Kamis, 19 Oktober 2017  

Belajar Perpajakan

GENERAL PROVISIONS AND TAX PROCEDURES

A A A 

CONSOLIDATIONOF LAW OF THE REPUBLIC OF INDONESIA

NUMBER6 OF 1983

CONCERNING

GENERALPROVISIONS AND TAX PROCEDURES

ASLASTLY AMENDED BY LAW NUMBER 16 OF 2000

CHAPTER I

GENERAL PROVISIONS

 

Article 1

For the purpose of this law, the meaning of:

1.

Taxpayer is any individual orentity who or which, pursuant to the provisions in the tax law, is requiredto fulfill tax obligations, including withholding agent of certain taxes.

2.

Entity is a group of people andor capital that forms a unity that either conducts business or not, includingcorporation, limited partnership, state or local-owned enterprise in whatevername and form, firma, kongsi, cooperative, pension fund, partnership,association, foundation, public organization, social and politicalorganization, or any similar organization, institution, permanentestablishment, and any other form of entity.

3.

Firm is an individual or entityin whatever form which in the course of business or work produces product, importsproduct, exports product, conducts trade, utilizes intangible goods fromoutside the Customs Area, renders services, or utilizes services from outsidethe Customs Area.

4.

Taxable Person for Value AddedTax (VAT) purposes is a firm referred to in point 3 (three) supplying TaxableGoods and or rendering Taxable Services as stipulated on the VAT Law of 1984and its amendment except for Small-sized firm the definition of which is setby a decree of the Minister of Finance, who does not elect to be confirmed asTaxable Person for VAT Purposes.

5.

Taxpayer Identity Number is anumber issued to a Taxpayer as means of taxation administration which is usedas a personal identity or Taxpayer identity in conducting his taxation rightsand obligations.

6.

Taxable Period is equal to onecalendar month or any other period that does not exceed 3 (three) calendarmonths as stipulated by a decree of the Minister of Finance.

7.

Taxable Year is a calendar year unlessa Taxpayer adopts an accounting year, which is different from the calendaryear.

8.

Fraction of a Taxable Year is part of one Taxable Yearperiod.

9.

Tax payable is tax, which must bepaid at a time, within a Taxable Period, a Taxable Year, or a Fraction of aTaxable Year in accordance with the provisions of the tax laws.

10.

Tax Return is a document used bya Taxpayer to report the calculation and or payment of taxes, taxable object and or non-taxable object and orassets and obligations pursuant to the provisions of tax laws.

11.

Periodic Tax Return is a TaxReturn for a particular Taxable Period.

12.

Annual Tax Return is a Tax Returnfor a particular Taxable Year or Fraction of a Taxable Year.

13.

Tax Payment Slip is a documentused by a Taxpayer to pay or remit tax payable to the State Treasury throughpost office and or state-owned bank or local-owned bank or such other placeof payment as may be stipulated by a decree of the Minister of Finance.

14.

Notice of Tax Assessment is anotice of assessment, which can be Notice of Tax Underpayment Assessment,Notice of an Additional Tax Underpayment Assessment, Notice of Tax OverpaymentAssessment, or Notice of Nil Tax Assessment.

15.

Notice of Tax UnderpaymentAssessment is a notice of tax assessment that specifies a principle amount oftax payable, amount of tax credit, a principle amount of underpayment tax payable,amount of administrative penalties, and total of tax indebtedness.

16.

Notice of an Additional TaxUnderpayment Assessment is a notice of tax assessment that specifies anadditional amount of tax payable over previously issued tax assessment.

17.

Notice of Tax OverpaymentAssessment is a notice of tax assessment that specifies an amount of taxoverpayment as a result of higher taxes credit than the tax payable or whichshould not have been payable.

18.

Notice of Nil Tax Assessment is anotice of tax assessment that specifies the principle amount of tax payableis as much as the amount of tax credit or there is no tax payable and no taxcredit.

19.

