TAX UPDATES AUGUST 2018 HAVE YOU MAINTAINED YOUR COMPLIANCE POST TAX AMNESTY PERIOD? I N S I D E T H I S I S S U E

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1 AUGUST 2018 J A K A R T A O F F I C E M e n a r a I m p e r ium, 27 th F l o o r J l. H R R a s u n a S a id K a v. 1, P h F x c o n ta c t@ p b t a x a n d. c o m S U R A BAYA O F F I C E G r a h a B u ko p i n, 9 th F lo o r J l. Pan g li m a S u d irm a n , P h F x s u r a b a y p b t a x a n d. c o m I N S I D E T H I S I S S U E 1. Have You Maintained Your Compliance Post Tax Amnesty Period? 2. Do You Know HAVE YOU MAINTAINED YOUR COMPLIANCE POST TAX AMNESTY PERIOD? The headline above reminds us that the end of the Tax Amnesty program opens a new era of transparency. In light of this, to ensure the Taxpayers compliance after the Tax Amnesty period, the Directorate General of Taxes ( DGT ) currently conducts supervision over Taxpayers. As a guideline in carrying out Supervision over Taxpayers after the Tax Amnesty period, the DGT issued Circular Letter No. SE-14/PJ/2018 ( SE-14 ) effectively enacted on July 19, This Circular Letter is intended to be used in implementing the guidelines on Taxpayer supervision after the Tax Amnesty period and it aims to provide clarity, uniformity, and priority to its implementation. The implementation of Supervision after the Tax Amnesty period shall be conducted through: A. Supervision in the context of Tax Amnesty; and B. Supervision in general The supervision channel may be through requests for explanations on data and/or information; and also by visiting Taxpayers; The supervision channel may be through requests for explanations on data and/or information; and also by visiting Taxpayers; and shall be conducted with the support of internal and external data and/or information found in the information system. Such supervision shall be conducted on both Tax Amnesty participant and non-participant Taxpayers.

2 August 2018 Page 2 (continued from page 1) A. Supervision in the context of Tax Amnesty Supervision in the context of Tax Amnesty shall be conducted: 1) On Non-participant Taxpayers of Tax Amnesty, with regards to the discrepancy of data and/or information on Assets based on external data and/or internal data provided by the information system; and through the examination and matching of internal and external data and/or information on the Taxpayer s Assets found in the Directorate General of Taxes database. Research shall be conducted in advance by the Account Representative ( AR ) or the Extension and Counseling Section. The AR, as referred to above, shall examine and match data on the Taxpayer s Assets, amongst others, found in: a. Taxpayer s Tax Return; b. Items of Information; c. Visit result; d. Data and/or information from Agencies, Institutions, Associations, or Other Parties; e. Result of development and analysis of Information, data, Reports and complaints; f. Internet; and g. Data and/or other information. If, upon the results of the examination and comparison, it is known that a Taxpayer s Assets are obtained from January 1, 1985 up to December 31, 2015; and are not yet reported in their Annual Income Tax Return, the AR shall record the results of the examination and comparison as depicted in the following diagram: A Taxpayer Supervision Sheet to record the result of the examination and comparison Followed by tax audit Not followed by tax audit If the Taxpayer has no Tax ID Number (NPWP),then the NPWP shall be issued ex-officio, in advance, for the Taxpayer and a follow-up shall be made on the Taxpayer through the issuance of a Tax Audit Instruction letter (SP2) and a Tax Audit may only be conducted if the SP2 is issued before July 1, 2019 Supervisory Sheet shall be archived

