Publications – ITNH

ITNH-03/2024 (MAP for transfer pricing dispute resolution)

MAP for transfer pricing dispute resolution
An alternative or a complement to litigation

Domestic taxpayers can now propose mutual agreement procedure (MAP) to the director general of tax (DGT) regarding the transfer pricing (TP) adjustments imposed or likely to be imposed by the DGT, that they believe to result in double taxation. Long kept in the dark, the route has been made clear with the issuance of PMK 172/2023 regarding the application of the arm’s length principles on affiliated transactions in late last year (PMK 172). Upon receiving the proposal, the DGT is bound to proceed with a further MAP proposal to the competent authority (CA) of the relevant double tax agreement (DTA) partner if the case qualifies for MAP. This is one thing missing in the previous MAP regulation (PMK 49/22019) replaced by PMK 172.

ITNH-2024-03-MAP as alternative and complement to litigation

ITNH_02/2024_Aiming_for_fair_pricing_with_outright_TPD

Transfer pricing under PMK 172/2023

Aiming for fair pricing with outright TPD

Tax relies on market forces for the pricing of virtually all types of business transactions. Market mechanism is believed to work well with transactions between independent parties: fair outcome is just taken for granted. Not so with transactions between parties of the same business group, deemed as being automatically consumed with a special relationship.

Minister of Finance (MOF) regulation Number PMK 172/2023 regarding transfer pricing (PMK 172) issued in late last year and took effect last month, like many other transfer pricing regulations, notionally aims to tackle the potential problem of unfair (non-arm’s length) pricing resulting from the presence of a special relationship in transactions between parties of the same group (affiliated transactions). This is dealt with from three fronts: outright transfer pricing documentation (TPD), mutual assistance procedure (MAP), and advance pricing agreement (APA).

ITNH-2024-02-Aiming-for-pricing-with-outright_TPD

ITNH-01/2024 (Monthly Calculation and Withholding Simplified)

Payroll tax (WHT21)

Monthly calculation and witholding simplified

January 2024 will watch the calculation and withholding of monthly payroll tax (WHT21), especially for permanent employees, is much simplified, entirely different from the previous years’. For a year’s months of January to November, you will need only to know the gross income of an employee and their marital status, which determine the non-taxable threshold (PTKP) of the employee. A specified tax rate for that amount, to be withdrawn from one of the three tables of monthly WHT21 rates, unofficially dubbed “TER”, to mean “monthly average rate”, can then be applied to that amount.

This is the main aim of Government Regulation 58/2023 (GR 58) released on 27 Dec 2023 regarding “WHT 21 Rates for income derived from occupation, services, and activities of individual taxpayers”, which has an immediate effect from 1 January 2024.

ITNH-2024-01-Payroll-tax-calculation-and-withholding

ITNH-05/2023 (Noncurrent assets depreciation and amortization)

Reg. 72/PMK/2023

One-stop regulation about noncurrent assets depreciation and amortization for tax

The Minister of Finance (MOF) issued Reg. 72/PMK/2023 (PMK 72) on 13 Jul. 2023 regarding the all-about noncurrent assets depreciation and amortization for tax, which came into force on 17 Jul. 2023. Replacing Reg. 96/PMK.03/2009 (PMK 96) and cancelling a few others, PMK 72 appears to serve as a one-stop regulation governing all the things about this matter previously addressed in several regulations. MOF Decree No. 521/KMK.04/2000 regarding noncurrent tangible assets depreciation for companies engaged in production sharing contracts, though, is left intact.

Default assets grouping is unchanged. Non- buildings assets, tangible or intangible, are classified based on their useful life into four groups while buildings assets into two. A pair of depreciation or amortization rate is specified for each non-building asset group, for the straight- line method (SLM) and the double-declining balance method (DDBM).

ITNH-2023-05-Noncurrent-assets-depreciation-and-amortization

 

ITNH-04/2023 (BIK and enjoyment tax treatment)

Benefits in kind and enjoyments

Former tax treatment completely upended

Non-cash remuneration for employment or service, in the form of either benefits in kind (BIKs) or enjoyments (kenikmatan), used to be non-deductible to the provider and non-assessable as an income tax object to the recipients. The Tax Regulations Harmonization Law (UU HPP) which came into force for income tax on 1 Jan. 2022, completely has upended the treatment. It has become deductible to providers and assessable to recipients since.

There are a few exemptions though. Certain BIKs and enjoyments, if incurred to secure, collect, and maintain income, under certain conditions, remain deductible to providers without being assessable to recipients. Yet, employers have been left wondering for a year and a half about how to put the new rule into practice. Only recently did things become clear when Finance Minister Regulation No. 66/2023 (Reg.66) was issued on 27 Jun. 2023 with immediate effect on 1 Jul

ITNH-2023-04-BIK-and-enjoyment-tax-treatment

ITNH-03/2023 (Govt-borne VAT for electric vehicles)

PMK 38/2023                                     

Government-borne VAT for battery-powered EV

Government-borne VAT applies to deliveries of certain brand new battery-powered electric vehicles (BPEV) manufactured in Indonesia. These include four-wheel passenger vehicles and more-than-four-wheel buses of ten-or-more-person capacity which meet a minimum local content (TKDN) requirement. Finance Minister Regulation No. 38/2023 (PMK 38) released on 28 March 2023 states the facility is to take effect for April up to December 2023 deliveries.

VAT remains due at 11% for each delivery. The Government bears 10% if the TKDN is 40% or more or, for buses, 5% if it falls below 40% but not less than 20%. This means, depending on the TKDN but not less than 20%, buyers are to pay only either 1% or 6% of the VAT due.

ITNH-2023-03-Govt-borne VAT for electric vehicles

ITNH-02/2023 (MAP to tackle TP disputes)

Mutual Agreement Procedure         

Tackling transfer pricing disputes

As tax audits are on the rise, transfer pricing disputes are getting more and more commonplace. An objection to the Director General of Taxation (DGT) is generally taken to seek resolution, followed by an appeal to the Tax Court if the issue persists. Next, if not satisfied with the appeal verdict, a case review request (CRR) to the Supreme Court becomes the last resort.

Time is a critical factor. Only with great luck, can one get their dispute decided in two to three years of the objection filing date. It takes years for many. So, why not considering the Mutual Agreement Procedure (MAP)? It is available under every tax treaty for taxpayers who seek resolution to the competent authorities to their complaints about inappropriate application of the tax treaty by the tax authorities. Hence, its scope is not limited to just transfer pricing.

