Taxation in Indonesia
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This article deals with Taxation in Indonesia or pajak.
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[edit] Definitions
There is not a single entry of "pajak" definition. "Pajak" in Indonesian is tax, taxes or taxation - that is "perpajakan" in Indonesian. So "pajak" is actually the same terminology to "tax" in English.
Pajak is the contribution to the state or country authorities. In Indonesian context, according to the Article 23A of UUD 1945 (1945 Indonesian Constitution), pajak is a can-be-forced-to-be-collect contribution exposed on every single Indonesian citizens and/or everybody else lived in Indonesia for a certain period of time (usually 120 cumulative days in a twelve month period).
Pajak in the official Indonesian terminology, is referring to the central government taxes only. This term is officially not used in local governments or provincial taxation context. Those local authorities refers their taxes as local taxes or "pajak daerah".
For each type of central tax there usually be a certain law. These laws are granted for a specific purposes.
[edit] The Indonesian Taxation Laws
There are eight base taxation laws in Indonesia:
- General Provisions and Taxation Procedures Law or Undang-undang Ketentuan Umum dan Tatacara Perpajakan - UU KUP in short, Law Number 6 of 1983 as secondly amended by the Law Number 16 of 2000;
- Income Tax Law or Undang-undang Pajak Penghasilan - UU PPh in short, Law Number 7 of 1983 as thirdly amended by the Law Number 17 of 2000;
- Value Added Tax (VAT) on Goods and Services and Sales Tax on Luxury Goods Law or Undang-undang Pajak Pertambahan Nilai atas Barang dan Jasa dan Pajak Penjualan atas Barang Mewah - UU PPN/PPn BM in short, Law Number 8 of 1983 as secondly amended by the Law Number 18 of 2000;
- Tax on Lands and Buildings Law or Undang-undang Pajak Bumi dan Bangunan - UU PBB in short, Law Number 12 of 1985 as first amended by the Law Number 12 of 1994;
- Tax Collection by Warrant Law or Undang-undang Penagihan Pajak dengan Surat Paksa - UU PPSP in short, Law Number 19 of 1997 as first amended by the Law Number 19 of 2000;
- Fees for The Acquisition of Rights to Lands and Buildings Law or Undang-undang Bea Perolehan Hak atas Tanah dan Bangunan - UU BPHTB in short, Law Number 21 of 1997 as first amended by the Law Number 20 of 2000;
- Tax Court Law or Undang-undang Pengadilan Pajak - UU PP in short, Law Number 14 of 2002;
- Stamp Duty Law or Undang-undang Bea Meterai - UU BM in short, Law Number 13 of 1985.
[edit] Basic Terminologies
These are the basic terminologies in Indonesian Taxation.
Taxpayers shall be individuals or statutory bodies which according to provisions of taxation laws, are stipulated to perform taxation obligations, including certain tax collectors or withholders.
Statutory bodies shall groups of persons, and/or capital which constitutes an unit, undertaking or not undertaking businesses, covering limited liability companies, limited partnership companies, other companies, state # or regional administration-owned companies in whatever names and forms, firms, joint companies, cooperatives, pension funds, partnerships, groups, foundations, mass organisations, social and political organisations or organisations of the same type, institutions, permanent establishments and other forms of statutory bodies.
Companies/entrepreneurs shall be individuals or statutory bodies in whatever forms which in their business activities or works/jobs produce goods, import goods, export goods, undertake trading businesses, utilize untangle goods from regions outside the customs area, provide services or utilize services from regions outside the customs area.
Taxable companies shall be the companies as meant in point 3 which deliver taxable goods or services subjected to the collection of tax on the basis of the Value-Added Tax Law of 1984 and its amendments, excluding small-scale businesses whose criteria are stipulated by the Minister of Finance, except small-scale businesses deciding to be validated as taxable companies.
Taxpayer Code Numbers shall be numbers given to taxpayers as means in the taxation administration which are used as personal identities or identities of taxpayers in exercising and fulfilling taxation rights and obligations.