Notice of Tax Collection is a noticefor the imposition and collection of tax and or administrative penalties inthe form of interest and or fines.

20.

Coerce Warrant is an order to paytax payable and tax collection expenses.

21.

Tax Credit for VAT Purposes iscreditable Input Taxes minus pre-audit refund of overpayment creditable VATor minus compensated VAT, which may be deducted from the tax payable.

22.

Tax Credit for Income Taxpurposes is Income Tax paid by the Taxpayer himself plus the principle amountof tax payable as a result of unpaid or under paid Income Tax for effectiveyear as specified in the Notice of Tax Collection plus any Income Taxwithheld or collected, plus any tax on income paid or payable abroad, minuspre-audit refund of tax overpayment, which may be deducted from the taxpayable.

23.

Independent personal services areservices performed by an individual having special expertise in order to earnincome without any employment relationship.

24.

Audit is a series of activitiesto find, collect, and process data and or other information in order toassess tax compliance and other objectives may necessary for complying withthe provisions of the tax laws.

25.

Tax Bearer is an individual or entityresponsible for tax payment, including a representative who exercises therights and fulfils the obligations of a Taxpayer pursuant to the provisionsof the tax laws.

26.

Bookkeeping is a process oforderly recording of financial data and information including assets,liabilities, equity, income and expenses, and acquisition cost and sales ofgoods or services resulting a financial report inthe form of a balance sheet and profit and loss statement at the end of eachTaxable Year.

27.

Verification is a series ofactions undertaken to evaluate completeness of information and attachment of a Tax Return, as well as the writing and calculationaccuracy.

28.

Investigation on tax crime is a seriesof activities conducted by Tax Investigator to find and collect evidence inorder to uncover a criminal offence in the field of taxation and to find thesuspect.

29.

Notice of Tax Correction is anotice for correcting errors in writing, calculation, and or errors in theapplication of particular provisions of the tax laws found in a notice of taxassessment, Notice of Tax Collection, Decision on Objection, Decision onDeduction or Annulment of Administrative Penalties, Decision on Deduction orCancellation of Inaccurate Tax Assessment, or Decision on Pre-audit Refund ofTax Overpayment.

30.

Decision on Objection is adecision on an objection requested by Taxpayer in respect of a notice of taxassessment or withholding by a third party.

31.

Decision on Appeal is a decisionof a tax court on an appeal against Decision on Objection as requested by aTaxpayer.

32.

Decision on Pre-audit Refund ofTax Overpayment is a notice used to determine the amount of a pre-auditrefund for particular Taxpayers.

Elucidation ofArticle 1

Sufficiently clear

CHAPTER II

TAXPAYER IDENTIFICATION NUMBER,

CONFIRMATION OF TAXABLE PERSON FOR VAT PURPOSES,

TAX RETURN, AND TAX PAYMENT PROCEDURES

 

Article 2

(1)

Every Taxpayer shall be obligedto register at the office of the Directorate General of Taxes in the districtwhere the Taxpayer resides or domiciles and deserves a TaxpayerIdentification Number.

(2)

Every Taxpayer as a firm which istaxable under the VAT Law of 1984 and its amendments shall be obliged toreport its business activities to the office of the Directorate General ofTaxes in the district where the Taxpayer resides or domiciles and where thebusiness activity is carried out, to be confirmed as a Taxable Person for VATPurposes.

(3)

The Director General of Taxes maydetermine:

 

a.

an office for registration and orfor reporting a business activity other than those referred to in paragraph(1) and (2),

b.

for specific individualTaxpayers, a place of registration at the office of the Directorate Generalof Taxes whose jurisdiction covering the location where the business iscarried out, in addition to the registration obligation to the tax officereferred to in paragraph (1).

(4)

The Director General of Taxes mayissue a Taxpayer Identification Number and or to confirm a firm as a TaxablePerson for VAT Purposes ex-officio in case a Taxpayer or Taxable Person for VATPurposes does not fulfill the obligations referred to in paragraph (1) and orparagraph (2).