ITNH 2_2023- MAP-to-tackle-TP-disputes

ITNH-01/2023 (GR 44 2022 on VAT)

How the Harmonized Tax Regulations Law affects VAT and LST

Government Regulation No. 44/2022 (GR 44/2022) aimed to apply the Tax Regulations Harmonization (TRH) Law on Value Added Tax (VAT) and Luxury Goods Sales Tax (LST) came into force as enacted on 2 Dec. 2022. It nullified GR 1/2012, its proceeding counterpart, and all the amendments covered in Art. 5 of GR 9/2012. However, implementing regulations governed by GR 1/2012 and GR 9/2021, to the extent not conflicting with GR 44/2022, remain applicable.

What follows highlights several changes covered in GR 44/2022 which may be of interest to you.

ITNH 1_2023- GR-44-2022

ITNH-06/2022 (Faktur Pajak berdasarkan PER 03)

Faktur pajak

Identitas pembeli BKP atau penerima JKP yang
melakukan pemusatan PPN

Faktur pajak (FP) harus berisi antara lain identitas pembeli barang kena pajak (BKP) atau penerima jasa kena pajak (JKP). Apabila pembeli BKP merupakan Wajib Pajak dalam negeri (WPDN), keterangan baku identitas pembeli terdiri dari nama, alamat, dan NPWP. Apabila WPDN tersebut merupakan orang pribadi, NPWP dapat diganti dengan Nomor induk kependudukan (NIK). Jika pembeli BKP merupakan subyek pajak luar negeri orang pribadi, NPWP diganti, nomor paspor dipakai sebagai pengganti NPWP. Apabila pembeli BKP merupakan subyek pajak luar negeri badan atau bukan subyek pajak, keterangan identitas hanya terdiri dari nama dan alamat pembeli BKP. Ketentuan yang sama berlaku untuk transaksi pemberian JKP.

ITNH 6_2022- Faktur-Pajak-berdasarkan-PER-11-PJ-2022

 

 

 

 

ITNH-05/2022 (Single ID Number)

Single identity number

NIK for NPWP for all Indonesian citizen taxpayers

Effective from 14 Jul. 2022, Indonesian citizen taxpayers are set to use their 16-digit citizenship identity number (NIK) in place of the current 15-digit tax identity number (NPWP). Those who have not had an NPWP by then will get one from the Director General of Taxation (DGT), either pursuant to their request or by virtue of the DGT’s authority, which is identical to their NIK just activated as the very NPWP. Others who have had an NPWP will need to ensure that their identity data held by the DGT match with the counterpart administered by the Director General of Citizenship (DGC or “Dukcapil”). Data inconsistency will result in the taxpayer barred from using the NIK as an NPWP. They may still use their 15-digit NPWP in such a situation, but its life is destined to end on 31 Dec. 2023 before the NIK-for-NPWP rule applies to all Indonesian citizen taxpayers starting 1 Jan. 2024. Requirements about this matter are set out in Minister of Finance Regulation No. 112/PMK.03/2022 (“PMK 112”) dated 8 Jul. 2022 which took effect on 14 Jul. 2022.

ITNH 5_2022-Single-ID-number

NH 5_2022-Single-ID-number-Bahasa

 

 

 

ITNH-04/2022 (Tax Invoice)

Tax Invoice

To be prepared electronically

A tax invoice (Faktur Pajak or “FP”) is the most important link in the value added tax (VAT) payment and reporting mechanism. For a taxable enterprises (Pengusaha Kena Pajak or “PKP”) delivering taxable goods or services, it is a proof of tax collection. For the taxable goods buyer or the taxable service recipient, it is a basis to claim input tax credit. A recent series of changes in the VAT Law, including those carried out through Law No. 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP) calls for a re-arrangement of tax invoice provision. The DGT Reg. No. PER-03/PJ/2022 dated March 31, 2022 (PER 03) responds to this need, replacing a number of provisions that previously governing tax invoices (Box 1).

ITNH 4_2022-Faktur-Pajak

ITNH 4_2022-Tax-Invoice

 

ITNH-03/2022 (Final tax on construction services)

Final tax on construction services

Changes in tax rates and service classification

The Government has recently issued Government Regulation No. 9/2022 (GR 9/2022) regarding final income tax on construction services, amending GR 51/2008 as amended by GR 40/2009. GR 9/2022 reclassify construction services into three categories in accordance with prevailing law and regulations regarding construction services and electricity: construction consulting, construction work, and integrated construction work. Each of construction consulting and construction work can be of a general or specialist type.

ITNH 3_2022-Final-tax-on-construction-services

ITNH-02/2022 (Response to COVID 19 pandemic)

Response to COVID 19 pandemic       

Tax incentives prolonged for shortlisted taxpayers

The Government has once again prolonged the provision of COVID 19-induced tax incentives in response to the recent soaring cases through Minister of Finance Regulation No. 3/PMK.03/2022 (PMK 3) issued on 25 January 2022. However, apart from the one granted to a certain group of farmers, the types of incentive have shrunk from four to just two: Art. 22 import tax exemption and 50%-cut of Art. 25 income tax.

The qualifying taxpayers as shown by their business classification codes (KLU) have also reduced to just 72 for Art. 22 import tax exemption and 156 for Art. 25 income tax cut compared to 397 and 481 respectively covered in the previous round. Moreover, a “KITE” status and business engagement in bonded zones do not automatically generate automatic ticket for the incentives.

ITNH 2_2022-Tax-incentives-for-COVID-19

 

ITNH-01/2022 (Tax return unification)

Unified WHT return

Streamlining WHT obligations performance procedure

The Director General of Taxation (DGT) is keen to streamline the way taxpayers should carry out their monthly withholding tax (WHT) obligations. Effective from April 2022, only a single monthly WHT return is required for a single month, unifying the reporting of all types of WHT, from WHT 4(2), WHT 15, WHT 22, and WHT 23 to WHT 26 currently dealt with separately in different WHT returns. As provided in DGT Reg. 24/PJ/2021 (PER 24) issued in late December 2021, taxpayers may adopt the new WHT system as early as January 2022, but not later than April 2022.

ITNH 1_2022-Tax-return-unification

ITNH-07/2021 (Tax regulations harmonization)

Making tax regulations in harmony

And reformation in tax continues

Law No. 7/2021 regarding tax regulations harmonization (TRH Law, or “UUHPP”) came into force on 29 Oct. 2021, the same day as enacted. The law is part the tax reformation package which includes Law No. 2/2020 dealing with state fiscal policy and financial system stabilization enacted in the face of raging COVID 19 pandemic in March 2020 and Law No. 11/2020 regarding job creation which came into force in Nov. 2020. Like its immediate predecessor, the TRH law amends the prevailing taxation laws (dealing with general provisions, income tax, and VAT). In addition, it introduces carbon tax and amends the excise law.

