Government Regulation (PP) No 46 Year 2013 Established: June 12, 2013 Enacted: June 13, 2013 Effective on : July

1, 2013 Conclusion: 1. Personal or Corporate Taxpayer (excluding Permanent Establishment) with income from business (excluding income from the independent service, income which is an object of 1% final income tax) less than Rp 4,8 billion in one fiscal year is taxed with 1% final income tax.

2. Personal Taxpayer who shall not be taxed with 1% Final Income Tax: a. Personal Taxpayer who engages in the business activities of trading and/or servicing by using assembled tools or infrastructure (both permanent and non permanent) and uses partially or wholly public locations which are not intended for business or trading. For example: a mobile food trader, hawkers, stall tent on the sidewalk, etc. b. Corporation which has not operated commercially or within 1 year after operating commercially obtained business gross income > Rp. 4.8B.

3. The imposition of 1% final income tax is based on gross income from business operation within 1 year of the previous fiscal year prior to current fiscal year. For example : PT A has gross income during 2013 (Jan-Dec 2013) of Rp. 4B, so that for 2014, PT A shall be taxed with 1% Final Income Tax because during the fiscal year 2013 PT As income is less than Rp. 4,8B. 4. Determination of the Gross Income as tax base of 1% final income tax for new registered taxpayers is: a. If the previous year prior to current fiscal year, when this PP is effective, is less than 12 months, then the gross income from previous fiscal year should be annualized. b. If the taxpayer is registered in the same year when the regulation is effective, on the previous month prior to this regulation is becoming effective, then the gross income amount is calculated from the month when taxpayer is registered to the month when this regulation is effective For example: PT A was registered 3 months before July 2013. Total gross income during 3 months is Rp 150.000.000. Gross Income during 3 months should be Annualized to Rp 150.000.000 x 12/3 = Rp 600.000.000. Since annualized gross income in 2013 is less than Rp. 4,8B, then the income received from July 2013 shall be taxed with 1% final income tax. c. If new taxpayer is registered after the effective date of this regulation, then the gross income is calculated on the first month when income was obtained, annualized. For example: PT AS book year is the same with fiscal year. It was registered as Taxpayers on August 2013. The gross income on August 2013 is Rp 150.000.000. Then the annualized gross income in 2013 is : Rp 150.000.000 x 12/5 = Rp 360.000.000. Since the annualized gross income in 2013 is less than Rp. 4.8B, then the income in 2013 shall be taxed with 1% final income tax. 5. If tax payers cumulative gross income in a month is more than Rp. 4,8B in one fiscal year, then it shall be taxed using the rate as mentioned above (according to analysis number 3) until the end of fiscal year.

For example: from the example number 3, in January to October 2014 PT A has gross income at the amount of Rp. 5B, then on the income up to December 2014 it still shall be taxed with 1% final income tax. 6. If gross income is more than Rp. 4,8B in one fiscal year, then the income in following fiscal year will be taxed according to the general tax rate of Income Tax Law (UU PPh). For example: from example number 3 and 4, since PT As gross income in 2014 is Rp. 5B (Rp. > 4,8B), thus the income in 2015 shall be taxed with general Income tax rate according to Income Tax Law. 7. The Tax Base of 1% Final tax income is the monthly gross income. For example: On August 2014, PT A obtains income from business at the amount of Rp. 50 million, thus the final income tax payable for August 2014 is: 1% x Rp 50.000.000 = Rp 500.000. 8. Taxpayer who is subject to final income tax based on this regulation and performs bookkeeping can compensate the loss with income which is not an object of the final income tax by the following conditions: a. The loss starts being compensated from the following Fiscal Year. b. Fiscal year when this Final Income Tax is effective is counted as a part of a period as referred in paragraph a. c. Loss in a fiscal year when Final Income Tax is effective can not be compensated in the following fiscal year(s).

This Government Regulation (PP) is effective on July 1, 2013.