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AN OVERVIEW OF
INDONESIA TAX SYSTEM
DIRECTORATE GENERAL OF TAXES
OF INDONESIA
ASEAN TAX SYSTEM SEMINAR
Bangkok, 16-17 September 2010
OUTLINE
1
2
3
• General Provision and Tax Procedure
Law
• Income Tax Law
• Value Added Tax Law
General Provision and
Tax Procedure Law
TAX CYCLE
(Framework of GPTP)
FISCUS
TAXPAYER
TIN Registration
Bookkeeping/Recording
Payment
Tax Reporting
(Tax Return)
Verification
Audit
Investigation
ASSESSMENT
TAX REFUND
 Objection
 Appeal
TAX COLLECTION
STRUCTURE OF TAX LAWS
FORMAL RULING
INCOME
TAX
VAT/STLG
STAMP
DUTIES
LAND &
BUILDING
TAX
Other tax refer to this law
GPTP LAW
EXCEPT
SELF REGULATED BY RELEVANT LAWS
Income Tax
TAXABLE PERSON
• Individual
• An undivided inheritance as a unit in lieu
of the beneficiaries
• A Corporation
• Permanent Establishment
TAXABLE PERSON
• Resident Taxpayer
 an individual who resides in Indonesia or is present in
Indonesia for more than 183 (one hundred and eightythree) days within any 12 (twelve) month period, or an
individual who in particular taxable year is present and
intends to reside in Indonesia;
 a corporation established or domiciled in Indonesia;
 an undivided inheritance as a unit in lieu of the
beneficiaries.
TAXABLE PERSON
• Non-resident tax payer
 an individual who does not reside in Indonesia or is
present in Indonesia for not more than 183 (one hundred
and eighty-three) days within any 12 (twelve) month
period, and a corporation which is not established or
domiciled in Indonesia conducting business or carrying
out activities through a permanent establishment;
 an individual who does not reside in Indonesia or is
present in Indonesia for not more than 183 (one hundred
and eighty-three) days within any 12 (twelve) month
period, and a corporation which is not established or
domiciled in Indonesia deriving income from Indonesia
other than from conducting business or carrying out
activities through a permanent establishment.
NON-TAXABLE PERSON
• Certain governmental units;
• A diplomatic mission;
• International organizations as determined
by Minister of Finance Decree;
• The officials of diplomatic and consular
mission or other foreign officials;
• The officials of the international
organization representative.
TAXABLE PERSON
Related PartyTaxpayers
• Capital ownership;
• Management or technology control
power;
• Family relationship.
BASIC TAX CALCULATION
Corporate
Taxable Income:
•
•
•
•
•
Gross Revenues
Deductions
Net Income
Loss carried forward
Taxable Income
A
B (-)
C
D (-)
E
General tariff (Law 36/2008):
28% and 25% starting on 2010
BASIC MECHANISM
Taxable Income
In 1 Taxable
Year
Tax Return:
Income Tax
Calculation
At year end
Tax Credit
Income Tax Payable
minus
Tax Credit
Settlement of
Tax
underpayment/over
payment
TAXABLE OBJECT
Taxable Object is income, defined as any
increase in economic capability received
or accrued by a Taxpayer, originating from
Indonesia as well as from offshore, in
whatever name or form, that can be used
to consume or to increase the wealth of
the Taxpayer.
TAXABLE OBJECT
Sources of Income:
• income from work in connection with employment and
independent personal services, such as salary,
honorarium, income derived by a physician, notary,
actuary, accountant, lawyer;
• income from conducting business and activities;
• income from capital in the form of movable or immovable
property, such as interest, dividend, royalty, rent, gain on
sales of property, or rights not used for the business;
• other income, such as discharge of indebtedness, gift.
TAXABLE OBJECT
Exclusion
1. Generally applied:
• assets including cash received by a corporation, in exchange for
shares or capital contribution.
• dividends or distribution of profit received or accrued by resident
limited corporations, cooperatives, state-owned companies, or local
state-owned companies through ownership in enterprises
established and domiciled in Indonesia, provided that:
– dividends are paid out from retained earnings.
– limited corporations and state owned companies and local stateowned companies receiving the dividends must own at least
25% of the total paid-in capital .
• Object of Final Income Tax.
TAXABLE OBJECT
Exclusion
1. Generally applied (Individual):
• Aid, donation, including zakat and other religious
donation;
• Gifts;
• Inheritances;
• Benefits in kinds;
• Payments by an insurance company to an individual;
• Scholarship.
