Individuals and corporations that have acquired a Tax ID (NPWP) or earn from profits such as wages, dividends, revenues, and other sources of income are both required to file a tax report with the Indonesian tax authorities.
Annual Tax is a tax that must be paid to the Indonesian tax body, the Directorate General of Taxes (DGT), every year.
To submit an Annual Tax Report to the Indonesian Directorate General of Tax (DGT), one must first register as an individual or a corporation. Given Indonesia’s frequent and abrupt changes in tax legislation, the registration will necessitate the submission of several documents. Note that Individuals and corporations are required by Indonesian law to file a tax report with the Indonesian Tax Authority.
Through Circular Letter Number 4/2021 regarding the Implementation of Terms in Criminal Offenses Related to Tax, the Indonesian Supreme Court of Justice imposed harsher penalties on November 29, 2021. This article will go over the most crucial points to remember when it comes to tax compliance in Indonesia and how to avoid penalties.
Tax Compliance in Indonesia: Important Things To Know
Indonesia employs a self-assessment system, in which taxpayers are entrusted to calculate, pay, and report their taxes in line with applicable laws and regulations. The DGT, however, may send tax assessment letters to a specific taxpayer if it discovers that, based on additional information provided by a tax auditor, the taxpayer has not fully paid his taxes.
Another factor that may lead to the DGT issuing an official tax assessment is the failure to keep books in compliance with the established standards.
Tax Payment and Filing Obligations
Tax liabilities for a certain time of year are normally paid to the State Treasury through an authorized tax-payment bank (bank persepsi) and then reported to the DGT office through the submission of relevant tax forms.
Depending on the tax obligation in concern, tax payments and returns must be filed electronically, on either a monthly or annual basis.
Direct payments, third-party withholdings, or a mix of the two can be used to meet corporate tax liabilities.
If the entire amount of tax paid in advance for the year is less than the total amount of CIT payable, the firm must make up the difference before completing its CIT report.
Tax Payment and Reporting Deadline
|Type of Tax||Monthly Payment Deadline||Monthly Filing Deadline||Annual Filing Deadline|
|CIT||15th of the month||20th of the month||4th month following the conclusion of the tax year|
|Individual Income Tax||15th of the month||20th of the month||3rd month following the conclusion of the tax year|
|Employee Withholding Tax||10th of the month||20th of the month||N/A|
|Other Withholding Taxes||10th of the month||20th of the month||N/A|
|VAT & LGST||Before the VAT return filing deadline||End of the month||N/A|
Penalties for Non-compliance
- Late tax payment: Monthly fee of 2% for a maximum of 24 months
- Late tax reporting and Underpayment: IDR 100,000 – IDR 1,000,000 penalty relying on the type of tax
- Rejected tax objection: 50-100% of the portion of the underpayment
- Incomplete, late issuance, non-conforming issuance, or non-issuance of VAT invoice: 2% surcharge
- Incorrect tax returns submission or non-submission: 3-12 months in jail or a fine of 200% of the unpaid tax
- Embezzlement, fraud, and improper bookkeeping of export and import activities: a maximum sentence of six years in jail or a fine of 200-600% of the actual payments
Stricter Penalties for Tax Non-compliance Has Been Imposed in Indonesia
The Supreme Court of the Republic of Indonesia published Circular Letter No. 4 in 2021 about the Implementation of Terms in Tax-Related Criminal Offenses, which is in effect since November 29, 2021, and states the following clauses:
- In terms of requesting termination of prosecution, a pre-trial involving a criminal offense in taxation should be prosecuted by the district court where the investigator or public prosecutor is domiciled.
- The criminal culpability of the caretaker and/or another party of the Criminal Offense in Tax during the Period of such offense is not absolved by the company’s insolvency or liquidation.
- The Defendant of a Criminal Offense Related to Tax is not eligible for probation.
- Other (additional) criminal sanctions will be imposed on both individuals and corporations.
Tax-related criminal offenses can occur as a result of
- Tax Embezzlement;
- Failure to file a tax return, whether on purpose or not;
- Falsifying supporting data for a tax report or submitting an incorrect tax report;
- Refusal of a tax officer’s inspection;
- Failure to retain accurate records;
- Misusing Tax ID.
Meet Your Tax Obligations with Tax Consulting Service in Indonesia
Many businesses prefer outsourcing the compliance of their tax obligations to Tax Consulting Services in Indonesia. To top it all, outsourcing companies help businesses cut overhead costs and save crucial time better spent on core business; provide security by using the latest technology, secure your data, ensure an error-free and boosted compliance, and full-fledged assistance in strategizing tax planning. Moreover, by outsourcing, one gets access to a higher level of tax expertise, and an efficient document management system.
Avoid Severe Penalties on Tax Non-compliance in Indonesia with Cekindo
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