3 August 2018 Page 3 (continued from page 2) 2) Taxpayers participating in Tax Amnesty, with regards to: a. The implementation of taxation obligations, by the Taxpayers, for the tax period/year after the Latest Tax Year. The latest tax year shall refer to the fiscal period that ended within January 1, 2015 December 31, Supervision in the context of Tax Amnesty participant taxpayers shall be conducted by the AR or the Extension and Counseling Section. The supervision, as intended above, shall be conducted through the examination and analysis of the: a. data in the Tax Amnesty Approval/Declaration; b. data on the Taxpayers Assets in Gateway Reports; c. data on the Taxpayers Assets in the Taxpayers Reports; d. data on the Assets, incomes, costs, and compensations reported by Taxpayers in the Annual Income Tax Returns and Monthly Tax Returns; e. data on the Taxpayers Assets and income in external data and/or internal data. The supervision, as intended above, shall be conducted through the following scale of priorities: Supervision on the overpayment of taxes in the Periodic Tax Returns, for the end of the Latest Tax Year until the succeeding tax period; Supervision on the compensation for fiscal losses in the Annual Tax Returns for a part or for the entire Tax Year, until the end of the Latest Tax Year, to a part or the entire succeeding Tax Year; Supervision on Assets conveyed in the Declaration Letter that will potentially become the sources of income for Taxpayers (taxbase); Supervision on amortization costs for intangible assets that constitute additional Assets in the Declaration Letter; Supervision on depreciation costs for tangible assets that constitute additional Assets in the Declaration Letter; Supervision on the transfer of rights for: Immovable assets in the form of land and/or buildings; Assets in the form of shares; and/or Indirectly owned assets through special purpose vehicles

4 August 2018 Page 4 (continued from page 3) b. Discrepancy in data and/or information on Assets are reported in the Declaration Letter, aside from discrepancy due to a difference in value; settlement of redemption money; and the Taxpayer s Report. Supervision, as intended above, shall be conducted through the order of priority and testing procedures, as follows: Supervision in the context of Tax Amnesty on taxpayers participating in Tax Amnesty Priority Supervision Order Testing Procedures Supervision on the Taxpayer s Assets being It shall be performed through the 1 transferred and invested into the territory of the examination and matching of data, among other Republic of Indonesia and/or maintained in the things, in the Tax Amnesty Approval Letter, territory of the Republic of Indonesia. Taxpayer s Report and Gateway Report. Supervision on Assets in the Latest Income Tax It shall be performed by examining and Return conveyed after the coming into effect of matching, among other things, data on Law Number 11 Year 2016 regarding Tax income in the Latest Income Tax Return, data Amnesty, but not reflecting the results of the of attachment to assets in the Last Annual summation of: a. Assets already reported in the Income Tax Income Tax Return submitted before the Tax Amnesty Law comes into effect and data on Returns submitted before the Latest Income Taxpayers Assets in Part A of Declaration Letter. 2 Tax Return ; b. Assets originating from income obtained in the Latest Tax Year; c. Assets originating from the increase in liabilities in the Latest Tax Year; d. Assets originating from capital payments from owners or shareholders during the Latest Tax Year Supervision on Assets which are not yet or poorly disclosed as a result of the adjustment of Assets value based on Revisions on the Approval Letter due to miscalculation. Supervision on the Taxpayers Assets that are not yet/poorly disclosed in the Declaration. Supervision on the Taxpayers Reports. It shall be performed by examining and matching data on the Assets recognized in the Tax Amnesty Approval Letter with Assets recognized in the Revision to the Tax Amnesty Approval Letter. It shall be performed by examining and matching data on additional Assets in Declaration with data on Assets based on external data and/or internal data. It shall be performed by examining and matching data on the Taxpayers Reports and Tax Amnesty Approval Letters.

