has prepared incentives for businesses opposing the increase of entertainment tax. The government has recently imposed taxes of up to 75 percent on nightclubs, spa facilities, karaoke houses, and bars.
Lydia Kurniawati, the ministry's director of regional taxes, said that businesses can file objections to local governments to qualify for fiscal incentives.
"Under Article 99 of Government Regulation No. 35 of 2023 on Local Taxes and Local Levies, individual taxpayers can request an incentive. If there are business entities expressing objections, possibly due to their financial situation not fully recovered from the Covid-19 pandemic, fiscal incentives may be granted," said Lydia during a press conference at the Ministry of Finance Media Center on Tuesday.
The fiscal incentives involve reductions, reliefs, exemptions, cancellations, or deferments of payments on the principal tax or levy provided by regional heads.
Business owners are required to justify their request for tax incentives to the regional head by submitting a financial report. Subsequently, the head will review the report to determine the eligibility for the incentive.
The conditions to receive fiscal incentives from the regional head must be based on several considerations:
- If the business owner is unable to bear the 40 percent tariff, the regional head has the authority to provide fiscal incentives.
- If the tax object is impacted by natural disasters, fires, or other events not deliberately initiated by the taxpayer or any other party to evade tax payments.
- For micro and ultra-micro business owners, if the business falls within these categories, the Regional Head can offer fiscal incentives.
- Tax incentives are given to support regional priorities or governmental initiatives, such as aiding the government in attracting tourists to the region.
- Regional heads can even provide fiscal incentives on a mass scale to many business owners if the social and economic conditions of their region require "special treatment."
"This fiscal incentive can be implemented on a broad scale. Regional heads, whether governors, mayors, or regents, are more familiar with the conditions in their regions," Lydia said.
The new tax rates – ranging from 40 percent to 75 percent for nightclubs, discotheques, spa facilities, karaoke houses, and bars – came into effect on January 5, 2024. In contrast, taxes on other entertainment businesses were capped at 10 percent. This includes cinemas, beauty contests, art exhibitions, motor racing competitions, horse races, circuses, sports games, zoos, and massage parlors.