TAXABLE OBJECT
Exclusion
2. Specifically applied :
• contribution received or accrued by a pension fund approved by the
Minister of Finance either paid by an employer or an employee.
• distribution of profit received or accrued by a member of a limited
partnership whose capital does not consists of shares, partnership,
association, firma, or kongsi.
• income received or accrued by a venture-capital company in the
form of profit distribution of a joint-venture company established and
conducting business or engaged in activities in Indonesia, provided
that :
– the investee is a small or medium-sized enterprise or engaged in
activities in business sectors determined by the Minister of
Finance Decree; dan
– the investee’s shares are not traded in the stock exchange in
Indonesia.
DEDUCTIBLES
• Expenses to earn, to collect and to secure income,
including cost of materials, costs in connection with
employment or services including wages, salaries,
honoraria, bonuses, gratuities and remuneration in the
form of money, interest, rents, royalties, travel expenses,
waste processing expenses, insurance premiums,
administrative expenses and taxes other than income
tax;
• Depreciation of tangible asset and amortization of rights
and other expenditures which have useful life of more
than 1 (one) year;
• Contributions to a pension fund approved by the Minister
of Finance;
• Losses incurred from the sale or transfer of properties
owned and used in business or used for the purpose of
earning, collecting and securing income;
DEDUCTIBLES
• Losses from foreign exchange;
• Costs related to research and development carried out
in Indonesia;
• Scholarships, apprenticeships and training expenses;
• Debts which are actually uncollectible.
• Certain donations.
TAX RELIEF
(Individual TP)
(Rp)
Individual TP
Married TP
Working spouse
15.840.000,1.320.000,15.840.000,-
Dependent family
1.320.000,-
Max. Dependents
M/3
Non-DEDUCTIBLES
Article 9 Paragraph (1) Income Tax Law:
•
•
•
•
•
•
Distribution of profit in whatever name or form, such as dividends, including
dividends paid by an insurance company to policyholders, and any
distribution of the surplus by a cooperative;
Expenses charged or incurred for the personal benefit of shareholders,
partners or members;
Formation or accumulation of reserves, except for reserve for bad debt of a
bank or a finance lease, reserves in an insurance business, and reserves
for reclamation costs in general mining, the terms and conditions of which
shall be stipulated by the Minister of Finance Decree;
Insurance premiums for health, accident, life, dual purpose, and education
insurance which are paid by an individual Taxpayer, except those paid by
an employer where premiums are treated as income of the Taxpayer;
Consideration or remuneration related to employment or services given in
the form of a benefit in kind, except provision of food and beverages for
employees or consideration or remuneration given in the form of a benefit in
kind in certain regions and in connection with employment as stipulated by
the Minister of Finance Decree;
Excessive compensation paid to shareholders or other associated parties
as a consideration for work performed;
Non-DEDUCTIBLES
Article 9 section (1) Income Tax Law (continued…):
•
•
•
•
•
Gifts, aid or donations, and inheritances referred to in Article 4
paragraph (3) subparagraph a and subparagraph b, except zakat on
income actually paid by a Moslem individual Taxpayer and or a
resident Taxpayer other than individual owned by a Moslem to an
amil zakat board or other amil zakat institutions established or
approved by the government;
Income tax;
Costs incurred for the personal benefit of a Taxpayer or his
dependents;
Salaries paid to a member of an association, firma, or limited
partnership the capital of which does not consist of stocks;
Administrative penalties in the form of interest, fines, and
surcharges, as well as criminal penalties in the form of fines
imposed pursuant to the tax laws.
Non-DEDUCTIBLES
Foreign Business Loss
Foreign Loss must not be combined to
calculate taxable income.
TARIFF
• Individual Taxpayer
Law 36 /2008
Taxable income brackets
Tax Rate
Rp 50,000,000.00 or less
5%
Over Rp50,000,000.00 - Rp 250,000,000.00
15%
Over Rp250,000,000.00 - Rp500,000,000.00
25%
Over Rp500,000,000.00
30%
TARIFF
Corporate taxpayer
• Law 36 / 2008
28% and 25% starting on 2010
VAT
VAT Characteristics
1.
2.
3.
4.
5.
6.
7.
Indirect Tax
Objective Tax
Domestic Consumption Tax
Multi Stage Tax
Tax Invoice Mechanism
Single Tariff
Non Cumulative
VAT Mechanism
• General
• Specific (VAT Withholding Agent)
VAT = Output Tax – Input Tax
VAT = Tariff X Tax Base
Taxable Object: Article 4
1.
2.
3.
4.
5.
6.
7.
8.
