Frequently Asked Questions: #penalties-late-incorrect-tax-reporting-indonesia

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 500,000 for a monthly VAT return, and IDR 100,000 for other monthly returns
• Late submission of annual tax returns:
  • For corporate taxpayers: IDR 1,000,000
  • For individual taxpayers: IDR 100,000
• Late payment or underpayment of tax:
  • Interest is no longer a flat 2% per month. Since the Job Creation Law (2020), the monthly rate is set by Ministry of Finance decree, based on the government benchmark interest rate plus an uplift of 5% to 15% per year (depending on the violation), divided by 12
  • Interest is charged for a maximum of 24 months, and part of a month counts as a full month
  • Voluntary corrections attract the lowest uplift; underpayments assessed in a tax audit attract the highest (15%)
• Objections and appeals (under the Tax Harmonization Law, 2021):
  • If an objection is rejected or only partially granted: penalty of 30% of the unpaid tax (previously 50%)
  • If a subsequent court appeal is rejected: penalty of 60% (previously 100%)
• Intentional tax evasion or fraud:
  • Criminal charges may result in fines of 2 to 4 times the unpaid tax and/or imprisonment
• Failure to register for a tax ID number (NPWP) when required:
  • The tax office can register you ex officio and assess back taxes with sanctions; intentional failure to register is a criminal offence
  • For Indonesian-resident individuals, the national ID number (NIK) now also functions as the NPWP
• Incorrect issuance of tax invoices (for VAT-registered companies):
  • Administrative fine of 1% of the tax base (DPP) for failing to issue, issuing late, or issuing incomplete tax invoices (previously 2%)

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 before an audit results in materially lower sanctions

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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