Summary of Tax Regulation (July)

Summary of Tax Regulation

28/PJ./2008, Requirements and Procedure for Issuance of Permit for Use of Book Value on Transfers of Assets in Merger, Acquisition or Business Expansion

Taxpayers conducting merger may use book value. Particularly for taxpayers conducting business expansion, those allowable to use book value are: a) non go public companies that shall conduct Initial Public Offering (IPO); or b) go Public companies whose all of business entities resulted from their business expansion conducts IPO. The recipients of assets under merger/the parties transferring assets under business expansion should: 1) file an application to the Director General of Taxes through the Head of Regional Office of the Directorate General of Taxes administering the tax office at which the said taxpayers are registered, within a maximum of 6 (six) months after the effective date of merger of business expansion; 2) settle all tax dues of every business entities related; and 3) fulfill business purpose requirements. The application letter to be filed should: a) conform to the Appendix I of this Regulation; b) be enclosed with a statement letter regarding the reason and objective of merger/business expansion and completed with the supporting documents as referred to in the Appendix II of this Regulation; and c) be enclosed with the questionnaire and statement letter in relation with the business purpose requirements based on the format of the Appendix III of this Regulation. Within a maximum of 1 (one) month since the application is completely received, the Head of Regional Office of Directorate General of Taxes on behalf of the Director General of Taxes shall issue a Decision Letter. If the said period elapses and no decision is issued, the application shall be considered to be accepted and the Decision of Approval shall be issued. The settlement of all tax dues should be made by the party transferring assets and the party receiving assets, including tax dues from branches/representatives registered at the local Tax Office. Taxpayers is considered to fulfill the business purpose requirements if: a) the main objective of the merger and business expansion is to create strong business synergy and to strengthen the capital structure as well as not to conduct tax avoidance; b) the business activities of the taxpayer transferring the assets still continues up to the effective date of merger; c) the business activities of the taxpayer transferring the assets prior to the merger should still be continued by the taxpayer receiving the transfer of assets at a maximum of 5 (five) years after the effective date of merger; d) the business activities of the taxpayer receiving the assets under merger should still continue at a minimum of 5 (five) years since the effective date of merger; e) the business activities of the taxpayers receiving the assets under business expansion should still continue at a minimum of 5 (five) years after the effective date of business expansion; and f) the assets owned by the taxpayer receiving the assets after merger/business expansion cannot be transferred by the said taxpayer at a minimum of 2 (two) years after the effective date of merger/business expansion. If the taxpayer receiving the assets conducts disposal of assets previously owned by the taxpayer transferring the assets before exceeding the 2 (two) year period after the effective date of merger/business expansion, the said taxpayer should file a written statement affirming that the asset is sold for the company’s efficiency including the supporting evidence to the Head of Regional Office of Directorate General of Taxes at which the taxpayer receiving the asset is registered within a maximum of 1 (one) month after the asset disposal. For a maximum of 1 (one) year after obtaining the approval of the Director General of Taxes to conduct asset transfer using book value, the taxpayers conducting business expansion and planning to sell their shares in the stock exchange should already file a listing application to the Capital Market Monitoring Board (Badan Bapepam-LK) in relation to the IPO and the statement of listing has already become effective. The said period may be extended to a maximum of 2 (two) years due to force de majeure under the approval of the authorized head of regional office of Directorate General of Taxes. If the said taxpayer still cannot conduct the IPO after the 3 (three) year period elapses, the period can be extended for a maximum of 1 (one) year after obtaining an approval from the Director General of Taxes. If within 5 years the Director General of Taxes through examination or tax audit finds evidence that the merger/business expansion does not fulfill the business purpose requirement and/or the taxpayer receiving the asset conducts disposal of asset previously owned by the taxpayer transferring the asset, the value of asset transfer under the merger/the business expansion based on the book value shall be recalculated based on the market price. To the taxpayer conducting the merger or the business expansion, the Head of Regional Office of the Directorate General of Taxes on behalf of the Director General of Taxes shall issue Decision of Revocation of Approval Letter. Based on the tax audit result and the Decision of Revocation, the Director General of Taxes shall issue Tax Assessment Notice.

PER-24/PJ./2008, Annual Corporate Income Tax Return and Annual Individual Income Tax Return including the Manual of Filling

Annual Income Tax Return to be filed by corporate taxpayers using Indonesian Rupiah currency is Form Number 1771 and its appendixes whereas for taxpayers using US Dollar currency, it is Form Number 1771/$ and its appendixes. There are 3 (three) types of Tax Return that may be filed by individual taxpayers, 1) Form no. 1770 and its appendixes, under the requirements that: a). income is from business/independent work maintaining bookkeeping/Net Income Calculation Norm; b). income is from one or more than one employer; c). Income is subject to Final Income Tax and/or is Final; and/or d). its other Income; 2) Form No. 1770 S and its appendixes, under the requirements that: a). income is from business/more than one employer; b). it is other domestic income ; and/or c). income is subject to Final Income Tax and/ or is Final; and 3) Form no. 1770 SS, under the requirements that income is only from one employer with gross amount not more than IDR48,000,000,00 per annum and no other income obtained, except for interest income from bank and/or cooperative. Form no. 1721-A1 and/or 1721-A2 is integrated part of the Form no. 1770 SS. The Regulation of Director General of Taxes is applied for the 2008 Annual Income Tax Return and the subsequent years. The format and filling manual of each tax return can be found in the appendixes of this Regulation.