(5)

A period for registration andreporting and the procedures for registration and confirmation, referred toin paragraph (1), (2), (3), and (4), including the termination of TaxpayersIdentification Number and or the annulment of Confirmation of Taxable Personfor VAT Purposes is governed by a decree of Director General of Taxes.

 

Elucidation of Article 2

Paragraph (1)

Under the �self-assessment�system, every Taxpayer shall register by himself to the office of theDirectorate General of Taxes to obtain a Taxpayer Identification Number.

The obligation toregister is also applied for a married woman who is taxed individually and separatelybecause she lives apart from her husband pursuant to a court order or the couple wish for the separation of income and wealth.

ATaxpayer Identification Number is an administrative instrument for identifyinga Taxpayer; therefore to each Taxpayer shall only be issued singleIdentification Number. In addition, the Taxpayer Identification Number is alsoused to ensure orderliness of tax payment and of the tax administrationsupervision. A Taxpayer must declare his Taxpayer Identification Number relatedto tax documents. In case a Taxpayer fails to register and obtain a TaxpayerIdentification Number he shall be subject to penalties in accordance with thetax law and regulations.

Paragraph (2)

Every Taxpayer qualified as TaxablePerson according to the Value Added Tax (VAT) Law of 1984 and its amendment,must report his business activities to be confirmed as a Taxable Person for VATPurposes.

Individual firm must report hisbusiness activities at the office of Directorate General of Taxes whose jurisdictionincludes the Taxpayer�s residence and the location where the Taxpayer�sbusiness activity is carried on. Whereas, an entity firmshall report its business activities at the office of the Directorate Generalof Taxes whose jurisdiction includes the domicile of the firm and the locationwhere the activity of the business is carried on.

In case an individual or an entitywhose business activities is located in several jurisdiction, he is obliged to reporthis activities to be confirmed as a Taxable Person for VAT Purposes not only atthe tax office whose jurisdiction covers the Taxpayer�s residence or domicilebut also at the tax office whose jurisdiction covers the location where theTaxpayer�s business activities is carried on.

The confirmation as a TaxablePerson for VAT Purposes is useful not only for recognizing the correctidentification of the Taxpayer but also for fulfilling rights and obligationsfor Value Added Tax and Sales Tax on Luxury Goods as well as in the supervisionof tax administration.

A firm, which qualified as aTaxable Person for VAT Purposes but fails to report his business activities forconfirmation as a Taxable Person for VAT Purposes shall be subject to penaltiesin accordance with the tax laws.

Paragraph (3)

For certain Taxpayers and TaxablePerson for VAT Purposes, the Director General of Taxes may stipulate offices ofthe Directorate General of Taxes other than those referred to in paragraphs (1)and (2) as the place for reporting and obtaining a Taxpayer IdentificationNumber and or confirmation as a Taxable Person for VAT Purposes.

In addition, for a certainindividual firm Taxpayer, i.e. an individual Taxpayer whose business spread inseveral location such as an electronics retailer whose stores located inseveral shopping centers, he is obliged to report his business activities notonly at the office of the Directorate General of Taxes whose jurisdictionincludes the location where the business activities are conducted but also atthe office of the Directorate General of Taxes whose jurisdiction includes thelocation where the Taxpayer is resided.

Paragraph (4)

In case a Taxpayer orTaxable Person for VAT Purposes fails to register and or report his businessactivities, he may be assigned a Taxpayer Identification Number and orconfirmed as a Taxable Person for VAT Purposes by the Director General of Taxesex-officio. The authority may be exercised if the Director General of Taxespossesses or obtains information indicating the individual or the entity inquestion is qualifying for Taxpayer Identification Number or the firm isqualifying to be confirmed as a Taxable Person for VAT Purposes.

