Dec 17, 2007

Tax Assesment Letter

Under the self assesment system in Indonesia, every Taxpayer shall be obliged to pay tax payable pursuant to the provisions of the tax laws without waiting for the issuance of notice of tax assessment.

Principally, tax is payable when there is a taxable object, but for the purpose of tax administration, the time of tax payable is:

1. at any time, for Income Tax withheld by a third party;

2. at the end of a Taxable Period, for Employment Tax withheld by the employer, or by other party on a business activity, or by a Taxable Person for VAT Purposes on the withholding of Value Added Tax on Goods and Services and Sales Tax on Luxury Goods;

3. at the end of a Taxable Year, for Income Tax.

The amount of tax payable, which has been withheld as well as which has to be paid by a Taxpayer himself by the Taxpayer, must be remitted to the State Treasury through a post office and or a state-owned bank or a local-owned bank or other places of payment stipulated by the Minister of Finance

The amount of tax payable as stated in a Tax Return filed by a Taxpayer is the amount of tax payable pursuant to the provisions of tax laws.

If the Director General of Taxes has a proof that the amount of tax payable according to the Tax Return is incorrect, the Director General of Taxes shall determine the correct amount of tax payable by issuing tax assesment letter.

The issuance of tax assesment letter generally is based on the result of audit or other information. If the tax calculated and reported in the Tax Return is incorrect, for instance a deduction is overstated, the Director General of Taxes shall determine the amount of tax payable as it should be in accordance with the tax law.

Underpayment Assesment Letter (SKPKB)

Within ten years from the date a tax is payable, or from the end of a Taxable Period, a Fraction of a Taxable Year, or a Taxable Year, the Director General of Taxes may issue a Notice of Tax Underpayment Assessment in the following conditions:

1. based on the result of an audit or other information, a tax payable is unpaid or underpaid;

2. a Tax Return is not filed within the right period and after being warned in writing, the Tax Return is not filed within the time specified in the Letter of Reprimand;

3. based on the result of an audit of VAT and Sales Tax on Luxury Goods, it is found that a tax overpayment should not have been carried over or that the 0% (zero percent) rate should not have been applied;

4. the Taxpayer obligations of bookkeeping or in situation of tax audit have not been met, so that the amount of tax payable cannot be determined.

The amount of tax underpaid in a Notice of Tax Underpayment Assessment referred to case of number (1) shall be increased by an administrative penalty of 2% (two percent) interest per month for a maximum of 24 (twenty four) months, calculated from the date a tax is payable or from the end of a Taxable Period, a Fraction of a Taxable Year, or a Taxable Year up to the issuance of the Notice of Tax Underpayment Assessment.

The amount of tax underpaid in a Notice of Tax Underpayment Assessment referred to case (2), (3), and (4) shall be increased by an administrative penalty in the form of surcharge of:

· 50% (fifty percent) of any Income Tax unpaid or underpaid in a Taxable Year;

· 100% (one hundred percent) of any Income Tax which has not been withheld or is under-withheld, not collected or under-collected, not remitted or under-remitted, and withheld or collected but not remitted or under-remitted;

· 100% (one hundred percent) of any VAT for Goods and Services and Sales Tax on Luxury Goods unpaid or underpaid.

The amount of tax payable as shown in a Tax Return shall be final under the tax laws if, within ten years from the date the tax is payable or from the end of a Taxable Period, a Fraction of a Taxable Year, or a Taxable Year, no notice of tax assessment is issued.

If the ten year period as stated in above paragraph has elapsed, a Notice of Tax Underpayment Assessment may still be issued, along with the imposition of an administrative penalty of 48% (forty eight percent) interest of the amount of tax unpaid or underpaid in the event that a Taxpayer, after the ten year period, is convicted of a tax crime under a definite court verdict.

The Other Kinds of Tax Assesment Letter

The other kind of tax assesment letter are : Additinal Tax Underpayment Assesment Letter (SKPKBT), Nil Tax Assesment Letter (SKPN) and Overpayment Tax Assesment Letter (SKPLB). These kind of tax assesment letter will be discussed in the next posting.

