Relationship between

Tax Compliance and

Tax Dispute (Including
TP Documentation)

Dessy Puspasari
Tax Compliance

“
Tax Compliances:
Degree to which a
taxpayer complies (or
fails to comply) with
the tax rules of his
country, for example
by declaring income,
filing a return, and
paying the tax due in
a timely manner.*

”
*http://www.moneycontrol.com/glossary/taxes/tax-compliance_3114.html
Tax Compliance
There are many tax returns that a company must file with the
Indonesian tax office (ITO), either on a monthly or annual basis:

Annual and Annual and Monthly Monthly VAT

monthly monthly withholding returns
corporate employee tax returns
income tax (payroll)
return income tax
returns
Tax Compliance Time Table
Monthly
Monthly Filling Annual Filling
Type of Tax Payment
Deadline Deadline
Deadline
End of the 4th
Corporate Income 15th of the 20th of the
month after the tax
Tax following month following month
year ends
End of the 3rd
Individual Income 15th of the 20th of the
month after the tax
Tax following month following month
year ends
Employee 10th of the 20th of the
N/A
Withholding Tax following month following month
Other Withholding 10th of the 20th of the N/A
Taxes following month following month
Before the VAT
VAT and Luxury End of the N/A
return filling
Goods Service Tax following month
deadline
Tax Audit
Indonesia uses a self-assessment system under which
taxpayers are required to calculate, pay and report their tax
liabilities in accordance with prevailing tax laws and
regulations. The DGT may conduct a tax audit to test his self-
assessment compliances with tax obligations and issue tax
assessment as result of tax audit

Tax Audit: a series of activities to collect and process data,

information, and/ or evidence that objectively and
professionally carried out based on an audit standard to test
the compliance fulfilment of tax obligations and/ or for other
purposes in order to implement the provisions of the law and
regulation of taxation (MoF 184 year 2015 Article 1 Letter 2)
 Conditions Triggering Tax Audit
Merge, consolidation, division,
A tax refund request 01 02 liquidation, dissolution, or will
leave Indonesia forever

tax return not filed within the

The Taxpayer has changed
prescribed time of filed after
its fiscal year or bookkeeping
method or performed fixed
03 04 the deadline stated in a warning
letter, which has been selected
assets revaluation to be audited based on risk analysis

Annual income tax

A tax return meeting certain
Return presenting/
claiming a tax loss
05 06 (undisclosed) DGT Criteria
Types of Tax Audit (MoF 184/PMK.03/2015 )

Field Audit
• Field Audit is an audit conducted in the residence or domicile of the Taxpayer,
in the Taxpayer business location or self employment, and/ or in other places
that are considered necessary by the Tax Auditor
• Procedure of Field Audit – PER-07/PJ/2017 & SE-10/PJ/2017
• In the event that the conducted Audit is Field Audit, the examination period,
shall be at no longer than 6 (six) months, commencing from the Field Audit
Notification Letter delivered to the Taxpayer, their representative, authority,
employee, or an adult family members from the Taxpayer, until the date when
the SPHP delivered to the Taxpayer, their representatives, proxy, employee, or
adult family member of the Taxpayer.
Types of Tax Audit (MoF 184/PMK.03/2015 )
Office Audit
• Office Audit is an Audit which is conducted at the office of the
Directorate General of Taxation
• In the event that the conducted Audit is Office Audit, the
examination period, shall be no longer than 4 (four) months from
the date the Taxpayer, its representative, proxy, employee, or
adult family member of the Taxpayer came to fulfil the Summon
for the Office Audit until the date at which the SPHP submitted to
the Taxpayer, its representative, proxy, employee, or adult family
member of the Taxpayer.
Tax Audit Flow
Issue Tax Audit
Tax Auditor
Audit Planning and Instruction Letter
Tax Audit Instruction requested
Programming and notify to
documents
taxpayer

Notice of Tax Implementing of

Tax Calculation Note Assessment (SKPKB, Discussion with QA examination ( Tax
SKPN, SKPLB) Team Audit Method)