Paragraph (5)

The obligation to register to obtaina Taxpayer Identification Number and to report a business to be confirmed as aTaxable Person for VAT Purposes is subject to time limit since this is relatedto the date of the taxes payable and the obligation to impose tax payable.Application for revoking a Taxpayer Identification Number and or to annullingthe confirmation of Taxable Person for VAT Purposes shall be concluded within12 (twelve) months since the date of submission of a complete application.

A regulation concerning the duedate for registration and for reporting, the procedures for issuing or revokinga Taxpayer Identification Number and the confirmation as and annulment of aTaxable Person for VAT Purposes, shall be stipulated by a decree of theDirector General of Taxes.

 

Article 3

(1)

Every Taxpayer shall be obligedto complete its Tax Return in Indonesia Language, Latin alphabet, Arabicnumerals, and Rupiah currency, and to sign and file it to the district taxoffice where the Taxpayer registers or confirms.

(1a)

A Taxpayer which has obtained a permission from the Minister of Finance to use foreignlanguage and non-Rupiah currency in its Tax Return, shall file its Tax Returnin Indonesia Language and the currency other than Rupiah as permitted, asregulated by a decree of the Minister of Finance.

(2)

A Taxpayer referred to inparagraph (1) and paragraph (1a) shall obtain a Tax Return form by himself, at the locations as specified by the DirectorGeneral of Taxes.

(3)

Due date for filing a Tax Returnshall be:

 

a.

For a Periodic TaxReturn, is 20 (twenty) days after the end of a Taxable Period;

b.

For an Annual Tax Return, is 3(three) months after the end of the Taxable Year.

(4)

On the request of a Taxpayer, theDirector General of Taxes may extend the period for filing an Annual TaxReturn referred to in paragraph (3) subparagraph b for no longer than 6 (six)months.

(5)

The request referred to inparagraph (4) shall be in writing accompanied by a statement estimating theamount of tax payable for a Taxable Year and proof of settlement of the taxpayable.

(5a)

In case of failure to file anyTax Return on the due date referred to in paragraph (3) or in case of theAnnual Tax Return having extended filing period on the due date referred toin paragraph (4), Letter of Reprimand shall be issued.

(6)

The form and content of the TaxReturn and the required information and or documents attachment shall bestipulated by a decree of the Minister of Finance.

(7)

A Tax Return shall be considerednot filed if it is not signed referred to in paragraph (1), or not fullyaccompanied by the information and or documents referred to in paragraph (6).

(8)

Certain Income Tax of Taxpayersas stipulated by a decree of the Minister of Finance may be exempted from theobligation referred to in paragraph (1).

Elucidation ofArticle 3

Paragraph (1)

For a Taxpayer forincome tax purposes, a Tax Return is functioning as an instrument for reportingand accountability for the calculation of tax payable and for specifying:

-

payment of tax by the Taxpayerhimself and or through withholding by another party in a Taxable Year or aFraction of Taxable Year;

-

income that is taxable object andor non-taxable object;

-

assets and liabilities;

-

payment by withholding agent onwithholding of tax from other individuals or entities in a taxable Period, as stipulated by theapplied tax laws.

For a Taxable Personfor VAT Purposes, a Tax Return is functioning as an instrument for reportingand justifying for the calculation of Value Added Tax and Sales Tax on LuxuryGoods actually payable and for specifying:

-

crediting of Input Tax againstOutput Tax;

-

paying by the Taxable Person forVAT Purposes itself and or withheld by another party in a Taxable Period, asprescribed by the applied tax law regulation;

-

for a Withholding Agent, a TaxReturn is functioning as an instrument for reporting and justifying for thetax, which has been withheld, and remitted.

Completing a Tax Return meanscompleting a Tax Return correctly, truthfully, and completely in accordancewith prescribed manuals based on the provisions in the applied tax law andregulation.

Completing a Tax Return incorrectlywhich resulting in underpayment of tax will be subject to penalties inaccordance with the tax laws.

Paragraph (1a)

Sufficientlyclear.

