Regional Round-Up: Indonesia Q4 2021 (Year in Review Edition)

Looking Back: 2021 and Gazing Into: 2022

Looking Back: 2021

2021 marked a year of recovery for Indonesia, both economically and in terms of combating the spread of COVID-19 through increased vaccination rates and imposition of social lockdowns. There was also a major structural change in the legal sphere, as the Government issued 49 implementing regulations to the Omnibus Law. These regulations govern various topics from employment to investment.

Indonesia also continues to expand digitally, with key regulators such as Bank Indonesia and the Financial Services Authority (“OJK“) issuing regulations on previously unregulated spheres like digital banking.

Lastly, the Government adopted a sweeping reform on tax by enacting the Harmonised Tax Law and the updated Indonesia-Singapore Double Taxation Agreement.

Gazing Into: 2022

At the end of 2021, just one year after the Government enacted the Omnibus Law (“Law“), the Indonesian Constitutional Court declared the Law as “conditionally unconstitutional”. While the Law and its implementing regulations will remain effective until November 2023, the Government will have to revisit and amend certain procedural flaws in the Law. Failure to do so may cause the Law to be deemed unconstitutional. We expect that the Government will use maximum effort to preserve the changes brought by the Law.

Meanwhile, the plan to move Indonesia’s capital city from Jakarta to Borneo by Q1 2024 is still going ahead. We expect that the bill on the new capital city, which will form the legal basis for the relocation, will be passed soon.

On energy transition and electric vehicles, the Government recently issued a new carbon tax regulation, which marked the beginning of the shift towards a more environmentally-friendly regime. We expect that more policies will be issued this year and the following years to ensure that Indonesia can achieve its targeted carbon neutrality (which in itself is very ambitious).

Lastly, we are looking at the second tax amnesty in 2022 as part of the Harmonised Tax Law. There are no details yet of the target and timing.

Full Report

Click on the link below for the full report which provides summaries of the key legal developments related to the above areas.

Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice

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