TAXES
LAW
8
KPMG Advisory Indonesia c/o Siddharta & Widjaja
Indonesia has a self-assessment tax system, meaning that
taxpayers have the obligation to declare and pay their taxes
in accordance with the Indonesian tax laws and regulations.
In order to be able to test this self-assessment compliance,
the Indonesian Tax Authorities (“ITO”) can conduct tax audits.
Companies (and individuals, which will not be discussed) can
be audited for all relevant taxes or for a particular tax (e.g., VAT)
over a certain period (i.e., a month or a year). The audit can
take place at the premises of the company, at the tax office or
at both. The ITO can initiate tax audits for various reasons. One
important reason to start a full tax audit (i.e., covering all taxes)
is a corporate tax refund request in case the company is in an
overpayment situation. A VAT refund request will trigger a VAT
audit.
However, the ITO can always broaden the tax audit to other
taxes. Other reasons for a tax audit can be: company in a loss
position, revaluation of assets, etc. Taxpayers have to submit
requested documents (e.g. Transfer Pricing documentation)
and information within one month after the request. Information
provided after the one month period will not be taken into
Jacob Zwaan, LL.M.(taxation)
Partner
+62 21 5799 5147
account by the ITO. At the end of the tax audit the ITO will issue
a tax audit letter with their findings and the proposed tax audit
corrections. In case the taxpayer disagrees with the findings, he
should respond in writing within 7 to 10 working days prior to the
so-called closing conference with the ITO. The ITO may amend
their tax audit corrections due to the information provided by and
discussion with the taxpayer. The final results are summarized
in a closing conference document, which has to be signed by
both parties.
New entities established under the Foreign Investment Law may
apply for an exemption from tax payable on the importation of
capital goods and raw materials. New enterprises must secure
an exemption certificate from the Indonesian Tax Office (“ITO”)
where the new entity is registered. The exemption is granted
for capital goods indicated in the BKPM Master list and must
be applied for each year. For investments in certain businesses
and or certain regions corporate income tax relief is available.
It regards investments in 25 selected sectors (52 sub-sectors)
and/or 15 selected locations (77 sub-locations), effective as per
22 December 2011. Investors should consult with the ITO or
their tax advisors as qualifying sectors and geographical regions
change from time to time. The tax relief for the selected sectors/
regions comprise of four incentives:
• Additional tax deduction of 5% of the realized capital
investment (depreciable and non-depreciable assets) each
year up to six years (revoked if the assets are transferred
during facility period);
• Option to use accelerated tax depreciation at double normal
rates;
• The period for tax loss carry forward may be extended to 10
years (instead of five years);
• WHT on dividends to non-resident shareholders is reduced
to 10% (or a lower DTA rate).
The selected business sectors are economic sectors that
have high priority on a national scale, particularly in respect
of boosting exports. The selected regions are remote regions,
which are economically potentially worthy of development but
whose economic infrastructure is generally inadequate and
where access by public transport is difficult. The regions include
maritime waters with a depth of over 50 meters where the
seabed has mineral reserves, including natural gas.
Jacob Zwaan, LL.M.(taxation)
Partner
+62 215799 5147
Tax Audit
Tax Audit Procedures in Indonesia
Tax Incentives for New Enterprises
Corporate Taxation
7
th
Edition | June 2017