ITNH 7_2021-Tax-regulations-harmonization

ITNH-06/2021 (E-signature to exercise tax rights and fulfill tax obligations electronically)

MoF Reg. 63/PMK.03/2021                                        

E-signature to exercise tax rights and fulfill tax obligations electronically

Issued on 7 June 2021, PMK 63 addresses how taxpayers may exercise their tax rights and fulfill tax obligations electronically using an electronic signature (e-Signature). Taxpayers have generally been familiar with “electronic transactions” with the DGT pertaining to their tax rights and tax obligations, such as making e-Faktur for tax invoicing, e-BUPOT for tax withholding, e-SPT for tax returns, and e-filing for submitting the tax returns. PMK 63 sets the basis for the DGT to expand the range of the transactions. Additionally, it allows the DGT to issue decision, assessment, and notification letters and some other documents such as approval letters, treatises, and proceedings in a digital format in lieu of the manual or printout version and submit them to the taxpayer electronically.

ITNH 6_2021-Tax-neutral-mergers-and-more

ITNH-06/2021 (Certificates of domicile of foreign taxpayers in tax audits and objections)

SE-35/PJ/2021 (SE-35)                                               

Certificates of domicile of foreign taxpayers in tax audits and objections

Issued on 31 May 2021, SE-35 addresses certificates of domicile (COD) delivered by a taxpayer only in the process of a tax audit, tax objection, or tax assessment cancelation or reduction. The DGT directs the auditors or the other tax officials in charge in the process to accept the COD if the following conditions prevail:

ITNH 6_2021-Tax-neutral-mergers-and-more

ITNH-06/2021 (Tax-neutral business mergers, consolidations, spinoffs, and acquisitions)

MoF Reg. 56/PMK.010/2021 (PMK 56)                   

Tax-neutral business mergers, consolidations, spinoffs, and acquisitions

By default, assets transferred in a business merger, consolidation, spinoff, and acquisition should be accounted for at fair market value for tax. Gains or loss may therefore result to the transferor which are assessable or deductible for tax. However, based on Minister of Finance (MoF) Reg. 52/PMK.010/2017 as amended by Reg. 205/PMK.010/2018 (PMK 52/2018), under certain conditions such transfers carried out by corporate body taxpayers (businesses) with capital held in shares can also be accounted for at book value resulting in the arrangement being tax-neutral. However, all the arrangements should be based on a specific approval of the Director General of Taxation (DGT).

ITNH 6_2021-Tax-neutral-mergers-and-more

 

ITNH-05/2021 (DGT reorganization)

DGT reorganization                          

Change of KPP of registration

By the time you get this ITNH, you may have received a written notice from the Director of General of Taxation (DGT) about the change of the Tax Service Office (KPP) with you or your company is registered as a taxpayer and/or confirmed as a taxable entity (PKP). Separately the DGT has issued decision letters No. KEP-176/PJ/2021 (KEP 176) and KEP-177/PJ/2021 (KEP 177) each with a list of thousands of taxpayers being reallocated from their existing KPP of registration to another resulting in a situation just like yours. The measure is part of a vertical reorganization of the DGT office mandated by Minister of Finance (MOF) regulation No. 210/PMK.01/2017 as amended by MOF Reg. No. 184/PMK.01/2020.

ITNH 5_2021-Change – of – tax – registration

 

ITNH-04/2021 (Special tax refunds)

Preliminary tax refunds                   

Judging the benefits against the risk

Normally a tax refund can only be requested at year end. This is done by ticking the refund box of the annual income tax return (AITR) submitted to the Indonesian Tax Office (ITO) for income tax or a similar box of the monthly tax return (MTR) for VAT. A thorough tax audit will then ensue. If things are in order, will you get an Overpaid Tax Assessment Letter (“OTSL” or “SKPLB”) stating the refund amount you will ultimately get, mostly in almost a year.

ITNH 4_2021-Special – tax – refunds

 

ITNH-03/2021 (Peraturan Pelaksanaan UU Ciptaker bidang perpajakan)

PP 9/2021

Perlakuan perpajakan untuk mendukung kemudahan berusaha

Menindaklanjuti diundangkannya Undang-Undang Nomor 1 Tahun 2020 tentang Cipta Kerja (UU Ciptaker) pada tanggal 2 November 2020, Pemerintah mengeluarkan memberlakukan Peraturan Pemerintah Nomor 9 Tahun 2021 (PP 9/2021) pada 2 Februari 2021 khusus sebagai peraturan pelaksanaan di bidang perpajakan terkait perubahan-perubahan pada UU PPh, UU PPN, dan UU KUP.

ITNH 3_2021 PP_9_2021 Peraturan Pelaksanaan UU Ciptaker bidang perpajakan

 

 

ITNH-02/2021 (2021 tax incentives and the COVID-19 pandemic)

2021 tax incentives and the COVID-19 pandemic

Cruciality of notification, request, and realization report submission

The government re-launched a series of tax incentives in response to the impact of the 2019 corona virus pandemic (COVID 19) on business activities through the Minister of Finance regulation Number 9/PMK.03/2021 dated 2 February 2021 (MoF 9/2021). Similar to the ones for 2020, the 2021 tax incentives include Government-borne Income Tax (DTP), exemption of Import Income Tax Art. 22, reduction of Income Tax Art. 25 installments by 50%, and preliminary overpaid VAT refund for low-risk taxable entrepreneurs (PKP). DTP Income Tax includes Art. 21 on employee income that does not exceed IDR 200 million a year, final Income Tax for small business (UMKM), and final Income Tax for construction services for certain government programs.

ITNH 2021-02-Insentif-Pajak

ITNH 2021-02-tax-incentives

 

ITNH-01/2021 (Unified WHT Tax Return)

Unified WHT Tax Return

One Monthly Tax Return for all types of WHT

To date, Income tax Art. 4 (2) (WHT 4.2), WHT15, WHT 22, WHT 23, and WHT 26 are each withheld/collected and reported by a separate set of WHT slips and monthly tax return which differs from each other depending on the type of WHT. With Director General of Taxation (DGT) regulation No. Reg. 23/PJ/2020 (REG 23/2020), the DGT has moved to combine the various tax withholdings/collections into two sets of WHT slips and a single Unified Monthly WHT Return.

ITNH 2021-01-SPT-Masa-Unifikasi-Bahasa

ITNH 2021-01-Unified-WHT-returns-English

 

ITNH-16/2020 (Tax-debt-collection)

Tax debt collection

Shareholders are included as tax bearers

Tax debt cannot be left alone. For the amount in arrears, the Director General of Taxes (DGT) can take action to collect by force of letters. There is a possibility, the approach of unpaid tax arrears, for tax bearers to prevent, take hostage, and freeze/block financial accounts. That is amongst other message from the Minister of Finance regulation Number 189 / PMK.03 / 2020 dated 27 November 2020 concerning Tax Debt Collection Procedures (PMK 189).

