AN OVERVIEW OFINDONESIA TAX SYSTEM DIRECTORATE GENERAL OF TAXES OF INDONESIA ASEAN TAX SYSTEM SEMINAR Bangkok, 16-17 September 2010
General Provision and Tax Procedure Law
TAX CYCLE(Framework of GPTP) FISCUS TAXPAYER TIN Registration Bookkeeping/Recording Payment Verification Audit Investigation Tax Reporting (Tax Return) ASSESSMENT • Objection • Appeal TAX REFUND TAX COLLECTION
FORMAL RULING STRUCTURE OF TAX LAWS LAND & BUILDING TAX INCOME TAX STAMP DUTIES VAT/STLG Other tax refer to this law EXCEPT GPTP LAW SELF REGULATED BY RELEVANT LAWS
TAXABLE PERSON • Individual • An undivided inheritance as a unit in lieu of the beneficiaries • A Corporation • Permanent Establishment
TAXABLE PERSON • Resident Taxpayer • an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia; • acorporation established or domiciled in Indonesia; • an undivided inheritance as a unit in lieu of the beneficiaries.
TAXABLE PERSON • Non-resident tax payer • an individual who does not reside in Indonesia or is present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, and a corporation which is not established or domiciled in Indonesia conducting business or carrying out activities through a permanent establishment; • an individual who does not reside in Indonesia or is present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, and a corporation which is not established or domiciled in Indonesia deriving income from Indonesia other than from conducting business or carrying out activities through a permanent establishment.
NON-TAXABLE PERSON • Certain governmental units; • A diplomatic mission; • International organizations as determined by Minister of Finance Decree; • The officials of diplomatic and consular mission or other foreign officials; • The officials of the international organization representative.
TAXABLE PERSON Related PartyTaxpayers • Capital ownership; • Management or technology control power; • Family relationship.
BASIC TAX CALCULATIONCorporate Taxable Income: • Gross Revenues A • Deductions B (-) • Net Income C • Loss carried forward D (-) • Taxable Income E General tariff (Law 36/2008): 28% and 25% starting on 2010
Taxable Income In 1 Taxable Year Tax Credit Tax Return: Income Tax Payable minus Tax Credit Income Tax Calculation At year end Settlement of Tax underpayment/overpayment BASIC MECHANISM
TAXABLE OBJECT Taxable Object is income, defined as any increase in economic capability received or accrued by a Taxpayer, originating from Indonesia as well as from offshore, in whatever name or form, that can be used to consume or to increase the wealth of the Taxpayer.
TAXABLE OBJECT Sources of Income: • income from work in connection with employment and independent personal services, such as salary, honorarium, income derived by a physician, notary, actuary, accountant, lawyer; • income from conducting business and activities; • income from capital in the form of movable or immovable property, such as interest, dividend, royalty, rent, gain on sales of property, or rights not used for the business; • other income, such as discharge of indebtedness, gift.
TAXABLE OBJECT Exclusion 1. Generally applied: • assets including cash received by a corporation, in exchange for shares or capital contribution. • dividends or distribution of profit received or accrued by resident limited corporations, cooperatives, state-owned companies, or local state-owned companies through ownership in enterprises established and domiciled in Indonesia, provided that: • dividends are paid out from retained earnings. • limited corporations and state owned companies and local state-owned companies receiving the dividends must own at least 25% of the total paid-in capital . • Object of Final Income Tax.
TAXABLE OBJECT Exclusion 1. Generally applied (Individual): • Aid, donation, including zakat and other religious donation; • Gifts; • Inheritances; • Benefits in kinds; • Payments by an insurance company to an individual; • Scholarship.
TAXABLE OBJECT Exclusion 2. Specifically applied : • contribution received or accrued by a pension fund approved by the Minister of Finance either paid by an employer or an employee. • distribution of profit received or accrued by a member of a limited partnership whose capital does not consists of shares, partnership, association, firma, or kongsi. • income received or accrued by a venture-capital company in the form of profit distribution of a joint-venture company established and conducting business or engaged in activities in Indonesia, provided that : • the investee is a small or medium-sized enterprise or engaged in activities in business sectors determined by the Minister of Finance Decree; dan • the investee’s shares are not traded in the stock exchange in Indonesia.
DEDUCTIBLES • Expenses to earn, to collect and to secure income, including cost of materials, costs in connection with employment or services including wages, salaries, honoraria, bonuses, gratuities and remuneration in the form of money, interest, rents, royalties, travel expenses, waste processing expenses, insurance premiums, administrative expenses and taxes other than income tax; • Depreciation of tangible asset and amortization of rights and other expenditures which have useful life of more than 1 (one) year; • Contributions to a pension fund approved by the Minister of Finance; • Losses incurred from the sale or transfer of properties owned and used in business or used for the purpose of earning, collecting and securing income;
DEDUCTIBLES • Losses from foreign exchange; • Costs related to research and development carried out in Indonesia; • Scholarships, apprenticeships and training expenses; • Debts which are actually uncollectible. • Certain donations.
