The regulation also sets a similar threshold for maintaining bookkeeping for an individual taxpayer.

Transcription

1 IDTN-ISSUE 1/MAR INDONESIA TAX NEWS CONTENTS Higher VAT threshold Increased article 22 income tax rate on import of certain consumer products E-VAT Invoice E-Filing ASEAN Trade in Goods Agreement Scheme HIGHER VAT THRESHOLD The Minister of Finance (MoF) has recently issued Regulation No. 197/PMK.03/2013 concerning an amendment to the Value Added Tax (VAT) threshold effective 1 January 2014 onwards. The regulation amends MoF Regulation No. 68/PMK.03/2010 on the same subject. The new VAT threshold is set at IDR 4.8 billion, which comprises the cumulative amount of the delivery of taxable goods and services within a fiscal year commencing 1 January 2014 (previously, the threshold was IDR 600 million). A taxpayer is obliged to request a VAT registration number (PKP) no later than the following month when its revenue reaches the threshold amount. Failure to self- register would lead to being deemed VATable entrepreneur ex officio by the Director General of Tax (DGT). In this case, the DGT could issue a tax assessment letter on the VAT payables as well as the penalty incurred due to the incompliance, calculation of which from the date the threshold was exceeded. The regulation also sets a similar threshold for maintaining bookkeeping for an individual taxpayer. Following this change in the threshold, a taxpayer that already has a VAT registration number but whose revenue is estimated to be less than the yearly threshold can request a revocation of its VAT registration number. Tax Exemption and Drawback Amendment of Foreign Investment Rules New Negative Investment List New Regulation on Preliminary Refunds for Certain Taxpayers Extended Withholding Tax Reduction For Mutual Funds New Application of Form 1770S and 1770SS

2 2 INDONESIA TAX NEWS TAX CUT FOR PUBLIC LISTED COMPANIES The Indonesian government issued Government Regulation (GR) No. 77/2013 on 21 November 2013 concerning the requirements for applying for the tax reduction facility for public listed companies, revoking GR 81/2007. The regulation comes into effect starting fiscal year GR 81/2007 requires that 40% shares of the company s paid-in capital must be owned by public, while under the new regulation, the 40% of shares should be listed for trading in the Indonesian Stock Exchange (IDX) and put in the collective custody of a custody and settlement institution (KSEI). Further, it also sets a requirement to maintain these conditions for at least 183 days (previously 6 months). Other requirements remain the same. Thus, the requirements for a public listed company to apply for the tax cut facility are now as follows: At least 40% of the paid-in capital is listed for trading in the IDX and put in the collective custody of KSEI. These shares must be owned by at least 300 parties. Each such party must not own more than 5% of the paid-in capital. The requirements above have to be maintained cumulatively for at least 183 days within a fiscal year. The regulation provides examples of the application of the requirements. For example, the minimum 40% shares discussed do not include shares listed for trading in an offshore stock exchange, shares traded outside a stock exchange, or shares in the form of certificates (warkat) that are not included in the collective custody of KSEI. INCREASED ARTICLE 22 INCOME TAX RATE ON IMPORT OF CERTAIN CONSUMER PRODUCTS The Minister of Finance has increased the article 22 income tax rate on certain consumer products to 7.5% through its Regulation No. 175/PMK.011/2013 dated 6 December 2013, which came into effect on 5 January The regulation serves as the third amendment of MoF Regulation No. 154/PMK.03/2010, most recently amended by MoF Regulation No. 146/PMK.011/2013. Under the new regulation, imports of certain consumer products as outlined in the list are subject to article 22 at 7.5%, disregarding the use of an Importer Identification Number (API). Previously, import using API for all types of products was subject to 2.5%, while import without API was subject to 7.5%, which is still the case. E-VAT INVOICE The MoF has recently introduced the use of electronic value added tax (e-vat) invoice for taxpayers with certain criteria through the enactment of MoF Regulation No. 151/PMK.011/2013 dated 11 November 2013, effective from 1 January 2014 onwards. The e-vat invoice requires an electronic signature. VATable entrepreneurs meeting certain criteria (which will be further regulated by the DGT) are required to issue VAT invoices electronically. Failure to comply, except in the case of particular force majeure, will result in a deemed penalty for not issuing VAT invoices. In addition, an e-vat invoice that is issued but not reported to the DGT, or reported inappropriately, will be deemed to be an invalid VAT invoice. The DGT is expected to issue a regulation soon on the application of the e-vat invoice that covers the following issues: Criteria of the VATable entrepreneurs that are required to use e-vat invoices. Format and size of the e-vat invoice.

