Frequently Asked Questions: #indonesiantaxoffice

PMA companies in Indonesia are required to prepare and submit annual financial statements to the Indonesian Tax Office. Here are the key requirements:

Preparation of Financial Statements:

• Financial statements must be prepared in accordance with Indonesian Financial Accounting Standards (SAK).
• The statements should include:
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Statement of Changes in Equity
  • Notes to the Financial Statements

Submission Requirements:

• Deadline: Annual financial statements must be submitted along with the Annual Corporate Income Tax Return (SPT Tahunan PPh Badan) by the end of the fourth month after the end of the fiscal year.
• Language: Financial statements should be prepared in Indonesian language.
• Currency: The statements should use Indonesian Rupiah (IDR) as the reporting currency.

Additional Requirements:

• For companies with gross revenue exceeding IDR 50 billion per year, the financial statements must be audited by a certified public accountant.
• Companies listed on the Indonesian Stock Exchange have additional reporting requirements set by the Financial Services Authority (OJK).

Supporting Documents:

• Trial Balance
• General Ledger
• Sub-ledgers for major accounts
• Bank statements and reconciliations
• Fixed asset register
• Inventory list (if applicable)

Electronic Submission:

• The Indonesian Tax Office has implemented an e-Filing system for tax returns and financial statements.
• Companies are required to submit their financial statements electronically through this system.

Penalties:

• Failure to submit financial statements or submitting incomplete/inaccurate statements can result in penalties, including fines and potential tax audits.

It’s important to note that the specific requirements may vary depending on the company’s size, industry, and other factors. Engaging with a professional accounting firm or tax consultant familiar with Indonesian regulations is highly recommended to ensure full compliance and accurate reporting.

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Okusi Associates provides comprehensive support for tax audits and SP2DK (Surat Permintaan Penjelasan atas Data dan/atau Keterangan - Tax Office Request for Explanation) in the following ways:

• Preparation and Review:
  • Reviewing financial records and tax filings to ensure accuracy and completeness
  • Identifying potential issues or discrepancies before the audit begins
  • Preparing necessary documentation and explanations in advance
• Representation and Communication:
  • Acting as a liaison between the company and tax authorities
  • Attending meetings with tax officials on behalf of the client
  • Providing clear and concise explanations to tax office inquiries
• Technical Expertise:
  • Offering in-depth knowledge of Indonesian tax laws and regulations
  • Interpreting complex tax issues and providing sound advice
  • Assisting in the preparation of technical arguments or justifications
• Response Formulation:
  • Drafting formal responses to SP2DK letters
  • Ensuring all requested information is provided accurately and timely
  • Structuring responses to minimize further inquiries or potential issues
• Negotiation and Resolution:
  • Negotiating with tax authorities on behalf of the client when discrepancies arise
  • Proposing solutions or compromises to resolve disputes
  • Assisting in the appeal process if necessary
• Post-Audit Support:
  • Implementing recommended changes to improve tax compliance
  • Providing guidance on how to prevent similar issues in the future
  • Assisting with any follow-up actions required by the tax office
• Documentation and Record-Keeping:
  • Maintaining thorough records of all communications and proceedings
  • Organizing and archiving relevant documents for future reference
  • Ensuring all audit-related materials are properly stored and accessible
• Strategic Planning:
  • Advising on tax planning strategies to minimize future audit risks
  • Recommending improvements to internal tax management processes
  • Providing ongoing support to maintain tax compliance

By leveraging their expertise in Indonesian taxation and their experience in dealing with tax authorities, Okusi Associates aims to minimize disruption to business operations, reduce potential tax liabilities, and ensure a smooth and efficient audit process for their clients.

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To obtain EFIN (Electronic Filing Identification Number) registration and digital certification in Indonesia, the following procedures and costs are typically involved:

EFIN Registration:

• EFIN registration is free of charge
• The process can be done online through the Directorate General of Taxes (DGT) website
• Required documents include:
  • Tax ID number (NPWP)
  • Valid email address
  • Active Indonesian phone number
• After submitting the online application, verification is usually done through a video call with a tax office representative

Digital Certification:

• Digital certification, also known as an electronic certificate (e-certificate), is required for certain online tax transactions
• The cost for obtaining a digital certificate varies depending on the provider and validity period, typically ranging from IDR 300,000 to IDR 1,000,000 per year
• The process involves:
  • Applying through an authorized certification provider
  • Submitting required documents (e.g., company registration, tax ID)
  • Verifying identity (may involve in-person or video verification)
  • Paying the required fee
  • Receiving and installing the digital certificate

Important Notes:

• EFIN is essential for accessing the DGT’s online tax services
• Digital certification provides a higher level of security for online tax transactions
• Both EFIN and digital certification are crucial for companies to comply with Indonesia’s e-invoicing and other electronic tax reporting requirements
• It’s advisable to keep both EFIN and digital certificates up-to-date to ensure uninterrupted access to online tax services

For the most current information on costs and specific procedures, it’s recommended to check the official DGT website or consult with a tax professional familiar with Indonesian tax regulations.