Dec 13, 2007

Taxpayer's Right in Tax Return

Extension of time to file the Annual Tax Return

One of taxpayer rights is extension of time to file the annual tax return. This right is suitable for taxpayer who can’t finish the audit process during the first three month of its book year so that it must to file the annual tax return after the due date of tax return.

The Director General of Taxation may, at the request of a taxpayer, extend the period for filing an annual tax return for a maximum period of 6 months The request shal be in writing and accompanied by a statement estimating the amount of tax due for 1 (one) tax year and proof of setlement of the tax due.

The form which taxpayer should use is 1771 Y or 1770 Y (income tax) and 1721 Y for Article 21 Income Tax.

Amendment of a Tax Return

A taxpayer may on his own initiative amend a tax return that has been filed by submiting a writen statement within two years from end of a tax period, part of a tax year, or a tax year, provided the Director General of Taxation has not started an audit.

Where the taxpayer amends the tax return himself resulting in an increase in the amount month of tax due, the taxpayer wil be subject to a penalty of 2% (two percent) interest per month on the amount of tax underpaid, calculated from the filing due date of the tax return up to the date of payment resulting from amendment of the tax return.

If an audit has been done, but an investigation has not been conducted into wrong doing commited by a taxpayer, there shal be no investigation of the wrong doing of the taxpayer if the taxpayer on his own initiative discloses the erors and pays any tax underpaid along with a fine equal to twice the amount of tax underpaid.

If the period for amending a tax return as prescribed in paragraph (1) has lapsed, provided the Director General of Taxation has not issued a tax assessment, a taxpayer may on his own initiative disclose in a separate report nay inaccuracy in the completion of a tax return already filed, which causes:

i. the amount of tax payable to increase; or

ii. the loses based on the tax payable to increase; or

iii. the total assets to increase; or

iv. the total equity to increase.

Any tax underpayment arising from the disclosure of inaccuracies in completing a tax return as prescribed in article 8 paragraph (4) along with penalty of 50% of the amount of tax underpaid, shal be paid by a taxpayer before submission of the above report.

Although the period alowed for amending a tax return as refered to in paragraph (1) has lapsed and as long as the Director General of Taxation has not initiated an audit, a taxpayer may amend the annual income tax return already filed in either of these situations:

i. The taxpayer receives a Decisions Leter on an objection to a tax assessment of a previous year’s tax return and the amount of fiscal loss stated on the Decision Leter is diferent from the tax assessment; or

i. The taxpayer receives a Decision Leter on an appeal to an objection to a tax assessment of a previous year’s tax return and the amount of fiscal loss stated on the Decision Leter is diferent from the amount stated on the Decision Leter on the objection. This amendment should be done within 3 months after the Decision Leter on the objection or appeal is received. (Article 8 Law No. 16 Year 2000)

Dec 12, 2007

Income Tax Payment For Individual Taxpayer

Based on self assesment system, taxpayer should calculate the tax due in accordance with the tax regulation. The calculation is done by taxpayer in tax form or SPT (Surat Pemberitahuan). The taxpayer has to pay the tax due to the state treasury via Post Ofice and/or a Bank or any other place of payment stipulated by the Minister of Finance. The tax payment should be done by tax slip or SSP (Surat Setoran Pajak).

Payment of Article 25 Income Tax

For Monthly Article 25 Income Tax Return, the monthly tax instalment payment is due no later then 15 days from the end of the month. If the 15th is a public holiday, Saturday or Sunday, the due date is the folowing day (Article 9-paragraph (1) Law No. 16 Year 2000).
The amount of monthly instalment which should be paid by taxpayer shall be equal to the tax due according to the annual income tax return for the preceding year, deducted by income tax under Article 21, 22, 23, and 24; then divided by 12 (twelve) or the number of months for part of the tax year.
For the months before the due date of the annual income tax return (January-February), the amount of monthly Article 25 income tax shal be equal to such amount paid in the last month (December) of the preceding tax year.
For an individual taxpayer who is conducting a business or is an independent professional an has several places of business, the monthly Article 25 income tax payable in the curent tax year shal be 1 % (one percent) of the monthly gross turnover from each place of business (Section 3 of Circular Leter No.: SE-40/PJ.41/2000 dated 29 December 2000).
For a new taxpayer who is conducting a business or is an independent professional, the monthly Article 25 income tax shal be equal to the income tax liability calculated using the normal tax rate on annualized net income, divided by 12 (twelve). The amount of that net income is previously deducted by the non-taxable income threshold amount (Article2 of Minister of Finance Decree No.: 522/KMK.04/2000 dated 14 December 2000).
However, for a new taxpayer other than the above mentioned, the monthly Article 25 income tax shal be equal to the income tax liability calculated at 10% of annualized net income, divided by 12 (twelve). The amount of that net income is previously deducted by the non-taxable income threshold amount (Circular Leter Number SE-31/PJ.4/1995 dated June 21, 1995).