3 INDONESIA TAX NEWS 3 Procedure for notification on the use of e-vat invoice. Guidelines for amendment of e- VAT invoices. Guidelines for cancellation of e- VAT invoices. Guidelines for request for the information on damaged or missing e-vat invoice. Implementation of e-vat invoice at buyer s end. E-FILING On 30 October 2013, the DGT issued Regulation No. 36/PJ/2013 concerning electronic filing (efiling) as part of the policy package to promote investment in Indonesia. The regulation comes into effect on 1 January 2014 and serves as an amendment of DGT Regulation No. 47/PJ/2008. Taxpayers who intend to submit their tax returns through e-filing have to request an Electronic Filing Identification Number (e-fin) to the related tax service office, which request will be processed within one working day (previously two working days). Upon obtaining the e-fin, the taxpayers are required to register and subscribe the application with the appointed application service providers (ASP). A digital certificate that will be used as a communication tool in operating the e-filing will then be provided to the taxpayer. The electronic signature as well as the tax office s electronic receipt will be generated by the system at the time a tax return is submitted. Given the revocation of Article 9 of the previous regulation, it is believed that the attachments and related supporting documents are submittable through the e-filing. ASEAN TRADE IN GOODS AGREEMENT SCHEME The import duty under the ASEAN Trade in Goods Agreement (ATIGA) scheme using a self-certification system has recently been regulated by MoF Regulation No. 178/PMK.04/2013 dated 9 December 2013, which becomes effective on 8 January Imports within ASEAN countries are advised to use the preferred rate under the ATIGA scheme which is applicable upon the satisfaction of the Rules of Origin through the implementation of a regional selfcertification system. Under the system, the invoice declaration issued by a certified exporter within a member state of ASEAN in the Second Pilot Project for the Implementation of a Regional Self-Certification System stipulates that the exported goods have satisfied the Rules of Origin to be considered as ASEAN Originating Products under the ATIGA scheme. Currently, the participating countries are Indonesia, Philippines and Laos. The invoice declaration has to be signed by the authorized person, who has been determined beforehand and provided a specimen signature, and is valid for 12 (twelve) months. Further, the invoice declaration can be used to the extent that the imported goods are included in the agreed list of products. However, certified exporters are not allowed to issue a back-to-back invoice or to use the invoice declaration in third-party invoicing. Details of data regarding certified exporters, companies address, the authorized signors and their specimen signatures, certified exporter authorization code, and the list of products produced by certified exporters are available from the ASEAN secretariat.

4 4 INDONESIA TAX NEWS TAX EXEMPTION AND DRAWBACK On 6 December 2013, the MoF issued Regulation No. 176/ PMK.04/2013 concerning import duty exemption and 177/PMK.04/ 2013 concerning import duty drawback. These regulations become effective on 5 February 2014 and amend MoF Regulations No. 254/ PMK.04/ 2011 and 253/PMK.04/2011. Both revoke Article 17 (2) of MoF Regulation No. 147/PMK.04/2011 as last amended by 120/PMK.04/2013 regarding Bonded Zones and Article 13 (3) of MoF Regulation No. 143/PMK.04/2011 regarding Bonded Warehouses. Several notable changes are highlighted below. The exemption covers VAT and/or LST in addition to the import duty. Accordingly, the guarantee includes VAT and/or LST amount in addition to import duty. All imported raw materials are entitled to the exemption and drawback (previously, raw materials used in production that do not form an integral part of the finished products could not enjoy the exemption and drawback facilities). A company needs only a Registration Number for Exemption (NIPER) to enjoy the import duty and tax exemption and drawback facilities (previously, approval from the regional customs and excise office was also required in addition to the NIPER). Corporate guarantee is recognized for companies of Authorized Economic Operator (AEO), prioritized or nonprioritized main partner (MITA), or companies with low risk profile and good financial performance. The benefits for the AEO and MITA are as follows: corporate guarantee, only notification to the regional customs and excise office is

