Summary of Tax Regulation (December)

Summary of Tax Regulation

Government Regulation, Number 71 Year 2008

Third Amendment to Government Regulation Number 48 Year 1994 concerning Payment of Income Tax on Income from Transfer of Right on Land and/or Building

This regulation amends the Article 4,5,6 and 8 from the Government Regulation (PP) No. 48 Year 1994 as lastly amended with PP No. 79 Year 1999. The amendment to the Article 4 is in form of additional 2 (two) paragraphs, which are paragraph (5) and (6) as follows: “(5) Simple house as meant in the paragraph (1) consists of Hygienic Simple House and Growing Main House, which obtain facility of Value Added Tax exemption under the prevailing regulation;(6) Simple Apartment as meant in paragraph (1) is a multistoried building constructed within a location used as inhabitance completed with sanitary rooms/toilets and kitchen either adjoined with the residential unit or separated with the communal use including Owned Simple Apartment, obtaining facility of Value Added Tax exemption under the prevailing regulation.” Meanwhile, the major change of the Article 5 is the affirmation that individuals transferring rights on land and/or building with gross transfer value less than IDR60 million and not being divided in amounts, shall not automatically be exempted from Income Tax payment obligation. The exemption is applied on individuals having income below Non Taxable Income. Later, another significant change occurs in form of elimination of Article 6 which stipulates tax imposition at the Corporate Income Tax level for corporate taxpayers, including cooperatives, conducting transfers of right on land and or building as their main business. In the end, the Article 8 of this Regulation informs the Final Income Tax imposition on taxpayers, either individuals or bodies, transferring right on land and/or building. Government Regulation (PP) No. 48 as lastly amended with PP No.79 Year 1999 shall still be applicable only for corporate taxpayers, including cooperative, conducting transfers of right on land and or building as their main business, where:

a. transfers of right on land and/or building occur prior to 1 January 2009 and upon which the related deed, decision, agreement, contract or minutes of auction is not yet made; and

b. income from the transfer of right is already reported in the Annual Income Tax Return and the related Income Tax is already paid.

Circular of Director General of Taxes, SE-67/PJ/2008

Utilization of Data or Information related to Annual Income Tax Return Filed by Taxpayers in framework of Implementation of Article 37A of Law of General Tax Provisions and Procedures Including the Technical Regulations

Annual Income Tax Return filed in relation to sunset policy shall not be subject to tax audits unless there is data/information—other than those stated in the Annual Income Tax Return—showing that the said tax return is untrue. Data/information that may be followed up is data/information (not from analysis result) related to taxation obtained from government institutions, organizations, associations, and other parties or counter parties of transaction, which are not yet included in the tax return filed. Such tax audits may only be conducted based on the consideration of the Director General of Taxes. If the Tax Office obtains data/information (not from analysis result), the data/information shall be followed up by persuasive acts through counseling procedures as follows: 1) Account Representative (AR) conducts verification to confirm that the said data/information has not been included in the Tax Return filed; 2) If the verification proves that the said data/information has been included in the tax return, the AR suggests that it will not be continued with counseling/tax audit; 3) if the verification proves otherwise, the AR shall: a) send announcement/ clarification to taxpayers under the format according to the Attachment I of this Circular; b) conduct counseling under the regulation of the Director General of Taxes No.170/PJ/2007 for the taxpayer who makes clarification; c) conduct re-announcement/re-clarification if the revision/ disclosure of the untruth in the tax return is not in accordance with the announcement/clarification/clarification result; and 4) If the taxpayer does not respond to the announcement/clarification, the AR shall suggest a special tax audit. In conducting the counseling, the AR shall be accompanied by the Head of Monitoring and Consulting Section/ the Head of Office based on the materiality of related data/information. The procedure that should be done in counseling is as follows: i) If the Taxpayer provides disagreement/clarification with strong supporting documents, the AR shall suggest the case not to be continued with tax audits; ii) If the Taxpayer provides disagreement/clarification with inadequate supporting documents and the taxpayer is willing to disclose the untruth of the tax return or provides clarification but discloses the untruth of the tax return, the AR shall monitor the revision/disclosure of the untruth of the tax return; iii) if the Taxpayer is willing to revise/disclose the untruth of the tax return but up to the period of 14 days and the counseling date the taxpayer does not revise/disclose the untruth of the tax return, the AR will propose for a special tax audit, and iv) If the Taxpayer provides disagreement/clarification with inadequate supporting documents and the taxpayer is not willing to revise/disclose the untruth of the tax return, the AR shall propose for a special tax audit.

Regulation of Finance Minister, 210/PMK.03/2008

Fifth Amendment to Decree of Finance Minister Number 254/KMK.03/2001 concerning Appointment of Income Tax Article 22 Collector, Characteristics and Amount of Tax, and Procedure for Payment and Reporting.

This regulation only amends Article 1, stipulating certain parties appointed as Income Tax Article 22 Withholder. Cigarette industry is now not explicitly mentioned as Income Tax Article 22 withholder. Accordingly, since the validity of this regulation on 01 January 2009, purchase of cigarettes from the industry is ought to no longer be subject to Income Tax Article 22.

Circular of Director General of Taxes, SE-76/PJ/2008

Service to Taxpayers in Relation to the End of Sunset Policy Program and 2008 Fiscal Year

Prior to the Circular, Circular of Director General of Taxes No.SE-66/PJ./2008 has informed that in framework with Sunset Policy, the Tax Offices around Indonesia on: 1) 06th, 13th and 20th December 2008 shall open as usual, at 07.00-17.00 local time; and 2)30th and 31st shall open longer than usual, at 07.30-19.00 local time and may be subject to change due to numbers of taxpayers to be served. This Circular informs that the service on 31st December 2008 is only up to 15.00 at local time. In addition, it also confirms that the due time of tax reporting should refer to the Finance Minister Regulation No.184/PMK.03/2007 on Determination of Due Time of Tax Payment and Reporting, Determination of Tax Payment Place, and Procedure for Tax Payment, Tax Payment and Reporting, and Procedure for Tax Installment and Tax Payment Postponement.

Announcement, PENG-10/PJ.09/2008

Provision of Sunset Policy Implementation for Taxpayers Registered in Year 2005

he announcement stipulates the extension of due time of Annual Income Tax Return filing in framework of sunset policy. However, this due time extension is limited to taxpayers with the registration year of 2005 and the first two digits of Taxpayer Identification Number are 17,18,19,27,28,29,37, or 38. These particular taxpayers shall be treated as new taxpayers (registered in 2008 ) and be allowed to file their annual tax returns of year 2007 and the preceding years at the latest on 31st March 2009. This Circular also affirms that the public should not feel hesitant whether those numbers are identified.

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