Paragraph (2)

For the purpose of servicing andfacilitating Taxpayers, Tax Return forms are made available at the offices ofthe Directorate General of Taxes, and in other places, which are readilyaccessible to Taxpayers as stipulated by the Director General of Taxes.

Paragraph (3)

This paragraph prescribes the duedate for filing a Tax Return, which are considered adequate for a Taxpayer tomake all preparations necessary connected with tax payment and closing hisbookkeeping.

Certain Taxpayers as stipulated bya decree of the Minister of Finance are permitted to file one Periodic TaxReturn for several Taxable Periods.

Paragraph (4)

If a Taxpayer, whetheran individual or an entity, cannot prepare or complete an annual financialreport or a balance sheet and an income statement within the time limitprescribed in paragraph (3) subparagraph b due to the scale of businessactivities and technical problems in completing the foregoing reports or sothat he has difficulties to comply it within the time limit and he needs toextend the due date the Taxpayer may request an extension of the due date forfiling an Annual Income Tax Return. The due date for filing an Annual IncomeTax Return can be extended for no more than 6 (six) months.

Paragraph (5)

To prevent tax avoidance and orextension of the due date for payment of tax payable within a Taxable Yearwhich is payable before the due date for filing an Annual Tax Return, it isnecessary to enact a requirement resulting an administrative penalties in theform of interest for Taxpayer wishing to extend the due date for filing anAnnual Income Tax Return.

For the requirement, the Taxpayerhas to submit a written statement based on the tentative calculation estimatingthe tax payable for a Taxable Year, as an attachment of the request for theextension the due date for filing the Annual Income Tax Return.

Paragraph (5a)

In order to build up the characterof Taxpayer, for a Taxpayer who fails to file a Tax Return on or before the duedate, a Letter of Reprimand shall be issued.

Paragraph (6)

Considering the functions of a TaxReturn as an instrument for every Taxpayer to report and justify for thecalculation of his tax payable and the payment thereof, in order to standardizeand simplify the completion and the administration, the form and contents of aTax Return shall be stipulated by a decree of the Minister of Finance.

An Annual Income Tax Return atleast should contain the amount of turnover, gross income, Taxable Income, taxpayable, tax credits, and the amount of tax underpayment or overpayment, aswell as assets and liabilities other than those used by business activities orindependent personal services for individual Taxpayers.

Taxpayers who is required to maintain bookkeepingshall also be obliged to attach financial statement in the form of balancesheet and income statement, as well as other information required to calculatethe amount of Taxable Income.

A Periodic Value Added Tax Returnat least should includes the amount of the Tax Base,Output Tax, creditable Input Tax, and the amount of tax underpayment oroverpayment.

Certain information and documents,among other things, power of attorney, declaration for separation of wealth andincome between married couple, imports or exports document, and Tax RemittanceSlips must be attached to the Tax Return.

Paragraph (7)

A signed Tax Return and itsattachments constitute a single document that ensures the validity of the TaxReturn. Therefore, if a Tax Return is filed without accompanied by a completeset of the required attachments, the Return will bedeemed not filed.

Paragraph (8)

In principle, every Income TaxTaxpayer is obliged to file a Tax Return. For the efficiency or otherconsiderations reasons, the Minister of Finance may exempt certain Income Tax Taxpayerfrom the obligation to file a Tax Return; for instance, an individual Taxpayerwho receives or accrues income less than the personal exemptions, yet due tocertain matters of interest is obliged to obtain Taxpayer IdentificationNumber.

Article 4

(1)

Taxpayers shall fill out, file,and sign a Tax Return correctly, completely, and clearly.

(2)

In case a Taxpayer is an entity,the Tax Return must be signed by any member of the management or board ofdirectors.

(3)

In case a Tax Return is completedand signed by other than the Taxpayer, a power of attorney must be attached.

(4)

The Annual Income Tax Return ofTaxpayers which are obliged to maintain bookkeepingmust be accompanied by financial statements in the form of balance sheet andincome statement as well as other information required to calculate theamount of Taxable Income.

