Summary of Tax Regulation (August)

Summary of Tax Regulation

PER-27/PJ/2008, Procedure of Filing, Administration and Revocation of Administrative Sanction in relation to Annual Income Tax Return of Individual Taxpayer for Tax Year 2007 and the Previous Years, and in relation to Revision of Annual Income Tax Return of Individual or Corporate Taxpayer for the Years prior to Tax Year 2007

Individual Taxpayers who voluntarily register themselves for Taxpayer Identification Number within tax year 2008 and file their Annual Individual Income Tax Return of tax year 2007 and the previous years, annulment of interest on unpaid/underpaid tax shall be granted. However, they should meet the requirements as follows: a) Not under preliminary evidence examination, investigation, law suit/examination at the Court due to criminal act in taxation; b) Submitting the Annual Individual Income Tax Return of tax year 2007 and the previous years starting since fulfilling the subjective and objective requirements at the latest on 31 March 2009; and c) Settling all underpaid taxes due to filing of Annual Income Tax Return using Tax Payment Slip prior to the filing of the related return. The tax return filed uses the form of Annual Individual Income Tax Return of the related tax year and in the middle upper part of the main form and the appendixes is stated “SPT berdasarkan Pasal 37A UU KUP”. The tax return is filed to the office of the Directorate General of Taxes at which the related taxpayer is registered enclosed with the Tax Payment Slip sheet no.3. Data and/or information stated in the tax return cannot be use as a basis for issuing tax assessment notice of other taxes. Further, for Individual or Corporate taxpayers which prior to 1 January 2008 has owned taxpayer ID Numbers and in year 2008 make revision to their Annual Individual/Corporate Income Tax Return of the tax year prior to tax year 2007 which results in bigger tax to be paid, annulment of interest due to late payment of underpaid tax shall be granted. The revision as mentioned refers to revision of Annual Income Tax Return which is firstly submitted in year 2008. However, the following are the requirements that should be fulfilled: a). Upon the revised tax return, no tax assessment notice has been issued; b). Upon the revised tax return, no tax audit has been conducted/ in case it is being audited, the tax auditor has not yet rendered the notification of tax audit findings; c) No preliminary evidence examination, investigation, law suit/examination at the Court due to criminal act in taxation is conducted on the related taxpayer; d) In case of Preliminary Evidence Examination has been conducted, it is not continued with an investigation due to no evidence of criminal act in taxation is found. ; e) The revised annual tax return of tax year 2006 and the previous tax years are filed at the latest on 31 December 2008; and f) The related taxpayer settles all underpaid taxes due to filing of Annual Income Tax Return using Tax Payment Slip prior to the filing of the related return. The tax return filed uses the form of Annual Individual Income Tax Return of the related tax year and in the middle upper part of the main form and the appendixes is stated “Pembetulan berdasarkan Pasal 37A UU KUP” or “SPT berdasarkan Pasal 37A UU KUP”. The Tax Payment Slip sheet no. 3 should be enclosed as the required appendix of a tax return. The revised tax return is submitted to the office of the Directorate General of Taxes at which the related taxpayer is registered. In the event that the revised tax return states an overpaid balance, the revision shall be considered as cancellation of refund application of tax overpayment as stated in the revised tax return. Data and/or information stated in the revised tax return cannot be use as a basis for issuing tax assessment notice of other taxes. If a taxpayer makes a revision to the annual income tax return but the tax audit is being conducted and covers other taxes, the tax audit on all type of taxes is discontinued, except for tax audit on the Annual Employee Income Tax Return (Income Tax Article 21) and/or Periodic VAT return stating overpaid tax/ tax audit on tax returns of other taxes which are based on the consideration of the Director General of Taxes should still be continued. If there are no Annual Employee Income Tax Return (Income Tax Article 21) and/or Periodic VAT return stating overpaid tax/ tax audit on tax returns of other taxes which are based on the consideration of the Director General of Taxes should still be continued, discontinuance of tax audit is made on all types of taxes. However, if there is a Annual Employee Income Tax Return (Income Tax Article 21) and/or Periodic VAT return stating overpaid tax/ tax audit on tax returns of other taxes which are based on the consideration of the Director General of Taxes should still be continued, discontinuance of tax audit shall only be conducted on tax return which does not state overpaid tax/tax audit on tax returns of other taxes which are based on the consideration of the Director General of Taxes should not be continued by issuing Summarized Tax Audit Finding Report in writing to the related taxpayer. In the event that a taxpayer makes a revision to his/her annual income tax return which is not under a tax audit but his/her tax return of other taxes for the same period is being audited, the tax audit is discontinued and a written notification is given to the related taxpayer, except for: a) tax audits on tax returns of other taxes stating overpaid tax; or b) tax audits on tax returns of other taxes which is under the consideration of the Director General of Taxes should still be continued. Other provisions are as follows: 1) Annulment of interest due to the sunset policy is made without issuance of Tax Collection Letter. The Annual Individual Income Tax Returns of tax year 2007 and the previous years submitted by individual taxpayer voluntarily registering themselves for taxpayer ID number in 2008, which are submitted after 31 December 2007 up to the promulgation date of this Regulation can be treated as Annual Income Tax Return under Article 37A of Law on General Tax Provisions and Procedure; 2) Taxpayers who prior to 1 January 2008 have owned Taxpayer ID No and up to 31 December 2008 have not yet submitted the Annual Income Tax Return from the tax years prior to tax year 2007, may submit the Annual Income Tax Return from the previous years before the tax year 2007. The returns from the previous years before tax year 2007 which is filed in year 2008 is treated as revision of the 2007 Annual Income Tax Return; 3) Taxpayers voluntarily obtaining Taxpayer ID No in 2008 and have submitted the 2007 Annual Income Tax Returns and the Annual Income Tax Return from the previous years after 31 December 2007 up to the promulgation date of this Regulation, may submit a revision of the Annual Income Tax Return from the previous years before the tax year 2007 under Article 37A of Law on General Tax Provisions and Procedure for one time after the promulgation date of this Regulation up to 31 December 2008; and 4) taxpayers who have owned Taxpayer ID No prior to 1 January 2008 and have submitted a revision of the Annual Income Tax Return from the tax years prior to tax year 2007 after 31 December 2007 up to the promulgation date of this Regulation, may submit a revision of the Annual Income Tax Return from the previous years before the tax year 2007 under Article 37A of Law on General Tax Provisions and Procedure for one time after the promulgation date of this Regulation up to 31 December 2008. This Regulation becomes effective since 01 January 2008.