Tax Period shall be a period whose duration is equal to one calendar month or other periods stipulated by a decision of the Minister of Finance at the maximum of 3 (three) calendar months.
Tax Year shall be the period of 1 (one) calendar year unless taxpayers use accounting years different from the calendar year.
Part of Tax Year shall be part of the period of one tax year.
Tax Due shall be amounts of tax which must be paid at a certain time, tax period, tax year or part of tax year according to provisions of taxation laws.
Tax Return is the form used by a Taxpayer to report the calculation and payment of tax due according to the provisions of tax law.
Periodical Tax Returns shall be tax returns for one tax period.
Annual Tax Returns shall be tax returns for one tax year or part of tax year.
Tax Payments shall be letters used by taxpayers to pay or remit tax due to the state cash through Post Offices and/or state- or regional administration-owned banks or other payment point appointed by the Minister of Finance.
Tax Assessments shall be letters of stipulation of tax covering. Underpaid-Tax Assessments or Additional Underpaid-Tax Assessments or Overpaid-Tax Assessments or Nil-Tax Assessments.
Underpaid-Tax Assessments shall be letters of stipulation of tax determining amounts of principal tax, tax credits, shortages of payment of principal tax, administrative sanctions and the remainder which must be paid.
Additional Underpaid-Tax Assessments shall be letters of stipulation of tax determining amounts in excess of tax payment because amounts of tax credits exceed tax due, or tax which should not be owned.
Overpaid-Tax Assessment shall be letters of stipulation of tax determining amounts in excess of tax payment because amounts of tax credits exceed tax due, or tax which should not be owned.
Nil-Tax Assessments shall be letters of stipulation of tax determining that principal amounts of tax are equal to amounts of tax credits or tax is not owed and tax credits are nil.
Tax Collection Letters shall be letters to collect tax and/or administrative sanctions in the forms of interest and/or fines.
Distress Warrants shall be letters of order to pay tax due and costs of collection of tax.
Tax Credits for Value Added Tax shall be input tax creditable after being reduced by the amounts of preliminary restitution of overpaid tax or after being reduced by amounts of tax already compensated for, which are deductible from tax due.
Tax Credits for Income Tax shall be tax paid by taxpayers themselves plus principal tax due in Tax Collection Letters because Income Tax for the currents year is not paid or underpaid, added by tax on income paid or owed abroad, minus amounts of preliminary restitution to overpaid tax which are deductible from tax due.
Independent works/jobs shall be jobs executed by individuals having special expertise in a bid to earn income not bound by certain working relations.
Audits shall be series of activities to seek, collect, process data and other kinds of information for testing the compliance with taxation obligations and for other purposes in the framework of the implementation of provisions of taxation laws.
Tax Guarantors shall be individuals or statutory bodies responsible for the payment of tax, including proxies exercising rights and fulfilling obligations of taxpayers according to provisions of taxation laws.
Book keeping/accounting shall be a recording process executed in an orderly manner to collect financial data and information covering property, liabilities, capital, income and costs as well as prices of acquisition and delivery of goods and services which are closed by compiling financial statements in the form of profit/loss balances and statements at the end of tax years.
Examination shall be a series of activities executed to evaluate the completion of Tax Returns and attachments including the truth of the writing and calculation.
Investigation into Taxation Crimes shall be a series of actions executed by investigators to seek and collect pieces of evidence for clarifying the taxation crimes as well as to find suspects.
Decisions on Rectification shall be decision correcting misprints, miscalculations and/or misapplication of certain provisions of taxation or Abolition of Administrative Sanctions, Decisions of Reduction or Revocation of Incorrect Tax Assessments or Decisions on Preliminary Restitution of Overpaid Tax.
Decisions on Objections shall be decisions on objections raised by taxpayers to tax assessments or tax withholding or collection by the third parties.
Decisions on Appeals shall decisions of tax arbitration courts on appeals against decisions on objections submitted by taxpayers.
Decisions on Preliminary Restitution of Overpaid Tax shall be decisions determining amounts of preliminary restitution of overpaid tax for certain taxpayers.