Taxes payable are taxes that must be paid including administrative sanction in a tax assessment or similar documents, which generally mature within one month. Tax bearer are taxpayers in implementing and fulfilling their taxpayer (WP) tax obligations. In the event that there is a taxpayer in arrears, based on PMK 189, the tax bearer is also responsible for the settlement.

ITNH 2020-16-Tax-debt-collection.pdf

ITNH 2020-16-Penagihan-Pajak.pdf

 

ITNH-15/2020 (UU-Cipta-Kerja)

Job Creation Law

Amendment to the taxation laws

Law Number 11 of 2020 concerning Job Creation (Job Creations Law) has been promulgated and comes into effect since November 2, 2020. This law is quite thick: according to the official version stamped by the Ministry of State Secretariat and signed by the competent official, the Law consists of 1,187 pages.

Structurally, the Job Creation Law consists of 15 Chapters (Chapters I-XV) plus two extra Chapters, namely Chapter VIIIA and Chapter “V”. Unlike Chapter V, Chapter “V” appears between Chapter VII and Chapter VIII. Some Chapters consist of several sections and some parts consist of several paragraphs.

ITNH 2020-15-UU-Cipta-Kerja.pdf

ITNH-14/2020 (UU-Cipta-Kerja)

CiptaKerja                                  

Structure of the Cipta Kerja Bills/ Struktur RUU CiptaKerja

The CiptaKerja Bill which was just passed by the Parlement on October 5 2020, is indeed very thick, covering so many laws, so it is not easy to read and understand all of them easily.  To help you understand this bill and make it easier to find the parts of the bill that you may need, we present a navigation on the structure of the bill below.

The Ciptakerja Bill consists of XV Chapters, each chapter consists of a part, and each part consists of a paragraph. Some of the sections / paragraphs that are related we are presented below.

ITNH 2020-14-UU-Cipta-Kerja.pdf

ITNH-13/2020 (e-Objection)

e-Objection                                        

Tax objections can now be filed online

Taxpayers can now file tax objections electronically (e-Objection). The provisions on this matter is set out in DGT Regulation No. 14/PJ/2020 issued on 29 July 2020. Conventional submissions of tax objections, i.e. submission by hand or by registered mail, are still allowed. However, apart from the need to minimize physical contacts during the new normal, e-Objection offers at least two advantages.

In either way, an objection must be filed no later than three months of the submission date of the tax assessment. By the conventional way, you can only submit your objection during office hour. You may have to struggle if you try to do it during public holidays. There is no such a hurdle with e-Objection. You can file your objection electronically any time during 24 hours in 7 days a week.

ITNH 2020-13-eObjection.pdf

ITNH-12/2020 (e-Commerce)

e-Commerce     

Six foreign players appointed as pioneers to collect e-commerce VAT

The Director General of Taxation (DGT) announced in a press conference in early July 2020 that it had appointed six foreign e-commerce players to pioneer as e-commerce value added tax (VAT) Collectors: Amazon Web Services Inc., Google Asia Pacific Pte. Ltd., Google Ireland Ltd., Google LLC, Netflix International B.V., and Spotify AB. E-commerce VAT, as set out in Government Regulation in Lieu of Law No. 1/2020 (“PERPU 1”) and further elaborated by MoF Reg. 48/PMK.03/2020 (“PMK 48”) and DGT Reg. No. PER-12/PJ/2020 (“PER 12”), refers to the VAT due on the use or consumption in Indonesian customs area of digital products or digital services originated from outside Indonesian customs area transacted electronically through an e-commerce platform. Pursuant to the appointment, they are to commence collecting e-commerce VAT effective from 1 August 2020.

ITNH 2020-12-eCommerce-VAT-and-tax-incentives.pdf

ITNH-12/2020 (e-Commerce)

COVID 19    

Tax incentives to weather the pandemic impacts: extended, expanded and implified

The Minister of Finance (MoF) issued Regulation No. 86/PMK.03/2020 (PMK 86) on 16 July 2020 to replace MoF Reg. No. 44/PMK.03/2020 (PMK 44) regarding tax incentives to weather COVID 19 pandemic impacts. While the two provide similar tax incentives (Government-borne payroll tax and SME final tax, PPh 25 reduction, Import tax (WHT22) exemption, and earlier VAT refund), there are some changes in PMK 86 as compared to PMK 44

ITNH 2020-12-eCommerce-VAT-and-tax-incentives.pdf

ITNH-11/2020 (Tax court rearrangement update)

Tax court rearrangement update     

New Normal from 8 June 2020

The Tax Court ultimately resumed its operations on 8 June 2020 pursuant to the issuance of circular letter No. SE-09/PP/2020 (SE 09) on 26 May 2020 which extends the COVID 19 spreading prevention (CSP) period, previously scheduled to end on 1 June 2020, to 7 June 2020 ushering in a new normal in the Tax Court. It also issue some other circular letters to address how the Tax Court will pursue the new normal asserting that all dealing with it follow strictly the stipulated CSP protocol.

ITNH 2020-11-Tax-court-rearrangement-update.pdf

ITNH-10/2020 (Tax court rearrangement update)

Tax court rearrangement update     

Activities to resume on 2 June 2020

The Tax Court will resume its activities on 2 June 2020, as stated on circular letter No. SE-07/PP/2020 of 19 May 2020 (SE-07), after a suspension extending from 17 March to 1 June 2020 to curb the pandemic of covid 19.  Separately, in circular letter No. SE-08/PP/2020 of 19 May 2020 (SE-08), it clarifies the shifts of tax appeal and tax lawsuit submission deadlines which fall within the suspension period.

ITNH 2020-10-Tax-court-rearrangement-update.pdf

ITNH-10/2020 (Tax court rearrangement update)

2020 annual tax compliance

Lowered tax rates applicable for PPh 25 calculation

Effective from fiscal year 2020, based on PERPU 1/2020, the corporate income tax is lowered to 22% from 25% currently applicable and further down to 20% in FY 2022. Listed companies with at least 40% of their shares traded on the Indonesian Stock Exchange will get an extra 3%-cut leading the rate for them to 19% for FY 2020-2021 and 17% for FY 2022 onwards.

Pertaining to the 2019 corporate income tax returns (CITR) filing, a question has been around on whether the new tax rate could be used immediately to calculate the monthly income tax prepayment (PPh 25) due for 2020. One rationale for the use of the new tax rate is that PPh 25 for a particular year must be determined as close as possible to the income tax ultimately due for that year. With the tax rate lowered for 2020, it is reasonable to factor the 2020 tax rate in calculating PPh 25 for 2020.