Non-DEDUCTIBLES Article 9 Paragraph(1) Income Tax Law: • Distribution of profit in whatever name or form, such as dividends, including dividends paid by an insurance company to policyholders, and any distribution of the surplus by a cooperative; • Expenses charged or incurred for the personal benefit of shareholders, partners or members; • Formation or accumulation of reserves, except for reserve for bad debt of a bank or a finance lease, reserves in an insurance business, and reserves for reclamation costs in general mining, the terms and conditions of which shall be stipulated by the Minister of Finance Decree; • Insurance premiums for health, accident, life, dual purpose, and education insurance which are paid by an individual Taxpayer, except those paid by an employer where premiums are treated as income of the Taxpayer; • Consideration or remuneration related to employment or services given in the form of a benefit in kind, except provision of food and beverages for employees or consideration or remuneration given in the form of a benefit in kind in certain regions and in connection with employment as stipulated by the Minister of Finance Decree; • Excessive compensation paid to shareholders or other associated parties as a consideration for work performed;
Non-DEDUCTIBLES Article 9 section (1) Income Tax Law (continued…): • Gifts, aid or donations, and inheritances referred to in Article 4 paragraph (3) subparagraph a and subparagraph b, except zakat on income actually paid by a Moslem individual Taxpayer and or a resident Taxpayer other than individual owned by a Moslem to an amilzakat board or other amilzakat institutions established or approved by the government; • Income tax; • Costs incurred for the personal benefit of a Taxpayer or his dependents; • Salaries paid to a member of an association, firma, or limited partnership the capital of which does not consist of stocks; • Administrative penalties in the form of interest, fines, and surcharges, as well as criminal penalties in the form of fines imposed pursuant to the tax laws.
Non-DEDUCTIBLES Foreign Business Loss Foreign Loss must not be combined to calculate taxable income.
TARIFF • Individual Taxpayer Law 36 /2008
TARIFF Corporate taxpayer • Law 36 / 2008 28% and 25% starting on 2010
VAT Characteristics • Indirect Tax • Objective Tax 3. Domestic Consumption Tax • Multi Stage Tax • Tax Invoice Mechanism 6. Single Tariff 7. Non Cumulative
VAT Mechanism • General • Specific (VAT Withholding Agent) VAT = Output Tax – Input Tax VAT = Tariff X Tax Base
Taxable Object: Article 4 • A transfer of Taxable Goods carried out in the Custom Area by a Firm; • Importation of Taxable Goods; • Rendering of Taxable Services in the Customs Area by a Firm; • Utilisation of intangible Taxable Goods obtained from outside the Customs Area within the Custom Area; • Utilisation of Taxable Services obtained from outside Custom Area within the Custom Area; or • The export of Taxable Goods by a Taxable Person for VAT purposes. • The export of Taxable Services by a Taxable Person for VAT purposes. • The export of intangible Taxable Goods by a Taxable Person for VAT purposes.
Non Taxable Goods • Products of mining and drilling, taken directly from the source; • Daily necessities needed by public; • Food and beverages served in hotel, restaurant, and such other places; • Money, gold, and valuable documents.
Transfer of Taxable Goods: • Transfer of title over Taxable Goods under the terms of an agreement; • Transfer of Taxable Goods under a hire-purchase agreement or a leasing agreement; • Transfer of Taxable Goods to an intermediate trader or to an auctioneer; • Taxable Goods for personal use and or Taxable Goods provided free of charge;
Transfer of Taxable Goods: • Taxable Goods and assets originally acquired not for sale, which remain available at the time of dissolution of the company, provided Value Added Tax on the acquisition of such assets may be credited in accordance with the rule; • Transfer of Taxable Goods from a head office to a branch or vice versa and supply of Taxable Goods between branches; • Transfer of Taxable Goods by consignment. • Transfer of Taxable Goods under syariah leasing agreement
Transfer of Taxable Goods; exclusion: • Transfer of Taxable Goods to a broker referred to the Commercial Law; • Transfer of Taxable Goods as collateral for loans; • Transfer of Taxable Goods referred to paragraph (1) subparagraph (f) where a Taxable Person for VAT purposes has obtained permission to centralise payment of tax payable. • Transfer of Taxable Goods for the purpose of merger, consolidation, expansion, acquisition of companies. • Taxable Goods and assets originally acquired not for sale, which remain available at the time of dissolution of the company, provided Value Added Tax on the acquisition of such assets may not be credited.
Non Taxable Services • Healthcare; • Social welfare; • Postal delivery; • Financial services; • Insurance services; • Religion services;
Non Taxable Services • Education; • Culture and entertainment which has been imposed by entertainment tax; • Broadcasting, not include advertising; • Shipping and inland public transportation;
Non Taxable Services • Manpower; • Hotels; • Rendering of services by the government in efforts to run the government in general; • Parking Services; • Coin public phone; • Money Delivery by Post Office; • Catering services.
Taxable Object: Article 16 C Self-construction activities • conducted outside the course of business or work • For living / business purpose • Area of 300m2 or more
Taxable Person Firm: Firm is an individual or anentity which in the course of business or work: • produces goods, • imports goods, • exports goods (including intangible goods), • engages in trading activities, • utilizes intangible goods obtained from outside the Customs Area, • provides business services (including exporting services), or • utilizes services obtained from outside the Customs Area
Taxable Person Firm: • Taxable Person for VAT purposes Include: • A firm who intends to deliver Taxable Goods/Services • Joint Operation 2. Small firms: Turnover in a year does not exceed Rp600 mil
Taxable Person Obligation: • To report its business activities to be registered as a Taxable Person for VAT purposes; • To withhold, • To pay and • To report Value Added Tax and Sales Tax on Luxury Goods which is payable;
Taxable Person Related Party TP: • where a Firm owns direct or indirect participation of 25% (twenty-five percent) or more in another firm; likewise, between two or more firms where there is direct or indirect participation of 25% (twenty-five percent) in each of those firms by another firm; or • a Firm has control over another firm, through management or technology; or • there exists a family relationship either through blood-line or through marriage within one degree of direct or indirect lineage.
Tax Base • Sales Price on transfer of Taxable Goods, • Consideration on transfer of Taxable Services, • ImportValue on the import of Taxable Goods, • Export Value on the export of Taxable Goods, • Other Value as may be determined by the Minister of Finance Decree.
VAT Tariff • The Value Added Tax rate is 10% (ten percent) • The Value Added Tax rate on the export of Taxable Goods or Taxable Services is 0% (zero percent)