Omnibus Law on Job Creation Part 2: Implication on Value-Added Tax and General Tax Provision

On 2 November 2020, the Indonesian Government issued Law No 11 of 2020 regarding Job Creation. In continuation of the last Vol 5, this publication addresses implication of the Law on Value Added Tax and General Tax Provision.

VALUE ADDED TAX

Key changes in the VAT Law are:

  1. Definition of taxable goods delivery now excludes delivery of taxable goods under consignment.
  2. Definition of non-taxable goods delivery is now including transfer of taxable goods for the purpose of equity contribution for paid up capital if both transferor and transferee are registered as VAT-able entrepreneurs.
  3. Product from coal mining is now subject to VAT.
  4. VAT-able entrepreneur can now credit all input VAT upon consumption of taxable goods and/or services prior to initial delivery of taxable goods and/or services (previously VAT credit available for capital goods only), provided that VAT credit requirements are met.
  5. If VAT-able entrepreneur in pre-operating phase does not perform delivery of taxable goods and/or services within three years since initial VAT credit, the input VAT that has been credited shall be adjusted. The three-years period may be extended for some business sectors. This provision is also applicable for business liquidation, revocation of VAT-able entrepreneur status, or having its VAT-able entrepreneur status revoked ex-officio, within three years since initial VAT credit.
  6. VAT-able entrepreneur in pre-operating phase can no longer apply for monthly VAT refund.
  7. Entrepreneur can now credit its input VAT before having registered as VAT-able entrepreneur, by up to 80% of the output VAT that should be collected.
  8. Input VAT which are not reported in VAT return but voluntary disclosed and/or discovered in tax audit process can be credited by VAT-able entrepreneur, provided that the input VAT meets requirements of creditable input VAT.
  9. Input VAT which are assessed under tax assessment letter can be credited by VAT-able entrepreneur by the amount as stated in the tax assessment letter, provided that the tax assessment has already been paid and no further legal action being pursued.
  10. Retailer VAT-able entrepreneur can prepare tax invoice without stating the identity of the buyer and the name and signature upon delivery of taxable goods and/or services to end-customers (subject to further Minister of Finance Regulation).

GENERAL TAX PROVISION

Key changes in the GTP Law are:

  1. Interest penalty is now capped at 24 months, maximum, which is calculated based on the monthly interest rate determined by the Minister of Finance, taking into account premiums which vary upon different conditions which resulting the interest penalty. Part of a month is considered as one full month. The calculation of interest penalty along with its applicability are as follow:
    • Benchmark interest rate divided by 1qq2:
      • Late payment of tax underpayment based on tax underpayment assessment letter, additional tax underpayment assessment letter, amendment decision letter, objection decision letter, appeal decision letter, or judicial review decision letter.
      • Late payment of tax underpayment based on tax installment or tax deferral.
      • Late payment of tax underpayment based on the difference of tax payable on the extended tax annual income tax return and the final annual income tax return.
    • Benchmark interest rate plus 5%, and divided by 12:
      • Tax underpayment as the result of amendment of annual tax return.
      • Tax underpayment as the result of amendment of monthly tax return.
      • Late payment of tax payable based on monthly tax return.
      • Late payment of tax payable based on annual income tax return.
      • Tax underpayment as stated on tax collection letter for current year income tax; or tax collection letter issued in regard to typo or miscalculation based on evaluation from tax office.
    • Benchmark interest rate plus 10%, and divided by 12:
      • Tax underpayment as the result of disclosure of incorrect statement in the tax return during tax audit.
    • Benchmark interest rate plus 15%, and divided by 12
      • Tax underpayment based on tax assessment letter as the result of tax audit.
      • Tax underpayment based on tax assessment letter as the result of being given VAT-able entrepreneur status ex-officio.
      • Tax underpayment based on tax assessment letter as the result of late repayment of uncreditable input VAT by VAT-able entrepreneur prior to its operation.
    • In case of VAT audit (with reference to Article 13(1) point a and c), only the highest amount of administrative sanction shall be charged, i.e. between interest and increase.
    • VAT-able entrepreneur who does not issue tax invoice or late in issuing tax invoice and does not fill the tax invoice in accordance with complete requirements is subject to administrative sanction in the form of fines at a rate of 1% of VAT base (reduced from current 2%).
    • The interest reward is calculated based on the monthly benchmark interest rate determined by the Minister of Finance, and divided by 12, with maximum period of 24 months. Part of a month is considered as one full month. This provision is applicable to:
      • Refund of tax overpayment.
      • Late issuance of tax overpayment assessment letter.
      • Tax overpayment assessment letter pertaining to certain condition of preliminary investigation audit (does not proceed to tax investigation, or continued to tax investigation but does not proceed to tax criminal prosecution, or continued to tax investigation and tax criminal prosecution but the court’s decision disregards the prosecution).
  2. Taxpayer who neglects in submission of tax return or submit tax return with incorrect or incomplete information is subject to fine by at least one time of the amount of tax payable or maximum two time of the amount of tax payable, or imprisonment by at least three months or maximum one year, disregarding whether it is the first time or not (previous 200% fine for first time taxpayer doing such negligence has been revoked). Previous provision regarding 48% interest penalty on tax assessment letter and additional tax assessment letter for taxpayer committing tax crime after five years statute of limitation has been revoked.
  3. Previous provision of 150% fine pertaining to voluntary disclosure for taxpayer already subject to preliminary investigation audit is now reduced to 100%.
  4. Previous provision of four times fine on tax underpayment pertaining to termination of tax crime investigation for the benefit of state revenue is now reduced to three times, only if the taxpayer has paid the amount of tax underpayment.

Your Contacts

  1. Tomy Harsono
    +62 811 9196 939
    tomy.harsono@consulthink.co.id
  2. Lidya Irawan
    +62 895 0998 3279
    lidya.irawan@consulthink.co.id

This publication is intended for general information only and should not be interpreted as substitute to any of our professional advices. All of information contained in this publication refers to the featured regulation as per the date of this publication.

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