Changes in the Income Tax Rate Scheme for Construction Services

The government issued Government Regulation No. 9/2022 on the Second Amendment to Government Regulation No. 51/2008 on Income Tax on Income from Construction Services Business. It aimed at providing legal certainty and convenience in the imposition of income tax (PPh) on income from the construction service business.

In addition, the amendment was to support a more conducive construction sector business climate and help construction sector entrepreneurs affected by the Covid-19 pandemic. The amendment includes tariff adjustments and additional categories of new income tax rates on construction services.

New Rate Scheme

Previously, the income tax rate for the construction service business was regulated in Government Regulation No. 51/2008 on Income Tax on Income from Construction Services Business. However, the government decided to amend the tax rate. The following are the applicable new tax rates:

1. 1.75% for construction work by service providers with a certificate of a small qualifying business entity or a certificate of work competence for individual businesses
2. 4% for construction work by service providers without a business entity certificate or work competency certificate for individual businesses
3. 2.65% for construction work by service providers other than the two service providers above, including service providers with medium, large or specialist business qualifications
4. 3.5% for construction consulting services  by service providers with business entity certificates or work competency certificates for individuals
5. 6% for construction consulting services by service providers without a business entity certificate or work competency certificate for individuals
6. 2.65% for integrated construction work, referring to a combination of construction work and construction consulting  by service providers with business entity certificates
7. 4% for integrated construction work by service providers without a business entity certificate.

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