ITNH 2020-09-Monthly-PPh-25-for-2020.pdf

ITNH-08/2020 (Simplified filing allowed instead of extra extension)

Covid-19 and annual tax compliance  

Simplified filing allowed instead of extra extension

With the covid-19 force majeure still hanging, a question has been around on whether the Director General of Taxation (DGT) will extend the time to submit the 2019 annual corporate income tax return (CITR) after allowing a one-month extension for individual income tax returns (IITR) in late March. This question is relevant for taxpayers with financial year ended on 31 December 2019.

It was finally confirmed by the DGT in a press conference held on 18 April, and further elaborated on DGT Reg. PER-06/PJ/2020 (PER 06), that no such an extension will be granted for CITR, stating that a relaxation on what documents to be submitted by 30 April will be allowed instead.  The relaxation will also apply to individual taxpayers who maintain books for their business and are bound to file individual income tax returns (Form 1770) by 30 April pursuant to the one-month extension.

ITNH 2020-08-Annual-tax-returns-filings.pdf

ITNH-07/2020 (Tax facilities granted for certain goods and services)

Covid-19 and tax         

Tax facilities granted for certain goods and services

The Government provides tax facilities embedded in certain goods or services required for the handling of covid 19 imported, acquired, or made use by certain bodies (government institutions, hospitals, and other parties) tasked for covid 19 handling in April-September 2020. The tax facilities include:

  • Non-VAT collection
  • Government-borne VAT
  • 22 income tax exemption
  • 23 income tax exemption.

ITNH 2020-07-time-extension-clarified.pdf

ITNH-07/2020 (Time extension clarified)

Covid-19 and tax         

Time extension clarified

In response the covid-19 outbreak, Government Regulation in Lieu of Law (“PERPU 1”) takes the policy of, among others, extending the law-provided time for the performance of certain tax rights and obligations which otherwise would come due in the State of Emergency Disaster (SCED) period established by the National Agency for Disaster Prevention (BNPB).

Our ITNH No. 04/2020 issued on 2 April 2020 assumed that the SCED period extends from 28 January to 29 May 2020, covering the first-established period (28 January-28 February 2020) and the period extension set out in BNPB Decision No. 13.A/2020 (29 February-29 May 2020).

ITNH 2020-07-time-extension-clarified.pdf

ITNH-06/2020 (Incentives available for certain industries)

Covid-19 and tax                            

Time extension clarified

In response the covid-19 outbreak, Government Regulation in Lieu of Law (“PERPU 1”) takes the policy of, among others, extending the law-provided time for the performance of certain tax rights and obligations which otherwise would come due in the State of Emergency Disaster (SCED) period established by the National Agency for Disaster Prevention (BNPB).

Our ITNH No. 04/2020 issued on 2 April 2020 assumed that the SCED period extends from 28 January to 29 May 2020, covering the first-established period (28 January-28 February 2020) and the period extension set out in BNPB Decision No. 13.A/2020 (29 February-29 May 2020).

ITNH 2020-07-time-extension-clarified.pdf

ITNH-06/2020 (Incentives available for certain industries)

Covid-19 and tax                            

Incentives available for certain industries

The Government recently announced a tax incentives package for certain taxpayers hampered by the severity of covid-19 outbreak in MoF regulation No. 23/PMK.03/2020 (PMK 23) issued on 23 March 2020, consisting of:

  • Government-borne employee income tax (WHT21) for employees with a maximum annualized gross regular income or Rp200 million
  • Article 25 (PPh 25) reduction by 30% of the amount otherwise due;
  • Import tax (PPh 22) exemption; and
  • Early VAT refund.

ITNH 2020-06-Covid-19-tax-incentives.pdf

ITNH-05/2020 (Covid-19 and Tax Litigations)

Covid-19 and tax litigations                             

Filing deadlines shifted, court hearings rescheduled

The Tax Court issued circular letter No. SE-03/PP/2020 (SE-03) on 2 April 2020 setting out some guidelines to deal with the current development of covid-19. Firstly, SE-03 specifies the period from 17 March to 21 April 2020 as the Covid-19 Spread Prevention (CSP) period. It then set out some adjustments to the litigation submission times that otherwise would hit the deadline in the CSP period and tax hearing schedules supposed to take place then.

ITNH 2020-05-Covid-19-tax-litigations.pdf

ITNH-04/2020 (Covid-19 and Tax)

Covid-19 and Tax                             

Income tax rate cut to 22% for fiscal year 2020, further down to 20% from 2022

Corporate income taxpayers and permanent establishments (PE) will see their income tax rates cut to 22% for fiscal year 2020 and further down to 20% from 2022. Those with at least 40% of their shares traded on the Indonesian Stock Exchange will still get an extra reduction of 3% from the general tax rates. This measure has been taken by the Government as part of its state treasury and financial system stability policy set out in Government Regulation in Lieu of Law No. 1/2020 (“PERPU 1”) issued on 31 March 2020 in response to the severity of Covid 19 outbreak.

Other tax changes include the extension of the time provided for the performance of certain tax rights and obligations, not only for the interest of taxpayers but also the Director General of Taxation (DGT), and the introduction of tax rules applicable for e-commerce business.

ITNH 2020-04-PERPU-1-2020.pdf

ITNH-03/2020 (Administrative penalties waived during downtime)

e-Filing                                              

Administrative penalties waived during downtime

The DGT acknowledged through decision letters No. KEP-157/PJ/2020 (KEP 157) and KEP-158/PJ/2020 (KEP 158) issued on 20 March 2020 that downtime has engulfed some parts of its IT system during 29 January-3 February 2020 and on 20 February 2020 causing failure in certain on-line tax services. As a result, taxpayers subject to mandatory e-filing have failed to fulfill certain tax obligations during that period.

ITNH 2020-03-Covid-19-Outbreak

ITNH-03/2020 (Certain submission deadline))

Covid 19 outbreak and tax               

Certain submission deadlines shifted to end of April and May 2020

The outbreak of Covid 19 has led the Indonesian Government to declare the period of 28 January up to 29 May 2020 as a State of Certain Emergency Disaster. Concerned especially with its impact to taxpayers’ occupations and activities, the Director General of Taxation (DGT) issued decision letter No. KEP-156/PJ/2020 on 20 March 2020 setting out its policy pertaining to the performance of taxpayer rights and obligations supposed to take place during the period:

ITNH 2020-03-Covid-19-Outbreak

ITNH-02/2020 (Indonesia-Singapore tax treaty)

Indonesia-Singapore tax treaty       

Amendment agreed pending ratification

Indonesia and Singapore finally agreed after five years of negotiations to a package of revisions to the existing double tax agreement (DTA) which has been in force for 29 years. Both States’ finance ministers signed the new DTA on 4 February 2020 in Bogor Indonesia, three months after Indonesia ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI Convention) to which Singapore is a party.