Payment of Annual Individual Tax Return Article 29 Income Tax

The tax underpayment based on the annual tax return should be paid by the 25th of the third month after the end of a tax year or part of a tax year, before the annual tax return is filed (Article 9-paragraph (2) Law No. 16 Year 2000).

Payment of Tax Assessment Letter

Additional payments required as a result of a Tax Colection Leter (STP), Tax Underpayment Assessment (SKPKB), Additional Tax Underpayment Assessment (SKPKBT), or Tax Corection Notice, Decision Leter on Objection or Appeal should be paid at the latest one month from the date of issuance (Article 9-paragraph (3) Law No. 16 Year 2000).

Payment of Exit Tax

An individual taxpayer who travels abroad has to pay exit tax at a counter located at each point of departure from Indonesia through land, sea, and air. The tax is paid at the counter by using an Exit Tax Form or paid at the post ofice or a bank authorized to receive tax payments on behalf of the Director General of Taxation by using tax payment slip (SSP). (Article 25-paragraph (8) Law No. 17 Year 2000).

Dec 11, 2007

Income Tax Return For Individual Taxpayer

After registering and obtaining the NPWP, a taxpayer has to file the folowing tax returns:

  1. Monthly Article 25 income tax return using tax payment slips (SSP) at the latest 20 days from the end of the month. An individual who is not conducting a business or who is not an independent professional is exempted from filing the monthly returns.
  2. Annual individual tax return (Form 1770) at the latest 3 months from the end of a tax year. The form 1770 can be obtained from the tax ofice. (Article 3-paragraph (3) Law No. 16 Year 2000).

Before completing the tax return, individual taxpayer should know this matter :

  1. Every taxpayer has to complete the tax return in Bahasa Indonesia using Latin Leters, Arabic numerals, and Rupiah curency, then sign and file it at the tax ofice where the taxpayer is registered. (Article 3-paragraph (1) and (1) a Law No. 16 Year 2000).
  2. A taxpayer has to complete and file a tax return corectly, thoroughly and clearly. The tax return has to be signed. (Article 4-paragraph (1) Law No. 16 Year 2000).
  3. Where a tax return is completed and signed by a person other than the taxpayer, a power of atorney must be atached. (Article 4-paragraph (3) Law No. 16 Year 2000).
  4. Completion of annual income tax return by taxpayers who have to maintain bookkeeping records must be accompanied by financial statements in the form of balance sheet and income statement as wel as other information required to calculate the amount of taxable income. (Article 4-paragraph (4) Law No. 16 Year 2000).
  5. For filing of 2001 annual income tax return, a taxpayer has to atach a statement of assets and liabilities (MOF Decree No. 534/KMK.04/2000 dated December 22, 2000).
  6. The filing of a tax return may be done by registered mail through the Post Ofice or by such other means as regulated by the decree of the Director General of Taxation. (Article 6-paragraph (2) Law No. 16 Year 2000).

Dec 10, 2007

General Ask Question About Indonesian Tax

What kind of tax does the Director General of Taxes (DGT) administer?

DGT administers income tax, Value Added tax, and Land and Building Tax.

Who qualifies as a Taxpayers?

Taxpayers are individual or corporation who has any tax obligation either income tax or Value Added tax.


REGISTRATION

How do I get a Taxpayer Identification Number (TIN)?

According to the decree of DGT, foreign investment corporation in field of chemical industries, non steel manufacturing industries, and other manufacturing industries that is categorized in the business groups of 35000, and 36000, and 39000 should generally register in KPP PMA Satu.