A transfer of Taxable Goods carried out in the Custom Area
by a Firm;
Importation of Taxable Goods;
Rendering of Taxable Services in the Customs Area by a
Firm;
Utilisation of intangible Taxable Goods obtained from
outside the Customs Area within the Custom Area;
Utilisation of Taxable Services obtained from outside
Custom Area within the Custom Area; or
The export of Taxable Goods by a Taxable Person for VAT
purposes.
The export of Taxable Services by a Taxable Person for
VAT purposes.
The export of intangible Taxable Goods by a Taxable
Person for VAT purposes.
Non Taxable Goods
1. Products of mining and drilling, taken
directly from the source;
2. Daily necessities needed by public;
3. Food and beverages served in hotel,
restaurant, and such other places;
4. Money, gold, and valuable documents.
Transfer of Taxable Goods:
1. Transfer of title over Taxable Goods under the terms of
an agreement;
2. Transfer of Taxable Goods under a hire-purchase
agreement or a leasing agreement;
3. Transfer of Taxable Goods to an intermediate trader or
to an auctioneer;
4. Taxable Goods for personal use and or Taxable Goods
provided free of charge;
Transfer of Taxable Goods:
5. Taxable Goods and assets originally acquired not for
sale, which remain available at the time of dissolution of
the company, provided Value Added Tax on the
acquisition of such assets may be credited in
accordance with the rule;
6. Transfer of Taxable Goods from a head office to a
branch or vice versa and supply of Taxable Goods
between branches;
7. Transfer of Taxable Goods by consignment.
8. Transfer of Taxable Goods under syariah leasing
agreement
Transfer of Taxable Goods;
exclusion:
1. Transfer of Taxable Goods to a broker referred to the
Commercial Law;
2. Transfer of Taxable Goods as collateral for loans;
3. Transfer of Taxable Goods referred to paragraph (1)
subparagraph (f) where a Taxable Person for VAT
purposes has obtained permission to centralise
payment of tax payable.
4. Transfer of Taxable Goods for the purpose of merger,
consolidation, expansion, acquisition of companies.
5. Taxable Goods and assets originally acquired not for
sale, which remain available at the time of dissolution of
the company, provided Value Added Tax on the
acquisition of such assets may not be credited.
Non Taxable Services
1.
2.
3.
4.
5.
6.
Healthcare;
Social welfare;
Postal delivery;
Financial services;
Insurance services;
Religion services;
Non Taxable Services
7. Education;
8. Culture and entertainment which has
been imposed by entertainment tax;
9. Broadcasting, not include advertising;
10.Shipping and inland public transportation;
Non Taxable Services
11.Manpower;
12.Hotels;
13.Rendering of services by the government
in efforts to run the government in
general;
14.Parking Services;
15.Coin public phone;
16.Money Delivery by Post Office;
17.Catering services.
Taxable Object: Article 16 C
Self-construction activities
• conducted outside the course of business
or work
• For living / business purpose
• Area of 300m2 or more
Taxable Person
Firm:
Firm is an individual or an entity which in the course of
business or work:
•
•
•
•
•
produces goods,
imports goods,
exports goods (including intangible goods),
engages in trading activities,
utilizes intangible goods obtained from outside the
Customs Area,
• provides business services (including exporting
services), or
• utilizes services obtained from outside the Customs Area
Taxable Person
Firm:
1.
Taxable Person for VAT purposes
Include:
a. A firm who intends to deliver Taxable
Goods/Services
b. Joint Operation
2.
Small firms:
Turnover in a year does not exceed Rp600 mil
Taxable Person
Obligation:
• To report its business activities to be registered as a
Taxable Person for VAT purposes;
• To withhold,
• To pay and
• To report Value Added Tax and Sales Tax on
Luxury Goods which is payable;
Taxable Person
Related Party TP:
• where a Firm owns direct or indirect participation of 25%
(twenty-five percent) or more in another firm; likewise,
between two or more firms where there is direct or
indirect participation of 25% (twenty-five percent) in each
of those firms by another firm; or
• a Firm has control over another firm, through
management or technology; or
• there exists a family relationship either through bloodline or through marriage within one degree of direct or
indirect lineage.
Tax Base
• Sales Price on transfer of Taxable Goods,
• Consideration on transfer of Taxable
Services,
• Import Value on the import of Taxable
Goods,
• Export Value on the export of Taxable
Goods,
• Other Value as may be determined by the
Minister of Finance Decree.
VAT Tariff
The Value Added Tax rate is 10% (ten
percent)
The Value Added Tax rate on the export of
Taxable Goods or Taxable Services is 0%
(zero percent)
• Thank You