ITNH 2020-02-Indonesia-Singapore DTA

ITNH-01/2020 (Input VAT credit claim)

Input VAT credit claim                                    

Three-month window interpretation upheld

By default, an input VAT must be credited against the output VAT of the same tax period (month). Nevertheless, if you have not been able to do so, the VAT law allows you to claim it in your VAT return for one of the following three months. If you receive a tax invoice dated 4 February 2020 from a vendor, for instance, you should credit it (i.e. claiming as a tax credit) in your VAT return for February. If you can’t, you can claim it in your VAT return for either March, April, or May 2020.

This rule has just been confirmed by the Director General of Taxation (DGT) through SE-02/PJ/2020 (SE-02) issued on 21 January 2020. The DGT also suggests the rule’s applicability for other documents designated as bearing a tax invoice status. It follows, an import VAT paid on 5 February 2020 can be claimed as an input VAT in your VAT return for February 2020, suggesting that the tax period to which an import VAT belongs is the month when you pay the import VAT. Alternatively, you can claim the import VAT in your VAT return for either March, April, or May 2020.

SE-02 expands the illustration with a situation in which you are only aware you have not claimed the input VAT when your VAT return for February is being audited by the DGT. This does not necessarily render the unclaimed input VAT non-creditable. With the three-month window, you can still claim it through the VAT return for either March, April, or May 2020.

Included as a creditable input VAT is an import VAT paid pursuant to an official assessment by the Directorate General of Customs and Excise (DGCE). Suppose with respect to import VAT originated in February 2020 above, the DGCE issues an assessment requiring you to pay an additional import VAT in November 2020. If you pay the assessed import VAT in November 2020, this will constitute an input VAT of November 2020 and accordingly can be claimed as a tax credit in your VAT return for November 2020. Alternatively, with the three-month window, you can claim it through your VAT return for either December 2020, January 2021, or February 2021.

In certain situations, you may need to revise the VAT return through which you intend to claim an input VAT. Suppose you receive a tax invoice dated 5 February 2020 in June 2020 when you have filed your VAT returns for February, March, and April 2020 but not for May 2020. In this case, you can claim the input VAT through the VAT return of either February, March, or April 2020 by revising the VAT return concerned or directly through the VAT return for May 2020. However, if you only receive the tax invoice long after the relevant tax period, say in November 2020, when you have filed all your VAT returns, you can only claim the input VAT by revising the VAT return for either February, March, April, or May 2020.

An across-the board condition applies to the rule and interpretation above: the input VAT has not yet been expensed or capitalized in your book.

ITNH 2020-04-200204.pdf

ITNH-08/2019 (E-Commerce)

E-Commerce                                     

SEP translated into physical presence

Foreign e-commerce businesses are required to have a physical presence in Indonesia if they are considered to have significant economic presence (SEP) in Indonesia. This can be done by appointing a representative based in Indonesia who can act as or for the foreign e-commerce business. The requirement is set out in Government Regulation (GR) No. 80/2019 (GR) regarding e-commerce issued in late November 2019.

E-Commerce in GR 80 refers to transactions of goods or services between parties through a chain of electronic devices and procedures aimed at transferring right over the goods and services and generating compensation. It not only involves businesses but also consumers, government, and individual persons.

The SEP is to be determined based on a certain criteria which measures the numbers of transactions, package shipments, and traffic access, and transaction values.  Further details are yet to be elaborated in Minister of Trade regulations.

The issue of SEP and physical presence has long been a hot topic in e-commerce.  It is crucial to note that, under current international tax standard, a country can only tax business profit of a foreign business if the foreign business has physical presence in that country, something easily dodged by e-commerce businesses as they can naturally do significant business in a country without physical presence in that country.

ITNH 2019-08-191219.pdf

ITNH-07/2019 (Luxury goods sales tax (LST) for vehicles)

Luxury goods sales tax (LST) for vehicles 

Fuel efficiency and CO2 emission counts more

Under current regulation (GR 41/2013 as amended by GR 22/2014), the LST rate for a vehicle is governed primarily by its type and its cylinder capacity. Sedans and station wagons are considered the most luxurious vehicles and therefore are taxed at the highest rates ranging from 30% for below-1500cc cars to 125% for those above 3000cc of the corresponding selling prices. For other vehicles, the passenger capacity matters. A 1500cc car with a passenger capacity of less than10 is taxed at 10%. The tax rate is increased for higher-than-1500cc cars the top rate being 125% for cars of higher than 3000cc. A four-wheel drive feature results in an extra increase of the tax rate.  However, larger passenger capacity may reduce the tax rate. A car of more than 15 passengers even has its LST zero-rated. For commercial vehicles, the tax rate arrangement is a little different (Table 1).

In its considerations, GR 41/2013 cites the objective of promoting energy-efficient and environment-friendly cars but does not provide any elaboration thereon. The 2017 implementing regulations, MoF No. 33/PMK.010/2017 (PMK 33), compensates the shortcoming: it rules that low-emission and affordable cars (KBH2), i.e. gasoline and diesel cars with a cylinder capacity of 1500cc or less, have their LST zero-rated.  Nevertheless, in other parts the regulation, PMK 33 states that a designated LST rate stipulated to apply for a particular category of vehicles, it shall apply to the vehicles within the category without regard to whether they are equipped with an electric engine (which generally features energy efficiency and environment friendliness).

On 16 October 2019, the Government issued GR 73/2019 regarding LST for motor vehicles (GR 73). Promoting the use of fuel-efficient and environment friendly cars remains as the main objective. GR 73 also aims to empower the Indonesian automotive industry. Therefore, it rewards better performance in terms of energy efficiency and environment friendliness relative to the others with lower LST rates. Overall, the LST rates under GR 73 (0%-95%) are lower than those under GR (0%-125%) (Table 2).

ITNH 2019-07-191129.pdf

ITNH-07/2019 (End-to-end e-compliance – accession continues)

Income tax – Super deduction facility rolled out for apprenticeship programs

The DGT issued DGT Decree No. KEP- 652/PJ/2019 (KEP 652) on 18 October 2019 as continuation of KEP 599/ PJ/2019 issued in September 2019 calling for taxpayers to adopt the end-to-end e-compliance system for WHT 23/26 obligations mandated by PER-04/PJ/2017.

As discussed previously, the system is implemented in phases, demanding a group of taxpayers after another to adopt the new system. KEP 652 adds another lot to join the group, i.e. taxpayers with a taxable enterprise (PKP) status registered with the following middle tax service offices (“KPP Madya”)

ITNH 2019-07-191129.pdf

ITNH-06/2019 (Income tax - Super deduction facility rolled out for apprenticeship programs)

Income tax – Super deduction facility rolled out for apprenticeship programs

Qualifying apprenticeship programs (QAPs) carried out by taxpayers engaged in certain industry sectors may soon get the super deduction facility provided by the Government recently. Details of the privileged sectors are set out in Minister of Finance Regulation (MoF) No. 128/PMK.010/2019 (PMK 128) issued in early September which broadly include manufacturing (construction, chemical, electronics, machinery, ship buildings, etc.), health, agribusiness, tourism and creative industry, and digital economy.

