Tax Dispute in Indonesia

Tax Dispute in Indonesia | Tax Consultant in Jakarta Indonesia

There is a wide variety of taxes in Indonesia that companies, investors, and individuals need to comply with. This includes corporate income tax, individual income tax, withholding taxes, international tax agreements, value-added tax (VAT), luxury-goods sales tax, customs & excise, tax concessions, and land & building tax. There are also some taxes in Indonesia administered by local government

Taxes administered by the Directorate General of Taxation / Indonesia Tax Authority (DGT) include income tax (corporate income tax and individual income tax), VAT and sales tax on luxury goods. Pursuant to Article 3, Paragraph 1 of the GRT Law, the self-assessment system must be completed by taxpayers filing tax returns and paying taxes due without reliance on DGT assessments.

Official assessments by the DGT are usually performed by tax audit. The quality of the tax audit is determined by its key indicators: high-tax revenue contribution and refund discrepancy. Official assessment potentially will trigger tax dispute. A tax dispute between a taxpayer and the DGT will typically arise following the issuing of a tax assessment letter (SKP) by the DGT which the taxpayer does not agree with. A SKPKB, an SKPKBT, and a STP constitute legal tax collection instruments on the basis of which the DGT may issue a Distress Warrant if the taxpayer fails to settle the underpaid tax on time. The way the DGT executes the Distress Warrant may give rise to another tax dispute between the parties. A tax dispute may also arise between two taxpayers if one taxpayer has withheld too much tax from the income payable to the other taxpayer.

Tax Dispute Resolution Phase

Tax Audit

Tax audit is a form of DGT official assessments. It will be required whenever a taxpayer requests a refund and it often called a routine tax audit. However, tax audit may also conducted on a tax payer that being selected by the tax office to assess its tax compliance obligation based on a risk analysis and its often called special tax audit.

Besides those two, there is also tax audit for other purposes such as taxable entrepreneur status, the deletion of TIN/ NPWP, determination of a remote area status, etc. It is important for tax payer who being audit to understand the rights and obligations during and post the audit process.  Taxpayer may disagree with the adjusment(s) made by tax auditor. These must be handled in proper manner of communication, clear and convincing explanation, cooperative and professional.

Tax Objection

DGT have rights based on the applicable law to issue the tax assessment letter based on their findings in tax audit process and Taxpayer who did not agree with the adjustment in assessment letter may raise an Objection.

Objection is the further legal effort to resolved tax dispute and will handled by the Regional Tax Office as the vertical unit of tax office which issued the tax assessment letter. The process will take a maximum 12 months until the issuance of Objection Decree.

Formal aspects of the Taxpayer objection letter and provision of documents during tax audit process are the key in this process.

Tax appeals or complaint

If the Taxpayer who filed an objection still unsatisfied with the Objection Decree because their objection being rejected or partly granted by DGT. Appeal is the second step of tax dispute resolution and will handled by the Tax Court through hearings process. In this stage a particular Panel of Judges will trial the dispute of both parties, Taxpayer as the Appellant and DGT as the Appellee.

In appeal process, Taxpayer may represent himself or appoints a licensed tax attorney. The process will take 12 months and may extend up to 3 months until the Panel of Judges declare that the hearing is sufficient.

Review to Supreme Court

This is an extra-ordinary legal effort for tax dispute resolution, where both parties who involved in Appeal may rise the Review to the Supreme Court if they feel unsatisfied with the Tax Court Verdict of Appeal.

There will be no hearing process in this stage, the Supreme Judge will decide the decree by reviewing both sides written argumentation.