The requirement s of registration are:

-

Certification from Board of Investment (BKPM)

-

Notary deed for establishment of the corportion

-

Power of attorney if the application is signed by person who is not the authorized person in the company

Soon after the requirements are fulfilled, KPP PMA Satu will issue a Taxpayers Identification Number. The number is valid for all taxes transaction including Income tax and Value add tax.

New foreign investment corporation, however, may choose to register at the tax service office where the corporation is domiciled.

Where do I have to register if I have several branches?

Taxpayer, who has more than one place of business, branches, representatives which are located outside Jakarta, should register at each tax office which is responsible for each place of business for the purpose of withholding taxes and Value Added tax only.

When do I have to have a TIN?

Corporation and individuals that are liable to be taxed shall have TIN as an and identity for tax purposes. Single TIN will apply for both Income Tax and Withholding Tax.

Is it possible to register via internet?

In the near future, the DGT will launch E-register to make the registration process more convenient to you.

Is there any action taken by DGT id a firm, which have any obligation in VAT does not register?

The director General of Taxes may issue a Taxpayer Identification Number and or to confirm a firm as a Taxable Person for VAT purposes ex-officio in case a Taxpayer for VAT purposes does not fulfill the obligation to register.

How long does the registration process take?

The registration process will take about one working day.

Is there any fee for that service?

The registration process is free of charge.

How do I pay my tax?

The tax due can be paid by taking a payment slip (SSP) to a bank, or just asking your bank to pay with e-payment.

What is MP3?

MP3 is a tax payment-monitoring program, which enables banks or other payment points to connect directly with Directorate General of Budget and DGT on line.

What is the benefit of MP3?

MP3 is an alternative to make tax payment more convenient. This system enables taxpayer to pay tax by using various scheme that is commonly used in banking practice such as phone banking, cash management system, automated teller machine, and etc.

MP3 gives more reliability for the taxpayer to ensure that the payment is remitted to government treasury.

You are exempted from the obligation to report your installment payment of Article 25 of Income tax ( monthly corporate income tax prepayment) if you pay by using MP3 system.

When do I have to file the annual corporate tax return?

The corporate tax return should be filed not later than three months after end of a taxable year. For instance, if PT AAA has a taxable year of January – December, then the return should be filed not later than the end of March of the succeeding year.

The taxable year may vary. It depends on the accounting period of a corporation chooses his taxable year, the corporation should continue to use that period unless the accounting period of the corporation is changed.

Any changes of the taxable year is permitted if a corporation submit an application to change the period, and it will be audited by the tax office.

Who should sign the tax return for a corporation?

In case a taxpayer is an entity, the Tax Return must be signed by a member of the management or board of directors.

In case a Tax Return is completed and signed by other than the taxpayer, a power of attorney must be attached.

What should be attached to the annual tax return?

The annual Income Tax Return of a Taxpayer who is obliged to maintain bookkeeping must be accompanied by financial statements in the form of balance sheet and income statement as well as other information required to calculate the amount of Taxable Income.

What is the sanction if we fail a complete tax return?

Incomplete tax return will not be received by the tax office. As a consequence, the taxpayer will be considered as not filing the return and it will be subject to penalty according to the law of General provisions and tax procedures.

What is complete tax return?

Tax return is considered as a complete return if the information listed in the form is all fulfilled, the attachment is complete, and the return is signed by the authorized person.

How do I fulfill my tax return?

Every Taxpayer shall be obliged to complete its Tax Return in Indonesia Language, Latin alphabet. Arabic numerals, and Rupiah currency, and to sign and file it to the district tax office where the taxpayer is registered.

A Taxpayer which has obtained a permission from the Minister of Finance to use foreign language and non-Rupiah currency in its Tax Return, shall file its tax Return in the language and the currency other than Rupiah as permitted, as regulated by a decree of the Minister of Finance.

How do I file the annual tax return?

The tax return should be filed at the tax office with which the taxpayer is registered or sending it by certified delivery either through post office or courier service. If you file directly to the tax office, you will get a receipt of your filing.

If you use a post office or courier service, the documentation received from that office may be used as a filing receipt.

Failure to comply with the filing deadline will be subjected to an administrative sanction of Rp. 100,000.

Can I ask for any extension to file the annual tax return?