ITNH 2019-05-190930.pdf

ITNH-06/2019 (WHT 23/26 obligations)

End–to-end e-compliance – mandatory for certain taxpayers

When it comes to WHT obligations, reference should be made to DGT Reg. No. PER-53/PJ/2009 (Reg. 53). It governs the WHT return and WHT slip format of all WHT obligations provided by the Income Tax Law other than payroll tax (WHT 21). These include WHT 4(2), WHT 15, WHT 22, and WHT 23/26. Each WHT return consists of one main tax notification letter and at least two supplementary schedules for the relevant WHT slips made during the month and the corresponding WHT payments. While companies (taxpayers) are left free as withholding agents to produce their own forms including WHT slips, all should be patterned after the models specified in Reg. 53, and crucially be scanner-readable.

ITNH 2019-06-190930.Pdf

ITNH-05/2019 (Income tax - Tax facilities granted for new investments)

Income tax – Tax facilities granted for new investments

A range of tax facilities will be granted to new investments not enjoying the ones governed Art. 31A of the Income Tax Law. Laid down in Government Regulation No. 45/2019 (GR 45) issued in late June 2019, the facilities aim to boost investments and economic activities by domestic body corporate taxpayers in the following areas:

ITNH 2019-05-190722.Pdf

ITNH-04/2019 (Permanent establishment in-country foreign business eyed)

In-country foreign business eyed

Indonesia can only tax business profits of a foreign enterprise if it carries on business in Indonesia through a permanent establishment (PE) located in Indonesia. This is an international standard enshrined in the Income Tax Law (ITL). Conditions are set in the ITL under which a foreign enterprise’s activities in Indonesia will lead to the creation of a PE. These conditions have just been reiterated by MoF Regulation No. 35/PMK.03/2019 (PMK 35) issued on 1 April 2019.

ITNH 2019-04-190507.pdf

ITNH-04/2019 (WHT23/26 Upgraded tax compliance system)

Upgraded tax compliance system

The DGT stepped up its effort to implement its upgraded WHT23/26 compliance system. Launched in 2017, according to DGT Reg. 04/PJ/2017 (Reg. 04), the system involved only 15 taxpayers at the outset treating it as a pilot project. By the passage of time, possibly with some improvement, more and more taxpayers were called in to participate in the project. The last expansion was done in late April 2019 the inclusion of 1745 taxpayers from the most prominent tax service offices (Large tax office, PMA tax office, Indonesian tax news Page 4 Highlight No. 04/2019 Badora, Go-public company tax office, and certain middle tax offics of Jakarta) as shown in DGT Decree. 425/PJ/2019 of 22 April 2019 (Decree 425).

ITNH 2019-04-190507.pdf

ITNH-03/2019 (More services qualifying for zero-rated VAT)

More services qualifying for zero-rated VAT

Export of VATable goods offers vendors two advantages when it comes to VAT over domestic sales: zero-rated output VAT and recoupable input VAT. Similar advantages are available for export of VATable services but only on a ringfencing basis in accordance with the Minister of Finance (MoF) regulation.

ITNH 2019-03-190408.pdf

ITNH-02/2019 (WHT & VAT Prizes, awards, and other trading-related considerations)

Prizes, awards, and other trading-related considerations

Selling efforts are typically carried out with some sweeteners, especially for consumer goods. To boost sales, a vendor may offer a range of incentives to distributors, retailers, or consumers. Cash back may be granted to distributors for achieving a sale or purchase target. Prizes may be available for consumers buying products during campaign periods. Events may be organized from which buyers are granted prizes based on a lottery.

ITNH 2019-02-190301.pdf

ITNH-02/2019 (Foreign tax credits. Clarity on how to claim)

Foreign tax credits : Clarity on how to claim

Under residence-based tax system, domestic taxpayers are liable to income tax in respect of its worldwide income. Income earned abroad must be accounted for as part of taxable income. However, income tax paid/due abroad thereon can be claimed as a foreign tax credit (FTC).

ITNH 2019-02-190301.pdf

ITNH-01/2019 (Potential suspension of filing date confirmation)

Potential suspension of filing date confirmation

It has long been established that the date stamped on a tax return submission receipt is considered the filing date of the tax return. This applies to all filing methods: by-hand delivery, electronically (e-filing), or by mail. No longer it is now pursuant to the issue of DGT Regulation No. PER 02/PJ/2019 regarding “The Procedures for Tax Return Submission, Receipt, and Processing” (PER 02) on 23 January 2019.

ITNH 2019-01-190213.pdf

ITNH-01/2019 (A new form for tax treaty benefit claims)

A new form for tax treaty benefit claims

With effect from January 2019, claims for tax treaty benefits in respect of Indonesia sourced income earned by foreign taxpayers should be accompanied made with a newly designed DGT Form as set out in DGT Reg. PER-28/PJ/2018. DGT Forms prepared based on the previous regulation (PER-10/PJ/2017) is no longer useable in 2019.

ITNH 2019-01-190213.pdf

ITNH-02/2018 (Simplify use of Tax Treaty Benefits (PER-25/PJ/2018 of 21 November 2018))

Simplify Use of Tax Treaty Benefits (PER25/PJ/2018 of 21 November 2018)

On 21 November 2018, the Director General of Taxation (DGT) issued DGT’s regulation No PER -25/PJ/2018 to replace PER-10/PJ/2017 regarding Procedure for the Application Of Agreement On The Avoidance of Double Taxation (“DTA/P3B”). The new regulation will be applicable commencing 1 January 2019. DGT-1 Forms which have already been legalized based on PER10/PJ/2017 can still be used until 31 December 2018. This means that in December 2018 (this month), for January 2019 onward, foreign taxpayers need to obtain a new DGT Form using a new form and new procedure as regulated by PER 25/PJ/2018.

ITNH 2018-02-181212.pdf

ITNH-01/2018 (Unlocking tax-tied deposits earlier)

Unlocking tax-tied deposits earlier

A 12-month time span has become the norm to get tax refunds from the Indonesian Tax Office (ITO). A lengthy audit, at times with surprise results, is another feature of the tax refund process. However, certain taxpayers can actually get a provisional refund much earlier. For VAT, the timeline is a month and for income tax three bypassing the cumbersome and lengthy tax audit.