Result of Tax Audit Minutes of Tax Audit Notification of Tax

Closing Conference
Report Result Audit Findings
Tax Audit

“ Taxpayers being audited are required to provide documents and

information requested by the tax auditor within a month of the request
date.
The Document that requested such as financial statement including
general ledger (General taxation procedure law art 29). This requirement
also includes transfer pricing documentation based on Minister of Finance
Regulation No 213 year 2016 (PMK-213) art 5, which dated and effective
30 December 2016. PMK-213 does not revoke the existing Transfer Pricing
regulations (DGT Regulation No. PER-43/PJ/2010 as amended by PER-
32/PJ/2011. However, PMK-213 prevails over the existing regulations to the
extent that there are any inconsistencies.
Tax Audit

“ PMK-213 require for taxpayers to conduct the Master

file/Local File requirement and Country-by-Country Reporting
(CbCR) for Indonesian Taxpayers who dealing with related
parties.
As anticipated, Indonesia’s Master file/Local File and CbCR
rules are consistent with the Organization for Economic Co-
operation and Development (“OECD”) recommendations
outlined in the final report on Transfer Pricing Documentation
and Country-by-Country Reporting – Action 13.
Tax Audit
The Master and Local Files must be prepared and maintained
by taxpayers who have related party transactions and;
Whose prior year annual gross
1 turnover exceeds IDR 50 billion;or

Whose prior year annual related

party transaction exceeds;
1. IDR 20 billion for tangible goods
transactions; or
2. IDR 5 billion for each transaction on
services, interest, intangible goods, or other
related transactions; or
2
Have related party transactions
with parties domiciled in countries or
3 jurisdictions with lower income tax
rate than Indonesia
Tax Audit Object
The tax audit of company may cover only a particular tax or all
taxes for a particular tax period (a tax month) or tax year.

Kind of Tax Audit Object

1. Object of Income Tax Art 23 : Expenses (profesional Expense,
rent expense), compare to Monthly Tax Return—PMK 141 of
2015
2. Object of Income Tax Art 21: Salary expense compare to
Total Gross income in Tax Monthly Tax Return(Jan-Des)—Per
16 of 2016
3. Object of Income Tax Art 26 : Overseas expenses
(Interest,royalty, professional) compare to Monthly Tax
Return—PP 94 of 2010
Tax Audit Object
4. Object of Income Tax Art 4(2) - Property rental (building
and land), contruction expense compare to Monthly Tax
Return—PP 5 of 2002 and PP 51 of 2008 Jo PP 40 of 2009
5. VAT Out – Sales Comparison to Annual Corporate Tax
Return
6. VAT In – Comparison of purchase goods and service to
monthly VAT return
7. Deductible Expense (Income Tax Law Art 9)
Tax Audit

Notification of Tax Audit Findings

Posts
Temporary
which is
Correction Correction calculation
corrected
Base Value for Tax
by Tax
Liabilities
Auditor
Tax Audit
Audit results to examine the fulfilment compliance of tax obligations
should be notified to the Taxpayer through the delivery of SPHP
which is attached with the list of Audit findings.

Taxpayer shall be obliged to give the written response against SPHP

and list of Audit findings, in the form of:

Audit results approval statement sheet in the event that Taxpayer approves all Audit results; or

Refutation letter, in the event that Taxpayer doesn’t agree on a part or overall results of the Audit.
Tax Audit
Written response should be submitted within the period of seven (7)
working days since the date of SPHP is received by Taxpayer.

Taxpayers could extend the period of the written response

submission before the period, for maximum period of 3 (three)
working days since the period as referred above.

Taxpayers could extend the period of the written response

submission before the period, for maximum period of 3 (three)
working days since the period as referred above.
 Written response should be submitted within the period of

a seven (7) working days since the date of SPHP is received

by Taxpayer.

Tax Taxpayers could extend the period of the written

response submission before the period, for maximum
Audit b period of 3 (three) working days since the period as
referred above.

