- Taxation in Indonesia
This article ls with Taxation in Indonesia or "pajak".
"Pajak" in Indonesian for:
taxand taxes whereas " perpajakan" is defined as taxationin Indonesian.
Indonesian taxation is based on Article 23A of UUD 1945 (1945 Indonesian Constitution), where tax is an enforceable contribution exposed on all Indonesian citizens, foreign nationals and residents who have resided for 120 cumulative days within a twelve month period.Indonesia has a stratification of taxation including Income Tax, Local Tax (Pajak Daerah) and Central Government Tax.
The Indonesian Taxation Laws
The relevant eight fundamental taxation laws of Indonesia include:
* General Provisions and Taxation Procedures Law "Undang-undang Ketentuan Umum dan Tatacara Perpajakan/UUKUTp" Law No. 6/1983, amended by Law no.16/2000;
* Income Tax Law ("Undang-undang Pajak Penghasilan/UU PPh": Law No.7/1983, amended by Law No. 17/2000;
* Value Added Tax
VATtermed 'Goods and Services and Sales Tax on Luxury Goods' ("Undang-undang Pajak Pertambahan Nilai atas Barang dan Jasa dan Pajak Penjualan atas Barang Mewah"/UU PPN/PPn BM ): Law No. 8/1983, amended by Law No. 18/2000;
Land Taxand Building Tax("Undang-undang Pajak Bumi dan Bangunan - UU PBB"): Law No. 12/1985 amended by Law No. 12/1994;
Warrantfor Tax Collection("Undang-undang Penagihan Pajak dengan Surat Paksa/UU PPSP") Law No. 19/1997, amended by Law No. 19/2000;
* Fees for
Acquisitionof Rightsto Lands and Buildings ("Undang-undang Bea Perolehan Hak atas Tanah dan Bangunan/UU BPHTB") Law No. 21/1997 amended by Law No. 20/2000;
* Tax Court Law ("Undang-undang Pengadilan Pajak/UU PP"): Law No. 14/2002;
Stamp Duty("Undang-undang Bea Meterai/UU BM") in short, Law Number 13 of 1985.
Indonesian Taxation law provides the following definitions to clarify whom exactly is obligated to pay tax:
Individualsor statutory bodieswhich meet relevant criteria stipulated, including certain tax collectors or withholders.
Statutory bodies are defined by Indonesian Taxation Law as groups of persons and/or capital which constitutes a unit. These are more clearly defined as such entities 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.
Companiesand entrepreneursare defined in the context of Indonesian Taxation Law as those in their business activities or works/jobs produce goods, import goods, export goods, undertake trading businesses, utilize goods, provide or utilize services from regions outside the customs area. Companiesare subject to Value-Added Tax, pursuant to Law of 1984 and all amendments, excluding the few small-scale businesses whose criteria are stipulated by the Minister of Finance.
The Indonesian Tax Period is defined as one calendar month or other periods stipulated by a decision of the Minister of Finance at the maximum of 3 (three) calendar months (
quarters).Tax Year shall be the period of 1 (one) calendar year unless taxpayers use accounting years different from the calendar year.
Indonesian Taxpayers must submit a
Tax Returnform which details and reports the calculation of tax payment owed by them. Tax Returnsmay cover a tax period or a 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.
The penalties for Tax Evasion and Avoidance are very strict in Indonesia. For
Underpaid-Tax, Additional Underpaid-Tax, Overpaid-Tax and Nil-Tax Assessments- which may be received by the debtor in the form of letters, warrants and administrative sanctions. Tax Creditsfor over-taxation or overpaymentis withheld until the subsequent year- as payouts are not issued within the same financial year.Independent works/jobs shall be jobs executed by individuals having special expertise in a bid to earn income not bound by certain working relations.
Appeals against the
Taxation Departmentmay be arbitrated via the Court of Appealsat taxpayer expense.