Timing to file the corporate tax return has a prescribed due date. However, a corporation may request an extension to file with following documents/condition:

-

Letter of request;

-

A temporary tax return (code Y);

-

An interim financial statement; and

-

Pay the estimated tax due based on the temporary tax return.

The extension is given for a maximum of six months after the end of the period of filing.

Is it possible to make any correction if an error (s) is found in my tax return?

Taxpayer my amend a filed tax return voluntarily by submitting written statement, within two years from the end of a taxable period, provided that the Director General of Taxes has not commenced a tax audit.

Is there any penalty for the increase of tax payable due to an amended tax return?

In case a Taxpayer voluntarily amends a filed tax return which result in an increase of the tax payable, the Taxpayer shall be subject to an administrative penalty of 2% (two percent) interest per month on the underpaid tax, calculating from the original due date for filing the Tax Return up to the date of payment of the underpaid tax arising from the correction of the Tax Return.

When do I have to pay the tax?

The tax due based on an annual tax return should be paid not later than the 25th of month in which to file the tax return. For instance, if the taxable year is January – December, payment should be done not later than March 25 of the succeeding year.

Due date for payment of monthly corporate income tax installment is 15 (fifteen) days from the end of a month.

What is the penalty for late payment?

If a payment or remittance of tax payable is made after the due date of the payment or remittance, an administrative penalty in the form of 2% (two percent) interest monthly, calculated from the due date of payment up to the date of payment where fraction of the month is treated as a1 (one) full month shall be imposed.

What is the statute of limitation for tax matters?

Within ten years from the date a tax is payable, or from the end of a Taxable Period, the Director General of Taxes may issue a Notice of Tax Underpayment Assessment in the following conditions:

a.

based on the result of a tax audit or other information, a tax payable is unpaid or underpaid;

b.

a tax return is not filed within certain period an after being warned in writing, the tax return is not filed within the time specified in the letter or reprimand;

c.

based on the result of a tax audit of VAT and Sales Tax on Luxury Goods, it is found that a tax overpayment should not have been carried over or that the 0% (zero percent) rate should not have been applied;

d.

the obligation to maintain bookkeeping have not been met, so that the amount of tax payable cannot be determined.

Is there any penalty for notice of underpayment issued by tax office?

The amount of tax underpaid in a Notice of Tax Underpayment Assessment shall be increased by an administrative penalty of 2% (two percent) interest per month for a maximum of 24 (twenty four) months, calculated from the date a tax is payable or from the end of a Taxable Period up to the issuance of the notice of tax underpayment assessment.

The amount of tax underpaid in a Notice of Tax Underpayment Assessment above mentioned shall be increased by 50% or 100% under certain condition.

Tax payer Identification Number (NPWP)

The Tax Identification Number (NPWP) is a number issued to taxpayers by the tax ofice to identify taxpayers and to assist them in fulfiling their tax obligations. (Article 1 - paragraph (1) Law No. 16 Year 2000). Taxpayer shal be obligated to register at the tax ofice in the district in which the taxpayer reside (Article 2-paragraph (1) Law No. 16 Year 2000) by submiting the folowing documents:
  1. Registration and change of data form
  2. Copyy of passport
  3. Copy of limited stay permit card (KITAS)
  4. Copy of work permit (for taxpayer who is an employee)
  5. Copy of tax identification number of the employer (for taxpayer who is an employee)
  6. Power of atorney (if his/her registration process is done by another party)
  7. Copy of business permit (for taxpayer who is conducting business or an independent professional)

An individual taxpayer who is an entrepreneur as mentioned in the Circular Leter of Director General of Taxation No.: SE-40/PJ.41/2000 is an individual who has several places of business activities. He/she is obligated to register in his/her place of business activities as folows:

  1. A taxpayer who has several places of business activities in one operational area of the tax ofice must register each place of business in each related tax ofice.
  2. A taxpayer who has several places of business activities located in the districts of several tax ofices must register each place of business in each related tax ofice.