ITNH 2018-01-180525.pdf

ITNH-01/2013 (Stricter control over tax invoice issue)

Stricter control over tax invoice issue

A new tax invoicing system is scheduled to take effect from 1 April 2013. Details of the system are set out in Director General of Taxation (DGT) Reg. 24/PJ/2012 (Reg. 24). One remarkable feature is the need for an entity to have an activation code serving as a digital identity and a password to enable it to issue tax invoices.

ITNH 2013-01 Tax invoice and Hong Kong DTA.pdf

ITNH-01/2013 (Indonesia-Hongkong DTA starts to take effect)

Tax invoice and Hong Kong DTA

A new tax invoicing system is scheduled to take effect from 1 April 2013. Details of the system are set out in Director General of Taxation (DGT) Reg. 24/PJ/2012 (Reg. 24). One remarkable feature is the need for an entity to have an activation code serving as a digital identity and a password to enable it to issue tax invoices.

ITNH 2013-01 Tax invoice and Hong Kong DTA.pdf

ITNH-01/2013 (Non-taxable income threshold increased to more than Rp24 million a year)

Non-taxable income threshold increased to more than Rp24 million a year

A new set of non-taxable income threshold (PTKP) for individual taxpayers is effective from 1 January 2013. Details of the amounts comprising the PTKP for a particular individual taxpayer are set out below:

ITNH 2013-01 Tax invoice and Hong Kong DTA.pdf

A Year of Reckoning For Past Tax Affairs by Robertus Winarto

A year of reckoning for past tax affairs by Robertus Winarto

The Directur general of taxation’s (DGT) authority to issue tax assessments is enshrined side by side in the Tax Administration Law (TAL) with taxpayer’s rights to determine, settle and report their own tax liabilities.

2013 – A year of reckoning for past tax affairs by Robertus Winarto.pdf

ITNH-01/2012 (Documentation to be attached to annual tax returns)

Transfer pricing : Documentation to be attached to annual tax returns

Transfer pricing documentation must be attached to the annual corporate income tax return (CITR) submitted to the tax office. That is part of the wording of Reg. 32 issued in late 2011 about the application of arm’s length principle (ALP) on related party transactions. The regulation amended Reg. 43/2010 issued in 2010.

ITNH 2012-01 Transfer Pricing in 2011 Annual Tax Filings.pdf

ITNH-01/2012 (Objections and appeals are no longer a deal breaker)

Objections and appeals are no longer a deal breaker

Mutual agreement procedure (MAP) is the procedure available under a tax treaty to solve problems facing a taxpayer pertaining primarily to (potential) double taxation arising from the actions of one or both contracting states concluding the tax treaty. This may be initiated by the taxpayer presenting his case to the competent authority of the contracting state of which he is a resident.

ITNH 2012-01 Transfer Pricing in 2011 Annual Tax Filings.pdf

ITNH-01/2012 (One way to mitigate the risk of transfer pricing disputes)

One way to mitigate the risk of transfer pricing disputes

The traditional approach to deal with a transfer pricing issue is to deliberately establish the arm’s length character of the related party transaction concerned. This is transfer pricing documentation is all about. The next step is to present the transfer pricing documentation to the tax authority (DGT), normally during a tax audit, or in light of Reg. 32, attach the documentation to the CITR filed with the tax office.

ITNH 2012-01 Transfer Pricing in 2011 Annual Tax Filings.pdf

ITNH-01/2011 (Paving the way for a tax holiday)

Paving the way for tax holiday

The Government has paved the way for a tax holiday by the issue of Government Regulation 94/2010 (GR 94) in late last year. To be eligible for the facility, a company must make a new investment in the pioneer industries which bear a broad linkage with other industries, provide high added values, introduce new technology, and are of strategic position from the national economic priority.

ITNH 2011-01 Paving the way for tax holiday.pdf

ITNH-04/2010 (Arm’s length nature of controlled transactions)

Arm’s length nature of controlled transactions

One burning question is always raised whenever a company engages in a transaction with a related party: Does the condition resulting from the transaction (price or profit) reflect the one that would obtain were it concluded between unrelated parties? In transfer pricing jargon, does the arm’s length principle (ALP) prevail?

ITNH-2010-#04 – Transfer Pricing.pdf

ITNH-04/2010 (Amendment to the Indonesia-Malaysia tax treaty to take effect from 1 Sep 2010)

Amendment to the Indonesia-Malaysia tax treaty to take effect from 1 Sept. 2010

After in a wait of more than four years, the 2006 Protocol amending the Indonesia-Malaysia tax treaty finally came into force in July 2010 following the exchange of ratification documents between the governments of Malaysia and Indonesia on 15 July 2010.

ITNH-2010-#04 – Transfer Pricing.pdf

ITNH-03/2010 (2010 VAT law comes into force)

2010 VAT law comes into force

1 April 2010 is an important day for tax as Law No. 42/2009 regarding the third amendment of the 1984 VAT law came into force. While a lot of regulations are yet to be issued, companies need to pay attention on a number of changes that may affect significantly their business. The current edition of ITNH will highlight some of those changes about which relevant implementing regulations have been issued.

ITNH-2010-#03 – New VAT law has come into force.pdf

ITNH-02/2010 (Transfer pricing documentation is required for 2009 CITRs)

Transfer pricing documentation is required for 2009 CITRs

This year will witness for the first time the implementation of transer pricing (TP) documentation requirement in Indonesia. Companies engaged in related-party transactions are required to disclose a number of transfer pricing-related issues in their 2009 corporate income tax returns (CITRs). The rule is set out in Reg. 39 issued by the director general of taxes (DGT) in July 2009.

ITNH-2010-#02 – Transfer Pricing Documentation.pdf

ITNH-01/2010 (A nominative list is required for promotion expenses)

A nominative list is required for promotion
expenses

A claim for promotion expenses for tax purposes must be supported by a nominative list detailing the types of promotion, the parties to which payments have been made, dates of payments, payment amounts, etc (Ref. to Table 1). The list must be attached to the corporate income tax return (CITR) filed with the tax office. Failure to attach the list will render the promotion expense non-deductible.

ITNH-2010-#01 – Promotion expenses.pdf

ITNH-01/2009 (War against abuses of tax treaties)

War against abuses of tax treaties continues

Abuses of tax treaty have been an issue of concern of the Director General of Taxation (DGT) for a long time. A series of tax regulations have been released by the DGT to crack down this practice, the most recent ones being Regulations 61 and 62 issued in early November. Previously, several regulations were released calling for the beneficial owner status to claimants of tax treaty relief. Another regulation was also issued in 2005 to suspend withholding tax (WHT) exemption on particular interest income provided by the Indonesia-Netherlands tax treaty pending mutual agreement between both governments on the mode of application (MoA).

ITNH-2009-#01.pdf

For more information Feel free to Contact with Us