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The process for registering for Value Added Tax (VAT) in Indonesia and the requirements are as follows:

When VAT Registration is Required:

• Companies must register for VAT when their annual gross turnover for the delivery of taxable goods and/or services exceeds IDR 4.8 billion (approximately USD 320,000) within a fiscal year.
• Companies can voluntarily register for VAT even if their turnover is below this threshold.

VAT Registration Process:

• Submit an application to the local tax office where the company is registered.
• Provide supporting documents, including:
  • Company’s deed of establishment
  • Tax ID number (NPWP)
  • Identity card of the company’s director
  • Statement of estimated turnover
  • Company’s latest financial statements (if available)

Post-Registration Requirements:

• Once registered, the company becomes a Taxable Entrepreneur (Pengusaha Kena Pajak or PKP).
• The company must issue VAT invoices for taxable supplies.
• Monthly VAT returns must be filed, even if there are no taxable transactions.
• The standard VAT rate in Indonesia is 11% (as of 2023).

Important Considerations:

• VAT registration is separate from the initial company registration process.
• Companies should carefully assess their turnover projections, as voluntary registration may be beneficial for certain business models.
• Proper bookkeeping and accounting systems should be in place to manage VAT compliance effectively.

It’s advisable to consult with a tax professional or a firm specializing in Indonesian taxation to ensure proper compliance with VAT regulations and to determine the best strategy for your specific business situation.

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Based on the information provided, here are the key requirements for preparing and submitting annual financial statements to the Indonesian Tax Office:

1. Financial statements must include:

   • Statement of Financial Position (Balance Sheet)
   • Statement of Comprehensive Income (Income Statement)
   • General Ledger
   • List of Assets and depreciation
   • List of prepayments, leases and amortization

2. Financial statements must be prepared in accordance with Indonesian accounting standards and tax regulations.

3. The statements must be prepared in the Indonesian language and use Indonesian Rupiah currency. Certain companies may be permitted to use English and USD after obtaining approval.

4. Books, records and supporting documents must be stored for 10 years in Indonesia.

5. The fiscal year is typically January 1 to December 31, but companies can use a different fiscal year with approval.

6. Annual financial statements must be submitted within 4 months after the end of the fiscal year.

7. Submission is done electronically through the Directorate General of Taxes website.

8. Companies must have a tax ID number (NPWP) to submit financial statements.

9. An electronic filing number (EFIN) is required for online submission. This can be obtained from the tax office.

10. For corporate taxpayers, additional documents required include:

    • Monthly and annual withholding tax reports
    • Monthly income tax reports
      
    • Annual income tax report
    • Investment plan

11. Small companies with annual revenue under 4.8 billion rupiah may be eligible for simplified 0.5% tax reporting.

12. Late submission can result in penalties, including a 2% monthly interest charge on tax payable.

13. Companies may need to engage professional accounting services to ensure proper preparation and compliance.

Okusi Associates offers comprehensive accounting and tax reporting services to assist companies in meeting these requirements and ensuring compliance with Indonesian tax regulations.

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Penalties for late or incorrect tax reporting in Indonesia can be significant and vary depending on the type of violation. Here are the key points to be aware of:

• Late submission of monthly tax returns:
  • Administrative fine of IDR 100,000 per return
  • Interest penalty of 2% per month (up to 24 months) on the unpaid tax amount
• Late submission of annual tax returns:
  • For corporate taxpayers: IDR 1,000,000
  • For individual taxpayers: IDR 100,000
• Underpayment of tax due to errors:
  • Interest penalty of 2% per month on the underpaid amount, calculated from the tax payment due date until the date of payment
• Intentional tax evasion or fraud:
  • Administrative fine of 50% to 100% of the unpaid tax amount
  • Potential criminal charges in severe cases, which may result in fines and/or imprisonment
• Failure to register for a tax ID number (NPWP) when required:
  • Administrative fine of IDR 1,000,000 for individual taxpayers
  • Administrative fine of IDR 5,000,000 for corporate taxpayers
• Incorrect issuance of tax invoices (for VAT-registered companies):
  • Administrative fine of 2% of the tax base

It’s important to note that:

• The Indonesian Tax Office has been increasing its enforcement efforts in recent years
• Penalties can accumulate quickly, especially for ongoing non-compliance
• Voluntary disclosure and correction of errors may result in reduced penalties in some cases

To avoid these penalties, it’s crucial to:

• Maintain accurate financial records
• Submit tax returns on time
• Ensure all reported information is correct and complete
• Seek professional assistance if you’re unsure about your tax obligations

By staying compliant with Indonesian tax regulations, you can avoid costly penalties and maintain a good standing with the tax authorities.

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