Indonesia

Payments of tax and tax returns filing

Tax liabilities for a particular period or year must typically be paid to the State Treasury through a designated tax-payment bank (bank persepsi) and then accounted for at the DGT office through the filing of the relevant tax returns. The tax payments and tax return filing for a particular tax must be undertaken monthly or annually, depending upon the tax obligation in question. These payments and filing obligations can also be conducted electronically. Tax payments should generally be conducted electronically.

Taxpayer can use tax deposit to settle a tax payment through an overbooking (pemindahbukuan) process. A tax deposit is a tax payment to the taxpayer's account in the DGT system that has not been allocated to a specific tax liability.

Corporate tax liabilities may be settled either by direct payments, third party withholdings, or a combination of both. Monthly tax instalments constitute the first part of tax payments to be made by taxpayers as a prepayment of their current year CIT liability. A monthly tax instalment is generally calculated using the most recent CIT return. The tax withheld by third parties on certain income or tax to be paid in advance on certain transactions (i.e. imports) also constitute prepayments for the current year corporate tax liability of the income recipient or the party conducting the import. If the total amounts of tax paid in advance through the year are less than the total CIT due, the company concerned has to settle the shortfall before filing its CIT return. Returns for transaction taxes, such as WHT, must be filed on a monthly basis.

A summary of these tax obligations is as follows:

Monthly tax obligations

Withholding taxes must generally be paid and reported by the 15th and the 20th of the following month, respectively. VAT and LST must generally be reported by the end of the following month and the payment must be made prior to the filing of the tax return.

Annual tax obligations

Penalties

Late payments of the above taxes incur interest penalties with a rate resulting from the application of the MoF Interest Rate (MIR) plus a surcharge. Part of a month, for example a single day, is considered a full month.

Late filing of a tax return or failure to file a tax return incurs an administrative penalty at the following amounts:

Tax assessments

Indonesia uses a self-assessment system under which taxpayers are trusted to calculate, pay, and report their own taxes in accordance with prevailing tax laws and regulations. However, the DGT may issue tax assessment letters to a particular taxpayer if it finds that, based on a tax audit or on other information, the taxpayer has not fully paid all tax liabilities. A tax assessment letter may also be issued by the DGT to a taxpayer who ignores a warning letter to file a tax return within a specified period. Failure to maintain books in accordance with the prescribed standards is another condition that may lead the DGT to issue an official tax assessment.

Tax audit process

The tax audit of a company may cover only a particular tax or all taxes for a particular tax period (a tax month) or tax year. It may be conducted at the company’s premises, at the DGT offices, or at both.

Conditions triggering a tax audit

Most tax refund request will trigger a tax audit, except for taxpayers eligible for early tax refunds. Due to the requirement for the DGT to decide on a refund request within 12 months, a tax audit will typically begin from a few weeks to several months from the refund request date. A CIT refund request will normally trigger a complete tax audit covering all taxes. A refund request of any other tax will normally trigger a tax audit covering only one particular tax. The DGT will likely broaden the tax audit scope to include other taxes.

Other events that may trigger a tax audit include the following:

• A tax return in an overpayment position (not necessarily accompanied by a refund request).
• An annual income tax return presenting/claiming a tax loss.
• The taxpayer has changed its fiscal year or bookkeeping method or performed fixed assets revaluation.
• A tax return not filed within the prescribed time or filed after the deadline stated in a warning letter, which has been selected to be audited based on a risk analysis.
• A tax return meeting certain (undisclosed) DGT criteria.

Statute of limitations

The DGT can issue an underpaid tax assessment letter within five years after the incurrence of a tax liability, the end of a tax period (month), or the end of (part of) a tax year.

Topics of focus for tax authorities

Indonesia is largely a self-assessment tax environment, and enforcement remains a priority of the tax authorities. The DGT continues its efforts in improving compliance by targeting tax audits on high-risk taxpayers. On the other hand, the DGT has also made some efforts to collect more information from various sources and is issuing several incentives to increase tax compliance as well as boosting national tax revenue.