How if taxpayer does not want to register? The Director General of Taxation has the authority to issue an NPWP oficialy. (Article 2-paragraph (4) Law No. 16 Year 2000)

If a taxpayer fails to register intentionaly resulting in loses to the state revenue, he/she shal be sentenced to imprisonment for period not exceeding 6 years and shal be subject to a fine for an amount not exceeding four times the tax unpaid/underpaid. (Article 39-paragraph (1) Law No. 16 Year 2000)

A taxpayer may inform the tax ofice of any change in his data (such as change of address, change of employer, etc.) by filing the registration and change of data form at the tax ofice where the taxpayer is registered.

What if the taxpayer is leaving Indonesia permanently or has applied for an Exit Permit Only to the Immigration Ofice? A taxpayer should state in writing that an Exit Permit Only (EPO) wil be forwarded to the tax ofice where he is registered, so that the tax ofice wil not issue a tax colection leter due to non filing or non payment of the monthly Article 25 income tax.

The folowing are to be atached when submiting the deregistration form (now known as registration and change of data form):

  1. Exit Permit Only (EPO)
  2. Statement from the employer stating that a taxpayer’s contract in Indonesia has ended (for a taxpayer who is an employee)
  3. Cancelation of business permit leter (for a tax payer who is conducting business or is an independent professional)
  4. Power of atorney (if his/her deregistration process is handled by another party)
  5. Original copy of taxpayer identification number card

Individual Taxpayer.

Indonesia income tax law has two kind of taxpayer : Individual taxpayer and Entity taxpayer. The difference in kind of taxpayer will lead to the diffrence in tax treatment such as tax rate, tax reporting, bookkeeping and so on.

Individual taxpayer consits of resident tax payer and non resident taxpayer. Who are resident taxpayer? They are :

  1. An individual residing in Indonesia or
  2. An individual who is present in Indonesia for more than 183 days in any 12 month period, or
  3. An individual who is present in Indonesia in a tax year with an intention to reside in Indonesia.

Non-Resident taxpayer are :

  1. An individual not residing in Indonesia or who is present in Indonesia for not more than 183 days in any 12 month period.
  2. who is conducting a business or carying out activities through a fixed based in Indonesia .
  3. who derives income from Indonesia other than from conducting business or carying out activities through a fixed based in Indonesia.

A taxpayer is an individual or a body which, pursuant to the provisions in the tax law, is required to fulfil tax obligations, including tax colection or tax withholding of certain taxes.

Introduction

There have been technological achievements, especialy in the fields of information and transportation, and improvements are continualy developing. Asa result, communication and interaction are made easier, expediting business agreements and decisions. Increased enthusiasm for globalization as wel as escalating interdependence between persons and nations provide a strong basis for growth and development of international transaction involving trade, service and investment.

Consequently, each nation and country are susceptible to influencing and being influenced by interaction and communication. From the economic perspective, al forms of protection for the benefit of a country are eliminated until goods, services, and capital flow in and out a country without obstacles (borderless economy).

Eficient global production processes with maximum output wil occur because global production resources are alocated eficiently to locations or countries which have comparative advantage. Global wealth can be atained as goods and services are purchased at relatively low prices.

Indonesian manpower wil continue to be highly mobile across national boundaries, especialy in regions where there is cross border employment. For example, many Singaporeans in Batam but live in Singapore. Further, there are many Indonesians who work overseas due to posting or to provide domestic services.

Increased international transactions in the service sector provide many benefits to Indonesia including growth in tax revenue.

Foreigners in Indonesia can be categorized as residents or non-residents depending on the length of time they stay in Indonesia and their activities. As soon as an individual becomes a resident in Indonesia for tax purposes, he/she is obligated to register at the appropriate tax ofice. In practice, many expatriates are reluctant to register, giving the reason that they have one employer and that the tax on their employment income has been withheld in accordance with paragraph 6 of article 21 of 1983 Income Tax Law, once an individual becomes a resident taxpayer, he/she is subject to tax on worldwide income, that is, income from sources within and outside Indonesia.

The issuance of amended income tax provisions in the year 2000, that is, Law Number 17 year 2000, is meant to make it clear that any individual who has become a resident should register at the appropriate local tax ofice.

After a taxpayer is registered and has a Tax ID Number (NPWP), he/she has obligations and rights as regulated by the prevailing tax provisions, for example, the obligation to pay and report monthly returns (SPT Masa) whereapplicable and annual returns (SPT Tahunan).

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