51 Year 2008, Income Tax on Income from Construction Service

Income from construction service is now subject to Final Income Tax at the tariff of: a). 2% for Construction Management conducted by the Service Provider with the small scale business qualification; b). 4% for Construction Management conducted by the Service Provider having no business qualification; c). 3% for Construction Management conducted by the Service Provider other than those with small scale business qualification and other than those having no business qualification. Service Provider as referred to in point a and b; d). 4% for Construction Planning/Supervisory conducted by Service Provider having business qualification; and e). 6% for Construction Planning/Supervisory for Service Provider having no business qualification. If the Service Provider is a Tax Withholder, the Final Income Tax is withheld by the Service Provider at the payment time. If the Service Provider is not a Tax Withholder, the Final Income Tax is solely paid by the Service Provider. Income Tax amount withheld/paid constitutes: a) Total payment, exclusive of VAT, imposed with Income Tax Tariff; or b) Total receipt of payment, exclusive of VAT, imposed with Income Tax tariff (in case Income Tax is paid solely by the Service Provider). The total payment is part of the Contract Value of Construction Service. If the Service Provider is a Permanent Establishment (PE), the Final Income Tax Tariff does not include Branch Profit Tax (BPT) after the Final Income Tax. The remaining profit for PE Sisa laba dari BUT after the Final Income Tax is imposed with Income Tax Article 26 paragraph (4) of Income Tax Law or under the provisions of Tax Treaty. If there is a discrepancy in form of less amount of Income Tax due based on the Contract Value of Construction Service and Income Tax due based on the payments already withheld/solely paid, the less discrepancy should be paid solely by the Service Provider. Further, if the Contract Value is not fully paid by the Service Provider, the remaining value not paid is not subject to the Final Income Tax, so long as the unpaid value is recognized as uncollectible receivable under the Article 6 paragraph (1) of Income Tax Law. However, if the uncollectible receivable later can be reclaimed, it shall be imposed with Final Income Tax. Taxes paid or owed abroad on foreign income received or acquired by the Service Provider can be credited against the tax due. Other income received or acquired other than from Construction Service is subject to the general tariff under the Income Tax Law. The Service Provider should make a separate recording of expenses related to income received or acquired from the other business. Profit/Loss from different exchange rate occurs in the business activities of Construction Service is included in the calculation of Construction Service Contact Value subject to Final Income Tax. The remaining loss from Construction Service business up to Tax Year 2008 shall only be carried forward up to the tax year 2008. In relation to the transition phase of the related regulation, the Government Regulation stipulates that if the contract is entered into prior to 1 January 2008 and the payment of the contract/part of the contract is made up to 31 December 2008, the Income Tax imposition is based on PP Number 140 Year 140. However, if the contract is entered into prior to I January 2008 and the payment of the contract/part of the contract is made up to 31 December 2008, the Income Tax imposition shall be based on this Regulation. The provisions which further regulate the procedure of collecting, withholding, remittance, reporting and administration of Income Tax on income from Construction Service business shall be under the Regulation of Finance Minister. At the time this Government Regulation is promulgated, the Government Regulation No. 140 Year 2000 is revoked and become ineffective.

