How to Apply for a Tax Allowance Through the OSS

CORPORATE taxpayers wishing to obtain a tax allowance must first apply through channels provided by the government. The application for a tax allowance is mainly submitted online through the online single submission (OSS) system.

However, if the OSS is not yet available, the application for a tax allowance may be submitted offline. This article describes the procedures for the application for tax allowances through the OSS.

Provisions on procedures for the application for tax allowance incentives through the OSS are stipulated under Government Regulation No. 78 of 2019 concerning Income Tax Incentives for Investments in Certain Business Sectors and/or Certain Regions (Gov. Reg. 78/2019) and the derivative regulations thereto.

The derivative regulation includes the Minister of Finance Regulation No. 11/PMK.010/2020 concerning the Implementation of Government Regulation Number 78 of 2019 concerning Income Tax Incentives for Investments in Certain Business Sectors and/or Certain Regions as amended by the Minister of Finance Regulation No. 96/PMK.010/2020 (MoF Reg. 96/2020).

On a side note, referring to Article 1 number 5 of Gov. Reg. 78/2019, OSS refers to a business permit issued by the OSS Institution for and on behalf of ministers, heads of institutions, governors or regents/mayors to entrepreneurs through an integrated electronic system

Provisions on procedures for the application for tax allowances through the OSS are outlined under Article 6 of MoF Reg. 96/2020. To obtain tax allowances, corporate taxpayers need to fulfil two provisions.

First, the corporate taxpayers must ensure that their businesses are included in certain business sectors listed in Appendix I of Gov. Reg. 78/2019 or certain business sectors and certain regions as stated in Appendix II of Gov. Reg. 78/2019.

Second, the corporate taxpayers must also fulfil the criteria and requirements to be eligible for tax allowances as outlined in the previous article. The two provisions are implemented through the OSS system.

Through the OSS system, taxpayers will be notified of whether or not the requirements and provisions to be eligible for tax allowance incentives are fulfiled. If the taxpayers are declared to have fulfiled the said requirements and provisions, they may continue to apply for tax allowances online.

Further, the taxpayers must submit 2 documents through the OSS system. First, a digital copy of the shareholders’ tax clearance certificates. Tax clearance certificate refers to information on a taxpayer’s compliance in a certain period in fulfiling the requirements to obtain services or in the context of implementing certain activities.

The definition is as per Article 1 number 2 of the Director General of Taxes Regulation No. PER-03/PJ/2019 concerning Procedures for the Granting of Tax Clearance Certificates (DGT Reg. 3/2019). Second, a digital copy of the details of fixed assets in the investment value plan.

The application that has been received in full is submitted through the OSS system to the minister of finance through the director general of taxes as a proposal to grant the tax allowance incentive. Further, the OSS system notifies the taxpayer that the application for the income tax incentive is forwarded to the minister of finance.

Pursuant to Article 6 paragraph (4) of MoF Reg. 96/2020, the application for the tax allowance incentive must be submitted before the start of commercial production. Referring to Article 1 number 7 of MoF Reg. 96/2020, commercial production commences when the products or services of the main business are sold or supplied for the first time or self-used for further production processes.

On another note, the application for a tax allowance may be submitted in conjunction with the registration to obtain a new business registration number or no later than one year after the issuance of a business permit for new investment and/or spin-off.

This concludes our discussion about how to apply for tax allowances through the OSS system. The next tax class article will discuss how to apply for tax allowances offline. (zaka/kaw)