(5)

Procedure and administration ofTax Return are regulated under a decree of the Minister of Finance.

Elucidation of Article 4

Paragraph (1)

Sufficientlyclear.

Paragraph (2)

Sufficientlyclear.

Paragraph (3)

Sufficientlyclear.

Paragraph (4)

Sufficientlyclear.

Paragraph (5)

The procedures of receiving andadministering Tax Return include, among others, examination of completeness,issuance of a receipt, classification of overpayment, underpayment, or nil TaxReturns, recording procedure and the follow-up process, stipulated by a decreeof the Minister of Finance.

Article 5

In certain cases,Director General of Taxes may appoint a place for filing Tax Return other thanplace referred to in paragraph (1) of Article 3.

Elucidation ofArticle 5

Sufficiently clear

Article6

(1)

A Tax Return filed directly by aTaxpayer at the office of the Directorate General of Taxes shall be stampedwith the date of receipt by an official designated for that purpose; whilefor an Annual Tax Return directly filed, an Annual Tax Return filing receiptshall be given.

(2)

The filing of a Tax Return may besent through registered mail of the post office or by such other means asregulated by a decree of the Director General of Taxes.

(3)

The registered mail proof anddate of dispatch of a Tax Return filed referred to in paragraph (2) as longas the Tax Return has been completed shall be considered as Annual Tax Returnfiling receipt and date of receipt.

Elucidation ofArticle 6

Paragraph (1)

Sufficiently clear.

Paragraph (2)

In order to improve services to Taxpayers, and in line with the advancement of informationtechnology, alternative methods to enable Taxpayers to fulfill the obligationof filing Tax Returns other than by registered mail through the post office maybe introduced. Such other methods shall be stipulated by a decree of theDirector General of Taxes.

Paragraph (3)

The registered mail proof and datedispatch of a Tax Return filed through post office is deemed a receipt,provided that the Return concerned is complete, namely, in compliance with therequirements as stipulated in paragraphs (1), (1a), and (6) of Article 3.

 

Article 7

(1)

In case a Tax Return is not filedwithin the time limit referred to in paragraph (3) of Article 3 or within theextended filing time limit referred to in paragraph (4) of Article 3, anadministrative penalty of Rp50,000.00 (fiftythousand rupiahs) fine for a Periodic Tax Return and Rp100,000.00 (onehundred thousand rupiahs) fine for an Annual Tax Return shall be imposed.

(2)

The administrative penalty in theform of fine referred to in paragraph (1) does not apply for certain Taxpayerstipulated by a decree of the Minister of Finance.

Elucidation ofArticle 7

Paragraph (1)

For the properly tax administrationpurposes and to persevere discipline of the Taxpayers, any Taxpayer fails tofile his Tax Return before or on the due date will be subject to anadministrative penalty in the form of Rp50,000.00(fifty thousand rupiahs) fine for a Periodic Tax Return and Rp100,000.00 (onehundred thousand rupiahs) fine for an Annual Tax Return.

Paragraph (2)

The Minister of Finance has theauthority to stipulate certain Taxpayers, such as a Non-Effective Taxpayer andan individual Taxpayer whose net income less than personal exemptions, to beexempted from administrative penalties as prescribed under paragraph (1).

Article 8

 

(1)

A Taxpayer may amend a filed TaxReturn voluntarily by submitting written statement, within two years from theend of a Taxable Period, Fraction of a Taxable Year, or a Taxable Year,provided that the Director General of Taxes has not commenced an audit.

(2)

In case a Taxpayer voluntarilyamends a filed Tax Return which is resulting an increasing of the taxpayable, the Taxpayer shall be subject to an administrative penalty of 2%(two percent) interest per month, based on the underpaid tax, calculatingfrom the due date for filing the Tax Return up to the date of payment theunderpaid tax arising from the correction of the Tax Return.

