Draft Government Regulation on Income Tax Reconstruction for Authors’ Royalties Under Preparation

The Ministry of Creative Economy/Creative Economy Agency (“Ekraf”) is currently preparing a Draft Government Regulation (RPP) concerning the Reconstruction of Income Tax (“PPh”) on Royalties for Authors. The regulation is intended to replace the current 15% gross withholding tax rate under Article 23 PPh, with the aim of supporting the literacy ecosystem and reducing the tax burden on creators.

“The preparation of RPP on the Reconstruction of PPh on Royalties for Authors is expected to create a more conducive environment in which authors can work with greater peace of mind, without being burdened by tax uncertainty, while continuing to make positive contributions to the national creative economy,” said Yuana Rochma Astuti, Director of Digital Content at the Ministry of Creative Economy, to Hukumonline.

One of the schemes being promoted is the Pre-Tax Creative Reinvestment model. Rather than merely reducing the current 15% gross tax rate to a lower single rate, the new paradigm under consideration is a tax exemption (0%) on royalties, allowing authors to reinvest such income into research for future books, literacy training programs, or the development of intellectual property (“IP”) into other forms of adaptation.

“The proposal is still under internal discussion, and input is still being gathered from academics,” she added.