66/PMK.03/2008, Procedure of Filing or Revision of Tax Return, and Requirement of Taxpayers for Obtaining Administrative Sanction Annulment in relation to Implementation of Article 37A of Law Number 6 Year 1983 on General Tax Provisions and Procedure as lastly amended with Law Number 28 Year 2007

Individual Taxpayers who voluntarily obtain Taxpayer Identification Number in 2008 and file Annual Income Tax Return of the tax year 2007 and the previous tax year, may be granted annulment of interest on unpaid/underpaid tax. However, the related taxpayers should meet the following requirement: 1) Not being under Examination of Preliminary Evidence, Investigation, Law Suit/Examination at the Court in taxation area; 2) Filing Annual Income Tax Returns of year 2007 and the previous years (including those related to payments of Income Tax Article 29, Article 4 paragraph (2) and Article 15 solely paid and reported in annual tax return) at the latest on 31 March 2009; 3) the taxpayers settles underpaid tax related to the tax return filed, prior to the tax return filing. In addition, taxpayers who in 2008 file revisions to Individual/Corporate Income Tax Return resulting in bigger tax due to be paid, annulment of interest sanction due to late payment of underpaid tax shall also be granted with the criteria as follows: a) Tax ID Number is owned prior to 1 January 2008; b) the revised tax return has not yet been subject to tax audit/ already subject to tax audit but the Tax Audit Result Notification has not been submitted; c) The taxpayer is not under Tax Audit on Preliminary Evidence, investigation, lawsuit/examination of criminal act in taxation area/the taxpayer is under tax audit on preliminary evidence but it is not continued up to investigation; d) tax assessment notice has not been issued on the revised tax return; e) the annual tax returns of 2006 and of the previous years have been filed at the latest on 31 December 2008; and f) all underpaid taxes due to Annual Income Tax Return filing are settled prior to the filing. In the event that the taxpayer revises the tax return under tax audit covering other taxes: a) the tax audit will be discontinued except for tax audit on tax return of other taxes stating overpaid balance; or b) the tax audit will be continued under the consideration of the Director General of Taxes. Further, in the event that the taxpayer revises the Annual Income Tax Return which is not under tax audit but the tax return of other taxes for the same period is under a tax audit: a) the tax audit will be discontinued except for tax audit on tax returns of other taxes stating overpaid balance; or b) the tax audit is still continued under the consideration of the Director General of Taxes. Furthermore, in case the revised tax return stating overpaid balance, the revision of Annual Income Tax Return will be treated as revocation of refund application of tax overpayment as stated in the revised tax return. Either for voluntary Tax ID Number registration or annual tax return revision, no tax audit will be conducted on the tax return filed unless there is data/information stating that the tax return filed is untrue or the tax return filed by the individual taxpayer voluntarily registering for Tax ID Number states overpaid tax/loss. Further, the data and information stated in the tax return filed cannot be used to base tax assessment notice of other taxes.

26/PJ./2008, Procedure for Handling of Taxpayers with Taxpayer ID Number with Double User

Upon taxpayers having same Taxpayer ID Number with other taxpayers and taxpayers with the status of branch or wife, new taxpayer ID Numbers shall be issued by the Tax Office where the taxpayers are registered at a maximum of 5 (five) working days after the Director General of Taxes decision of new taxpayer ID number for replacement, by issuing: a) New Taxpayer ID Number card and Certificate of Registration; and b) Letter of Appointment of VAT-registered Person, for taxpayers appointed as VAT-registered Person. The new taxpayer ID Numbers becomes effective since the date of issuance and all tax rights and obligations should be performed using the new taxpayer ID number, including Decision Letter/Tax Assessment Notice/Tax Collection Letter/Certification/Overbooking/other tax administration products issued by the Directorate General of Taxes. The tax rights and obligations already performed, as well as tax data and information including tax administration products issued by the Directorate general of Taxes using the old Taxpayer ID Numbers prior to the issuance of the new ones are still valid so long as the prevailing tax regulations are fulfilled. The taxpayers may use the old tax forms, standard tax invoices and withholding slips with the old taxpayer ID numbers until the end of the third month at a maximum after the month of the new taxpayer ID number issuance. During the three month period, the provisions regulate that: a) tax documents issued/received with the old taxpayer ID numbers by taxpayers shall still be considered valid; b) tax invoices issued by the taxpayers with old taxpayer ID numbers and continuing the previous serial numbers may still be considered valid and creditable for the VAT-registered Person recipients; c) Tax Withholding/Collection Slips issued by the taxpayers using the old taxpayer ID numbers are still valid and creditable for the recipients; and d) documents related to crediting received by the taxpayers with the old taxpayer ID numbers are still considered valid and creditable, so long as the prevailing tax regulations are fulfilled.

Taxpayers conducting business expansion, allowable to use book value are:

a. non go public companies that shall conduct Initial Public Offering(IPO); or

b. Go Public companies whose all of business entities resulted from their business expansion conducts IPO.

Regulation of Director General of taxes Number PER-28/PJ./2008, dated 19 June 2008.

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