5 INDONESIA TAX NEWS 5 AMENDMENT OF FOREIGN INVESTMENT RULES The Indonesia Investment Coordinating Board (BKPM) has issued Regulation No. 12/2013 (Regulation 12) dated 18 September 2013 concerning guidelines and procedures of investment licensing and non-licensing. The regulation serves as an amendment of Regulation No. 5/2013 (Regulation 5) which was issued on 12 April Key changes are highlighted below. required for unloading raw materials, and an entitlement of subcontracting the entire production activities due to capacity limitation. Finished products have to be exported. However, under the new regulation, products can be transferred to other companies enjoying similar exemption or drawback facilities for further export. Additional conditions where NIPER can be suspended: - In absence of a signboard on stockpiles and at plant locations, which signboard should include at least information on name of company and its NIPER. - The company does not comply with the provisions of a subcontract (previously, this violation was subject to an administrative penalty ranging between 100% and 500% of the import duty payable). - The company does not conduct any import or export that utilizes the exemption facility - within the determined period (previously, a revocation of NIPER). Companies can utilize the tax exemption facility and tax facility of bonded zones, in different locations (previously, companies enjoying the tax exemption facility could not enjoy similar facility of bonded zone at the same time and have to choose one between). As a transition, the existing NIPER needs to be updated no later than 12 months from the enactment of the new regulation, or it will be suspended. The old regulation still applies for imports conducted prior to the effective date of the new regulation. Meanwhile, for export that involves raw materials obtained under the old regulation as well as the new regulation, the export realization will be under the new regulation. Tax exemption letters that are still applicable on the effective date of the new regulation are considered valid and are entitled for the exemption of VAT and/or LST in addition to the import duty. Foreign control in public listed companies may no longer be deemed as foreign investment (PMA) companies nor required to convert their status following the revocation of the requirements under the new regulation. Previously, public companies with PMA status were subject to BKPM rules including the negative list of investment. This resulted in a complicated condition due to the application of BKPM regulations in addition to the Financial Services Authority (OJK) regulations which could have a significant impact on the investment climate in Indonesia. Without further clarification by the authorities on the revocation of Articles 49 and 50, the amendment perhaps returns the situation to the period prior to the enactment of Regulation 5, whereby the implementation was in grey area as subject to BKPM s discretion. Meanwhile, the new negative list is still under discussion. Conversion of subsidiary of local company to PMA company due to share acquisition by foreign investors - is revoked by Regulation 12. Nevertheless, whether the

6 6 INDONESIA TAX NEWS negative list could apply to the subsidiary still requires further clarification from the authorities. Divestment requirement the new regulation does not require a PMA company that has performed its divestment to maintain its local shareholding. Accordingly, the local shareholders can sell out their shares upon the fulfilment of the divestment requirements. NEW NEGATIVE INVESTMENT LIST As part of the economic policy phase four, the Indonesian Coordinating Ministry of Economic Affairs has entered into a final discussion on the revision of Presidential Regulation No. 36/ 2010 concerning the Indonesian Negative Investment List. The new list is expected to be implemented at the beginning of However, it has not yet been issued. Basically, foreigners are welcome to invest in Indonesia, except for particular industries as determined by the negative investment list (NIL) which are either closed or partially open to foreign investors. The recent revision contains only 14 fields closed to foreign investment(previously, 20 fields). The upcoming NIL will potentially reduce the foreign ownership restrictions on certain industries such as pharmaceuticals, advertising agencies, power plants, etc. Under the new NIL, investment will be classified into 5 (five) categories: (i) business sectors that are open for foreign investment, including transportation industry, pharmaceuticals, tourism and creative economy and financial industry; (ii) business sectors that are restricted for foreign investment, including distribution, warehousing and cold storage in certain areas; (iii) business sectors that adopt the harmonization of the simplification of the foreign capital ownership, including information and communication industries and multimedia services; (iv) business sectors in a public/ private partnership arrangement with the government, including sea transportation, air transportation, public sector industries, energy and mineral resources; and (v) business sectors which must comply with the prevailing laws and regulations, including agriculture and commodity future trading. Further implementation will be advised upon release. NEW REGULATION ON PRELIMINARY REFUNDS FOR CERTAIN TAXPAYERS The Indonesian Minister of Finance issued MoF Regulation No. 198/PMK.03/2013 on 27 December 2013 regarding the amended criteria of certain taxpayers that are entitled for preliminary refunds. The regulation supports Article 17D of the KUP Law but is not applicable for low-risk VATable entrepreneurs 1 and golden taxpayers 2. This revokes MoF Regulation No.193/PMK.03/2007 as last amended by MoF Regulation No. 54/PMK.03/2009 and comes into effect starting 1 January The key changes under the new regulation are discussed below. No turnover amount is regulated under the new regulation (previously, an individual taxpayer with turnover of IDR 4.8 billion p.a., corporate taxpayer with IDR 5 billion p.a., and VATable entrepreneur with 1 Article 9 par 4c of the VAT Law 2 Article 17C of the KUP Law