Written
Response c
Taxpayer should submit a written notice before the
period as referred above directly or through fax

d
If taxpayers does not submit a written response, the Tax
Auditor shall make an official report not submitting a
written response to the SPHP which is signed by the Tax
Auditor team.
Closing Conference
Agree

Discussion
In The Closing
Conference the
taxpayer may
Tax Minutes
reassert its position
Taxpayers Auditor of Tax
Team Audit with regard to the
tax audit corrections
and present the
relevant supporting
document
Dissagree
Quality Assurance
A taxpayer can request discussion with the Quality Assurance team
from regional tax office but only limited to disagreement concerning
the legal basis, except for audit on other concrete information
performed through office audit. The discussion will be recorded in
memorandum prepared by QAT

Audit Quality Assurance Team means the team established by the

Director General of Tax in order to discuss the Audit result, which has
not been agreed between the Tax Auditor and the Taxpayer in the
Audit Result Final Discussion in order to produce a qualified Audit
 Quality Assurance Filing Requirements

01 02 03
Request letter,
should be delivered Minutes of discussion
within the maximum is signed by taxpayer Taxpayer does not
period of 3 (three) and submitted to Tax sign the minutes of
working days since Quality Assurance tax audit result
the signing of treatise Team
of discussion

21
Tax Audit
Result of discussion with the Audit Quality Assurance Team shall be
mentioned in treatise of the Audit Quality Assurance Team.
Treatise of the Discussion, and treatise of the Audit Quality Assurance
Team, shall be utilized by the Tax Auditor as a basis for making the
minute of Audit Results Final Discussion of which is attached by the
treatise of final discussion results.

Tax Audit through the head of Audit executor unit summons

Taxpayer by sending summon to sign the acknowledgement of the
Audit Results Final Discussion. Taxpayer should fulfil the summon
within the period of three (3) working days after the summon to sign
the minute of the Audit Result Final Discussion is received by
Taxpayer.
Tax Audit

Audit Result Final Discussion and reporting period, shall

be no longer than 2 (two) months, commencing from the
date at which the SPHP delivered to the Taxpayer, its
representative, proxy, employee, or adult family member
of the Taxpayer until the date of LHP.
 Tax Audit Result
STP (Tax Collection Letter) 1 Administration Penalty

SKPLN (Nil Tax Assessment Tax Principal = Tax Credit

Letter) 2

SKPLB (Tax Overpayment Tax Principal < Tax Credit

3
Assessment Letter)
SKPKB (Tax Underpayment Tax Principal > Tax Credit
4
Assessment Letter)

SKPKBT (Additional Tax Underpayment Additional Data and Tax

Assessment Letter) 5 Liabilities
Objection (Keberatan)
A taxpayer who does not agree with a tax assessment letter can
submit an Objection to the DGT within three months of the date of
issue of the assessment letter. The Objection must state the amount
the taxpayer has calculated at the tax due and set out the reason for
its disagreement with the DGT tax assessment

A taxpayer that is going to file a tax objection with the DGT over an
assessment letter must pay at least the amount of tax payable that
has been agreed by the taxpayer in the closing conference during
the tax audit, before submitting objection letter
Objection (Keberatan)
A taxpayer can submit an objection on :
a. SKPKB
b. SKPKBT
c. SKPLB
d. SKPN
e. Tax withheld by third party
Objection Letter Requirements
It is important for taxpayers to make sure the objection letters meets
the following requirements. As a letter fails to meet these requirements
will not be regarded as a valid objection letter, and the objection will
not be processed further by the tax office.
Objection Letter must
A separate objection state the amount of tax
must be filed for each due according to the
type of tax and for each taxpayer and be
fiscal year supported by clear
reason

Objection must be The letter should be

submitted in writing in signed by the executives
the Indonesian of the company or its
language. proxy

PMK No 9/PMK.03/2013 sebagaimana telah diubah oleh PMK No 202/PMK.03/2015

Objection (Keberatan)
The DGT has to issue a decision on the tax objection within 12
months of the filling date of the objection. In no decision is issued
by DGT within 12 months, the objection is automatically deemed
approved by the DGT

If the objection is rejected by the DGT, any underpayment is

subject to a surcharge of 50%. However, the underpaid tax and
the surcharge are not payable if the tax payer files an appeal
with tax court in respect of the objection decision.