Indonesia has a series of progressive sliding rate taxes for all categories. Furthermore, as a developing nation, much economic activity is done at the 'cottage' level where sales and services taxation are tax exempt.Indonesia's taxations system recognises the economic reality of the majority poorer citizens and the poor are exempt from almost any taxation.The underlying ethic of
"gotong-royong"- "neighbourly [sic moral] help" is applied where the more fortunate wealthier are enforced to meet their moral obligation of a heavier burden of tax- regardless of arbitrary arguments to its' fairness.
The tax-free poverty threshold for Indonesian income earners is also dependent on regions as there exists some disparity between purchasing power of the
Rupiahbetween regions and intra-regionally between larger urban cities and smaller ones. The Capital, Jakartais considered the most expensive city in term of all goods, services and wages.
Income taxation is subject to Regional (
Propinsi) government regulations defined by the economic realities of that particular area. As mentioned above, the poorer denizens are exempt from almost all taxation.Although rates are Regionally variable, for the sake of illustration income taxbasically employs a progressive rate, commencing at 10% grosssalary income per annum, sliding to 40% per annum. Regulations are being debated as of 2008 to include income from shares, dividends, trustsand such related.
For example, the most urbanised and industrialised region,
DKI Jakarta(Special Administrative Region of Greater Municipality of Jakarta), income taxation commences with salaries greater than one million [Rupiah ( IDR)] per calendar month,a at a rate of 10%, which slides progressively to 40%. Goods and Services Taxation
A Goods and Services Tax (
GST) is levied at the rate of approx 11% at point of sale, by major vendors. Sales and services tax are exempt from cottage economies and industries.
Land and Constructions Tax
Land Taxand Tax for the buildings constructed there upon must paid annually, or may be paid via arrangement in ten year blocks by Indonesian land title deed-holders, pursuant to relevant criteria for exclusions. In general terms, this tax is applicable mainly to those of the middle classes and upwards.Land holding businesses must also pay this tax.
Land and Constructions thereupon are calculated at a value calculated by the Regional government- which is less than real market worth. This calculated value has the
caveatof being a legally non-negotiable purchase price if the Government wishes to procure said land.In Jakarta, land tax is 10% of Government calculated value.
Non Indonesians may not legally own land but may arrange long-term assured leases from the Indonesian Central Government. As such, Foreign Nationals may not subject to the Land Tax obligation of Indonesians.Exemptions from Land Tax exist for poorer society. Land Tax calculations are considered a highly specialised skill- most especially as the punishments and sanctions for false reportage are very severe and indeed costly.
Passenger Vehicle Tax is required to be paid by all owners, the rationale being those fortunate enough to afford a motor vehicle can afford to subsidise their poorer brethren who rely on far less luxurious public transportation.Again, Regional Government legislates the specific definitions regarding this tax.
For the city of Jakarta, the city with the greatest vehicle ownership, most congested city, 1% of current vehicle real agreed market is due annually.Furthermore- passenger vehicles with an engine capacity greater than 4 cylinders are taxed again and as are those mass greater than 1500 kilogrammes (commonly four-wheel drives and
Transportation and logistics vehicles,
trucks/ lorries, buses, vansand utility pick-upsare taxed according to axlenumber, vehicle mass and maximum safe gross loaded weight.Maximum loaded weight inspections are frequent and random and joked colloquially as the Police's cash-cow.
Petroleum is taxed at a rate of approximately 25%- though remains cheaper than neighbouring developed nations such as Australia or Singapore.
* [http://Pajak.go.id] - Indonesian Official Taxation website- note- bi-lingual and very informative, accessed 15 July 2008 @ 09:25 GMT
* [http://www.pajak.net/infopajak.htm: Indonesian Specialists Taxation Forum- accessed 15 July 2008 09:25 GMT
* [http://www.pajak.go.id Official site of the Indonesian Taxation Authority- note in Indonesian Language- try [http://www.toggletext.com/kataku_trial.php] for online free transliteration] , alternative online dictionary is [http://www.kamus.co.id] .
* [http://www.pajak.net/infopajak.htm: Indonesian Specialists Taxation Forum- free software relevant to Indonesian Taxation available online (note site is in Indonesian Language)
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