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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.

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