Government Introduces 5 Relaxations for First Year of Global Minimum Tax
Oleh: Arif Azmi Rianto dan Muammar Aldy Widiarto
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The implementation of the 15% global minimum tax, in accordance with Minister of Finance Regulation (PMK) Number 136 of 2024, is ensured not to burden multinational enterprises covered by the Global Anti-Base Erosion (GloBE) Rules. This is because relaxation clauses have been provided, particularly in Chapter XIV of the regulation, which takes effect on January 1, 2025.
In essence, the GloBE provisions regulated in PMK 136/2024 require multinational enterprises (MNEs) that are part of a business group to meet certain criteria to comply with GloBE provisions, including the Income Inclusion Rule (IIR), Undertaxed Payment Rule (UTPR), and Domestic Minimum Top-up Tax (DMTT).
The criteria for MNEs subject to the GloBE mechanism include having an annual gross revenue of EUR 750 million in at least two of the four tax years preceding the analyzed tax year.
To prevent taxpayers from being overly burdened in complying with these provisions, five relaxations will be granted in its implementation. First, relief in setting deferred taxes when calculating the effective tax rate. Second, exemption from UTPR. Third, an extension for submitting the GloBE Information Return (GIR). Fourth, an extension for submitting the annual tax return related to GloBE implementation. Fifth, exemption from administrative sanctions.
Read: Indonesia to Officially Implement Global Minimum Tax Starting 1 January 2025
Recording of Deferred Tax Assets and Liabilities
Multinational Enterprises (MNEs) that meet the GloBE requirements must account for deferred tax assets and deferred tax liabilities in the financial accounts of their constituent entities within a country/jurisdiction during their first tax year. This is intended to determine the adjusted covered taxes.
A deferred tax asset represents the amount of income tax that can be credited in future periods. This arises due to several factors, such as deductible temporary differences, accumulated tax losses that have not yet been compensated, and unused tax credits, in accordance with tax regulations.
Meanwhile, deferred tax liability is the amount of income tax payable in future periods due to taxable temporary differences.
Read: PMK 136/2024: Safe Harbour Provisions in the Transitional Period of GloBE Rules
Calculation of Deferred Tax Assets and Liabilities
In calculating deferred tax assets and deferred tax liabilities, the lower rate between the Minimum Rate (15%) and the applicable domestic tax rate is used.
Meanwhile, deferred tax assets are calculated using the minimum rate in the effective tax rate calculation if they are recorded at a domestic tax rate lower than the minimum rate and attributed to GloBE losses.
Exception for Financial Account Adjustments
Deferred tax assets arising from transactions occurring after November 30, 2021, must be excluded from the calculation.
Additionally, for the transfer of assets (excluding inventory) between constituent entities within an MNE group after November 30, 2021, and before the first day of GloBE implementation, the transferred assets must be recorded at their book value in the financial accounts of the transferring entity. Meanwhile, the deferred tax assets and deferred tax liabilities of the transferred assets must be included in the covered tax calculation based on the book value of the assets.
Read: Understanding UTPR in PMK 136/2024: A Proportional Additional Tax Mechanism
UTPR Exemption
The additional tax under the UTPR allocated to Indonesia is set at zero if the MNE Group meets the following two conditions:
1. It has constituent entities in no more than six countries/jurisdictions; and
2. The total net book value of tangible assets from all constituent entities across all countries/jurisdictions does not exceed EUR 50 million.
The total net book value of tangible assets excludes the net book value of tangible assets from the reference jurisdiction, which is the country/jurisdiction with the highest net book value of tangible assets within the MNE Group.
However, these conditions do not apply five years after the first day the MNE Group falls under the scope of the GloBE rules. For MNE Groups already within the scope of GloBE when the rules take effect, the five-year period begins when the UTPR provisions come into force.
Exemption from GIR Submission
In the first year that an MNE Group falls within the scope of the GloBE rules, the standardized GloBE Information Return (GIR) must be submitted no later than 18 months after the end of the Fiscal Year. In subsequent years, the GIR must be submitted no later than 15 months after the end of the Fiscal Year.
For example, PT ABC (with a January-December fiscal year) in the 2025 Fiscal Year is entering the scope of the global minimum tax.
Thus, for the 2025 Fiscal Year, PT ABC must submit the GIR no later than June 30, 2027. Subsequently, for the 2026 Fiscal Year, the GIR must be submitted no later than March 31, 2028. The same applies to the submission deadlines in the following years.
An extension for tax returns related to the implementation of GloBE, which includes the GloBE Corporate Income Tax Return, DMTT, and UTPR, may be granted for two months in the first year of its implementation.
Sanction Exemption
The administrative sanction exemption period for entities reporting the GIR covers all Fiscal Years that begin on or before December 31, 2026, up to the Fiscal Year ending on June 30, 2028.
