Entertainment Tax Rates of 40%-75%, Business Owners Can Apply for a Tax Discount

TAX-JAKARTA. Until now, the imposition of taxes is still a debate among entrepreneurs due to the tax rate which is considered too high.

Based on Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (UU HKPD). Referring to Article 58 paragraph 2, specifically the rate of Certain Goods and Services Tax (PBJT) on entertainment services at discos, karaoke, nightclubs, bars and steam baths/spas is set at a minimum of 40% and a maximum of 75%.

In line with the mandate of the UU HKPD, local governments have also established regional regulations (perda) to implement the imposition of special entertainment tax rates for certain services. Unfortunately, many entrepreneurs protest and object to this rate, which is considered to be able to kill the entertainment business.

The Director of Regional Taxes and Regional Levies of the Directorate General of Financial Balance (DJPK) of the Ministry of Finance, Lydia Kurniawati Christyana, said that entrepreneurs can apply for fiscal incentives if they feel burdened by this rate.

The fiscal incentives referred to are in the form of reductions, relief, exemptions, elimination or postponement of payment on the principal of the tax. This is stipulated in Article 99 of Government Regulation Number 35 of 2023.

"So if at this time you are not yet able to afford the 40% rate, please based on the regional assessment reduce the principal of the tax, provide exemption or elimination from the principal of the tax," said Lydia in a Media Briefing, Tuesday (16/1).

These fiscal incentives can be granted upon the request of business actors or taxpayers or granted ex officio by the Regional Head based on several considerations. First, the ability to pay taxpayers and/or levy obligors. In this case, if the entrepreneur as a taxpayer is not yet able to afford the business set at a 40% rate, then the Regional Head can provide these fiscal incentives.

Second, certain conditions of the tax object, such as tax objects affected by natural disasters, fires, and/or other causes that occur not due to deliberate elements carried out by taxpayers and/or other parties aiming to avoid tax payments.

Third, to support and protect micro and ultra micro business actors. This means, if certain entertainment businesses that are subject to a minimum rate of 40% have a business license categorized as micro and ultra micro, then the Regional Head can provide the intended fiscal incentives.

Fourth, to support the policies of local governments (pemda) in achieving regional priority programs and/or to support government policies in achieving national priority programs.

Well, the granting of these fiscal incentives is the authority of the Regional Head in accordance with regional policies in managing regional finances.

"Providing this incentive facility must of course be assessed first if the application is from the taxpayer. If it is a regional priority, yes, please give it en masse," she said.

Referring to Article 100 paragraph (1) PP 35/2023, the granting of fiscal incentives is stipulated by Perkada and notified to the Regional People's Representative Council (DPRD). Notification to the DPRD is accompanied by the Regional Head's consideration in providing fiscal incentives.

"Further provisions regarding administration and procedures for granting fiscal incentives are regulated by Perkada," reads Article 100 paragraph (3) of the regulation.