PER-30/PJ/2008, Amendment to the Regulation of Director General of Taxes Number 27/PJ/2008 concerning Procedure of Filing, Administration and Revocation of Administrative Sanction in relation to Annual Income Tax Return of Individual Taxpayer for Tax Year 2007 and the Previous Years, and in relation to Revision of Annual Income Tax Return of Individual or Corporate Taxpayer for the Years prior to Tax Year 2007.

In this Regulation, it is stipulated that if a taxpayer makes a revision to the Annual Income Tax Return of the tax year which is being audited though the tax returns of other taxes of the same tax year are not being audited, the tax audit shall be discontinued unless based on the consideration of the Director General of Taxes it should be continued due to the following: a) the tax due based on the revision of the Annual Individual/Corporate Income Tax Return is smaller the that of based on the temporary tax audit findings supported with adequate evidence and approved by the super ordinate of the Head of Tax Audit Unit; or b) there is an indication of criminal act in taxation. If a taxpayer makes a revision to the Annual Income Tax Return of a tax year which is being audited and the tax audit covers other taxes: a) the tax audit on all taxes shall be discontinued, except for tax audit on tax returns of other taxes stating overpaid tax; or b) the tax audit on all taxes shall still be continued under the consideration of the Director General of Taxes. If a taxpayer makes a revision to the Annual Income Tax Return of a tax year which has not been audited but upon the tax returns of other taxes in the same tax year is being audited: a) the tax audit on the return of other taxes shall be discontinued except for tax audit on the tax return in an overpaid tax balance; b) the tax audit shall still be continued based on the consideration of the Director General of Taxes. The tax audit that should still be continued based on the consideration of the Director General of Taxes is proposed for examination of preliminary evidence. If the tax audit is discontinued, it shall conducted by issuing a form of Tax Audit Discontinuance Report in Relation to Sunset Policy and it should be given in written to the related taxpayer. Later if there is data/other information showing that the revision is untrue, the discontinued tax audit may still be continued/followed up with the preliminary evidence examination. Annual Individual Income Tax Return for tax year 2007 and the previous years submitted after 31 December 2007 up to 30 June 2008, may be treated as Annual Income Tax under Article 37A of General Tax Provisions and Procedure Law. Revision of Annual Income Tax Return for tax year 2006 and/or the previous years submitted after 31 December 2007 up to 30 June 2008, may be treated as revision of Annual Income Tax under Article 37A of General Tax Provisions and Procedure Law. Individual taxpayers voluntarily obtaining Tax ID No in 2008 and submitting their 2007 Annual Income Tax Return and the tax returns for the previous year after 31 December 2007 up to 30 June 2008, may submit a revision of Annual Income Tax Return for tax year 2007 and for the previous years under Article 37A of General Tax Provisions and Procedure Law for one time after the promulgation date of this Regulation up to 31 December 2008. Later, taxpayers already obtaining Tax Id No prior to 1 January 2008 and already submitting their Annual Income Tax Return/ revision of their Annual Income Tax Return from the previous tax years before the tax year 2007 after 31 December 2007 up to 30 June 2008, may submit a revision of Annual Income Tax Return from the previous tax years before the tax year 2007 under Article 37A of General Tax Provisions and Procedure Law for one time after the promulgation date of this Regulation up to 31 December 2008.

First:

Tax Offices in the area of Regional Office of the South Jakarta Directorate General of Taxes are stipulated as the places where Periodic VAT Return of 1108 form is effectively prevailed.

Second:

the time of Periodic VAT Return of 1108 effectively prevailed, as meant in the first decision, shall be commenced since the tax period of August 2008.”

Decree of Director General of Taxes Number KEP-127/PJ/2008, dated 11 August 2008

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