7 INDONESIA TAX NEWS 7 Increased article 22 income tax rate on import of certain consumer products deliveries up to IDR 400 million per month). Higher threshold of overpayment amount is given to an individual with overpayment of IDR 10 million (previously, IDR 1 million or 0.5% of the turnover amount), corporate taxpayer with IDR 100 million (previously, IDR 10 million) and VATable entrepreneur with IDR 100 million (previously, IDR 28 million). Shorter timeline to process the refunds. DGT s decision on the refunds is expected within 15 working days for individual taxpayers (previously, 3 months), and corporate taxpayers and VATable entrepreneurs are within 1 month (previously, corporates at 3 months and VATable entrepreneurs at 1 month). Risk analysis is recognized under the new regulation, which covers timely filing of tax returns, timely settlement of tax liabilities, and the accuracy of the monthly and annual tax returns filed, including those of prior years. Tax administrative penalties can be waived or reduced by particular condition, which penalty is capped at 48 percent (previously, capped reduction was not mentioned explicitly). Tax credits or input VAT are based on the DGT application system (previously, the basis of data was not stipulated). Tax audit will be conducted automatically on any refusals of preliminary refund requests (previously, the DGT issued a refusal letter prior to a tax audit). Under the new regulation, a taxpayer satisfying the criteria mentioned above despite not requesting a preliminary refund would be treated under the process and therefore is exposed to the significant tax administrative penalty (100 percent tax increment). On the other hand, the new regulation provides further reduction by which tax increments could be capped at 48 percent. Tax credits and inputs VAT would be based on the data of the DGT, which in practice may lead to discrepancies from taxpayers data due to: timing differences, sellers not yet reporting the output VAT, and other reconciliations. Further, particular types of tax such as import taxes may involve other counterparties, which will require further coordination among the parties. Regarding the accuracy of tax returns filed, including those from prior years, as required in the risk analysis procedure, it is not clearly defined whether adjustments by tax auditors in the past are included under the definition.

8 8 INDONESIA TAX NEWS EXTENDED WITHHOLDING TAX REDUCTION FOR MUTUAL FUND As part of the Indonesian government s support for the growth and development of local mutual funds, the discounted withholding tax rate of 5 percent is extended through the year 2020 before it increases to 10 percent in 2021 onwards (previously, the normal withholding tax rate of 15 percent was intended to be applied starting in 2014). NEW APPLICATION OF FORM 1770S AND 1770SS The individual annual tax returns (Form 1770S and 1770SS) have been amended through the issuance of DGT Regulation No. 1/PJ/2014 on 6 January 2014, which comes into effect on the same day. The regulation revokes DGT Regulation No. 39/PJ/2011. Form 1770SS is applicable for individual taxpayers, not including entrepreneurs, with cumulative gross income of less than IDR 60 million p.a., to declare their taxable income (previously, Form 1770SS was applicable for individuals, not including entrepreneurs or those whose income is received from more than one employer). Form 1770S is applicable for individual taxpayers whose income is received from more than one employer with cumulative gross amount exceeding IDR 60 million p.a. including any final taxed income (previously, the form was applicable for those with income received from more than one employer even if less than IDR 60 million). It is important to note that the discussions above are for reference and do not comprise legal advice. Further consultation with any of the contacts below is recommended. Let s talk! Your BDO contacts in Indonesia: Irwan Kusumanto ikusumanto@bdo.co.id T Vivi Karwito vkarwito@bdo.co.id Julia jjuliawati@bdo.co.id This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Indonesia to discuss these matters in the context of your particular circumstances. BDO Indonesia, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO International Limited is a UK company limited by guarantee. It is the governing entity of the international BDO network of independent member firms ( the BDO network ). Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand name for the BDO network and for each of the BDO member firms.