5 August 2018 Page 5 (continued from page 4) In the event of a testing result, as described in point 1 and 5, where it is known that there is a discrepancy of data, the AR shall follow-up through a warning letter. In the event that a Taxpayer: 1. conveys a response to and/or submits a Taxpayer s Report on the Warning Letter, as intended above, and it is known that the Taxpayer s Assets have been transferred and were invested into a territory of the Republic of Indonesia and/or is maintained in a territory of the Republic of Indonesia, the AR shall prepare a Taxpayer Supervision Sheet in the Context of Tax Amnesty, with a recommendation that it shall not be followed up with an audit and Supervisory Sheet shall be archived; 2. does not convey any response to and/or Taxpayer s Report on the Warning Letter, as mentioned above, or conveys a response to and/or Taxpayer s Report; however, it is known that the Taxpayer s Assets are not transferred and invested into the territory of the Republic of Indonesia and/or are not maintained in the territory of the Republic of Indonesia, the AR shall prepare a Taxpayer Supervision Sheet In the Context of Tax Amnesty with a recommendation for it to be followed up with an audit. B. Supervision in general Supervision in general shall be performed on the implementation of taxation obligations by the Taxpayers, besides those who have been supervised in the context of Tax Amnesty, i.e. among other things: 1. Non-participant Taxpayers in Tax Amnesty, it shall be performed on the implementation of taxation obligations for the tax period/year for all types of taxations with due observance of an expired stipulation. Supervision on the implementation of taxation obligations for the tax period/year for all types of taxation with due observance of the expiry dates of tax assessments in accordance with the Circular Letter of the Director General of Taxation, which stipulates the Taxpayer supervision in the form of a request for explanation on data and/or information, and visiting the Taxpayers. 2. Participating Taxpayers in Tax Amnesty, shall undergo general supervision on the implementation of taxation obligations for all types of taxation for the tax period/year following the Latest Tax Year. The supervision shall be performed in accordance with the Circular Letter of the Director General of Taxes regarding Taxpayer supervision in the form of a request for explanation on data and/or information, and visiting the Taxpayers.

6 August 2018 Page 6 (continued from page 5) Conclusion Based on our analysis of SE-14, it is no doubt that DGT has a complete system to trace and monitor the supervision activity ensuring that all findings are properly followed up. Now, it is a matter of how you comply with the prevailing laws, yet maintaining the business runs as efficient as possible. If you have any queries, please contact your usual PB Taxanders for further guidance. DO YOU KNOW? 1. The latest tax audit policy in 2018 is the establishment of an Audit Planning Committee within the DGT Head Office and DGT Regional Offices. This committee s tasks include the discussion and determination of the targeted audit priorities throughout the year. Its aim is to improve the quality of the selection of taxpayers to be audited; improve the quality of tax audits; and increase tax revenue obtained from audit activities. (Circular of the Director General No. SE-15/PJ/2018 dated August 13, 2018). 2. Starting September 12, 2018, small-scale factory entrepreneurs and ethyl alcoholic distributors who are obliged to have a Taxable Entrepreneur Registration Number; and Retail Sales Entrepreneurs of ethyl alcohol or beverages containing ethyl alcohol that are required to obtain a Taxable Entrepreneur Registration Number, must submit a recapitulation of the results of their records or bookkeeping every 3 months and should be reported every 15th of April, July, October and January, at the latest. The report will be used as profiling and/or analysis material by the supervising office/customs and Excise Service and Supervision Office. (Minister of Finance Regulation No. 94/PMK.04/2018 dated August 13, 2018). 3. Upon the setting of the state of Force Majeure regarding the earthquakes on Lombok Island, West Nusa Tenggara Province; the Taxpayers domiciled, located at, and/or own businesses in Lombok Island, West Nusa Tenggara Province, are exempted from administrative sanctions for delays in the reporting of Periodic Tax Returns and Annual Tax Returns, as well as sanctions for late tax payments and/or tax debts that are due on July 29, 2018, of up to 2 months after the end of the emergency response declaration made on August 25, (Decision of the Director General of Taxes No. KEP-209/PJ/2018 dated August 21, DISCLAIMER The information contained in this document is intended only to be a guide. It must not be relied on in, or applied to, specific situation without previously seeking proper professional advice. Even if all reasonable care has been taken in its preparation, PB Taxand do not accept any liability for any errors that it may contain or lack of update before being published, whether caused by negligence or otherwise, or for any losses, however caused, or sustained by any person. Description of, or reference or access to, other publication within publication do not imply endorsement of them.