tax compliance in indonesia

Common Tax Infringements in Indonesia and How to Avoid Them

InCorp Editorial Team

Table of Content

Over the years, we have seen an immense flourish of businesses in Indonesia. Therefore, the legal requirements to keep up legitimate accounting and tax filing are also getting more and more significant.

However, due to the ever-changing laws and the complexity of the regulations, most business owners and foreign entrepreneurs often find tax filing, reporting and other tax-related processes to be daunting and exhausting.

As a result, they have been struggling to get it right when it comes to tax compliance in Indonesia.

In Indonesia, taxation laws and regulations are created and governed by the Ministry of Finance and Director General of Tax (DGT).

It is obligatory for all companies in Indonesia to comply with the lawful taxation requirements to thrive and to compete with other businesses.

Tax and accounting outsourcing services offered by professional tax consultants could be businesses’ rescuer for tax compliance and tax crimes avoidance.

Law Governing Tax Compliance in Indonesia

Article 23A of the 1945 Indonesian Constitution serves as the principal taxation law and regulation in Indonesia.

According to Article 23A, taxes in the form of contribution are mandatory for all Indonesian nationals, foreigners and the country’s residents who have stayed in Indonesia for at least 183 days within a consecutive 12-month period.

A person is not considered a tax resident if he/she has resided in Indonesia for fewer than 183 days over a 12-month period. In this case, he/she does not have to pay for taxes of income generated outside of Indonesia; he/she only has to pay for taxes of income generated in Indonesia.

Common Tax Infringements in Indonesia

tax compliance in indonesia

A business or an individual can easily commit a tax crime if a tax regulation is violated.

Common tax crimes or tax infringements in Indonesia include the following:

  • Failure to register for Taxpayer Identification Number (NPWP)
  • Failure to to register a business as taxable entrepreneur (PKP)
  • Unauthorised use or misuse of NPWP or PKP
  • Failure to submit an SPT
  • Submit an SPT with invalid or incomplete information
  • Refusal of DGT’s examination
  • Provide false documents that do not reflect the current circumstances
  • Failure to pay taxes or the correct amount of taxes
  • Issue a fake tax invoice
  • Falsify evidence, statement, or documents related to taxation

Penalties for Tax Infringements in Indonesia

The penalties of a person or a business committing a tax crime in Indonesia vary based on the type of the tax infringement.

For instance, if a corporation fails to submit an SPT, a fine of IDR 1,000,000 awaits. For an individual, the fine is IDR 100,000.

For a more serious tax infringement like an unauthorised use or misuse of PKP or NPWP, tax offenders can be jailed at least six months or up to two years.

In addition to imprisonment, huge monetary fines will be imposed on tax offenders. More serious tax crimes can lead to an increased jail time of up to six years; or even double the time if the tax offender ever committed a tax crime as well in the past year.

Ensure Tax Compliance through Outsourcing to Cekindo

Cekindo understands that every company in Indonesia is always in search of ways to boost their business performance, and cut their spendings and costs.

Most importantly, they want to ensure tax compliance in Indonesia to prevent unnecessary tax crimes or tax infringements.

Therefore, we provide flexible and effective tax and accounting outsourcing services all across Indonesia.

In this ever-increasing competitive market, it is hard for businesses to handle all their business processes internally especially when it comes to taxes, finance and other accounting processes.

Thus, by outsourcing to Cekindo, you can keep your finances up to date and your accounting work ahead of your competitors.

What’s more, you will be able to reduce your overheads and get immediate updates on your outsourced processes to ensure compliance in Indonesia.

Outsource to Cekindo now and outperform others. Fill in the form below.

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