An objection which is filed by a taxpayer with the DGT office with

respect to tax withheld by a third party has the same time limits
on filling the objection and for the DGT’s decision.
Appeal (Banding)
File an Appeal
Doing a Legal
Refuse by DGT to the Tax
Effort
Objection Court
Letter
Accept by
DGT

If the Taxpayer is not or has not been satisfied with decision

given on the objection, A taxpayer can file an appeal only
to the tax court institution (Pengadilan Pajak) against a
Notice of Tax Objection (Surat Keputusan Keberatan).

29
The Subject Matter of Tax Appeal

Appeal is a legal effort to seek justice and truth facilitated by

the law for taxpayers who do not agree with the notice of tax
objection

Tax appeal shall comply with applicable legal norms and

statutory provisions

Tax appeal is the first and final legal effort to resolve the tax
dispute, but it is also possible if the WP disagrees over the
decision of the tax court judge. There are legal effort to file a
judicial review, and must be accompanied with reasons novum
which are not previously presented in the tax court
30
Formal Requirements to File an Appeal
It should be submitted in:

1 Written in Indonesian language with clear reasons;

2 At the longest by 3 (three) months since the Notice of

Tax Objection received, except force majeur condition

3 Enclosed with the copy of the Notice of Tax Objections.

4 One Notice of Tax Objections is for one Appeal Letter

5
31
Regular Appeal Process
H Tax Court’s Secretary
Submit Appeal to Tax
Court within 3 months Appeal send the copy of
Verdict to Taxpayer
after the Notice of Verdict and Tax Authorities
Tax Objection (DGT)
A G I
Tax Court send a Request Execution of
of Appeal Explanation Court Session appeals by tax
Letter (Surat Uraian
Banding) to DGT as an in Tax Court authorities
Appellee
B F
Explanation:
DGT send the Tax Court send the
A: within the period of 14 working days
Appeal Appellant's
response to B: within the period of 3 months
Explanation Letter
to Tax Court Appellee C: within the period of 14 working days
D: within the period of 30 days
C E
E: within the period of 14 working days
Tax Court send the Taxpayer send the F: within the period of 30 days
copy of Appeal Appellant's response
(Surat Bantahan) to
G: within the period of 12 months (max.)
Explanation Letter to D
Taxpayer Tax Court H: within the period of 30 days
I: within the period of 30 days
32
Form of Tax Appeal Verdict

Cancel Reject

Correcting
Write Error
Accept Partly /
and/or
Wholly
Miscalculation;
and/or

Increase Tax
Unacceptable
Accrued

33
Judicial Review
A Tax Court Decision is considered to be a final decision with full legal force based
on Tax Court Law art 31 and 33 (Law No. 12 of 2002). However, the parties involved
in a tax dispute may file a judicial review request (Peninjauan Kembali).

Judicial review request can be done only if any of the following

conditions prevail:
1. The Decision has been based on a perjury, a deception, or false
evidence on the part of the opposing party;
2. A piece of important written evidence is found which, had it
been considered previously, would have led to a different
Decision;
3. Some part of the claim has been ignored without reason;
4. Something which was not demanded was granted
5. The decision is clearly inconsistent with prevailing tax regulations
34
Judicial Review
A Tax Court Decision is considered to be a final decision with full
legal force. However, the parties involved in a tax dispute may file a
judicial review request (Peninjauan Kembali).

Judicial review request can be done only if any of the following

conditions prevail:
1. The Decision has been based on a perjury, a deception, or false
evidence on the part of the opposing party;
2. A piece of important written evidence is found which, had it
been considered previously, would have led to a different
Decision;
3. Some part of the claim has been ignored without reason;
4. Something which was not demanded was granted
5. The decision is clearly inconsistent with prevailing tax regulations
35
Judicial Review Flow

Tax Court ask for Tax Court send

Judicial Review Pleated send
contra memory contra memory
Request Contra Memory
to pleated to pleader

Tax Court send

Judicial Review Supreme Court
Bundle A and B to
Verdict process the file
Supreme Court

36
Thank You

37