(3)

Even though an audit has beenperformed, provided an investigation has not been conducted on deficienciescommitted by a Taxpayer referred to in Article 38, there shall be noinvestigation on the erroneous of the Taxpayer as long as the Taxpayervoluntarily discloses the erroneous and pays any underpaid tax along with anadministrative penalty in the form of fine as much as twice the amount of theunderpaid tax.

(4)

Even though the period forcorrecting a Tax Return referred to in paragraph (1) has been elapsed,provided that the Director General of Taxes has not issued a notice of taxassessment, a Taxpayer may voluntarily disclose any deficiency in its filedTax Return on a separate report, which causes:

 

a.

increase of the tax payable; or

b.

decrease of the tax losses; or

c.

increase of the total assets;or

d.

increase of the total equity.

(5)

Any underpaid tax arising fromthe disclosure of erroneous in completing a Tax Return referred to inparagraph (4) along with an administrative penalty in the form of incrementof 50% (fifty percent) of the amount of tax underpaid shall be paid by the Taxpayerbefore submission of the above report.

(6)

Even though the period forcorrecting a Tax Return referred to in paragraph (1) has been elapsed,provided that the Director General of Taxes has not conducted an audit, aTaxpayer may amend the filed Annual Income Tax Return within 3 (three) monthsafter Decision on Objection or Decision on Appeal of previously years taxassessment when the Taxpayer accepts the decision stating the amount offiscal loss is different from the amount in the tax assessment being objectedor appealed.

Elucidation ofArticle 8

Paragraph (1)

Any error in a filed Tax Returndone by a Taxpayer may be corrected by the Taxpayer voluntarily within 2 (two)years since the end of a Taxable Period, Fraction of a Taxable Year or aTaxable Year, provided that the Director General of Taxes has not commenced anaudit. Commencing an audit means a date when an Audit Notification Letter isgiven to the Taxpayer, or his representative, or the person having authorization,or the official, or received by the adult member of the Taxpayer�s family.

Stipulation of a due date for thecorrection of a Tax Return is considered, on the one side, to providesufficient time for a Taxpayer himself to review and amend a Tax Return thatcontains error and deficiencies and, on the other side, to give sufficient timefor the Director General of Taxes to provide appropriate services and tosupervise the correction filed by the Taxpayer before the elapsing of the duedate for correcting a Tax Return.

Paragraph (2)

The voluntary correction of a TaxReturn may results the calculation of tax payable andtax paid will be different from the original amount.

Any tax underpayment resulting fromthe above correction will be subject to an administrative penalty of 2%(two-percent) interest for each month.

The interest on the underpaymenttax will be calculated since the due date for filing a Tax Return up to thepayment of the underpayment due to the correction.

Paragraph (3)

Even though an audit to a Taxpayerhas been carried out, so long as an investigation has not been commenced, hewill not be investigated provided that he has both disclose his error and paidfully the tax actually payable plus an administrative penalty which is 2 (two)times the amount of tax underpaid.

If, however, an investigation hascommenced and has been notified to the Public Prosecutor, the Taxpayer has noopportunity anymore for voluntary amendment.

Paragraph (4)

Although the 2 (two) year periodstipulated under paragraph (1) has elapsed and the Director General of Taxeshas not issued a notice of tax assessment, a Taxpayer who has or has notamended the Tax Return still has an opportunity to disclose error and or deficienciesin a filed Tax Return, either for an Annual Tax Return or a Periodic Tax Returnof the past years or periods. The disclosure of errorand or deficiencies in a Tax Return, however, isrestricted to the following matters:

a.

an increase in thetax payable; or

b.

a reduction in lossbased on the tax provisions; or

c.

an increase inassets; or

d.

an increase in capital.

Paragraph (5)

Sufficiently clear.

Paragraph (6)

In case the Decision on Objection or Decision onAppeal resulting in a different fiscal loss from that of tax decision objectedto or of Decision on Objection appealed, a Taxpayer still has an opportunity tocorrect the following year Annual Income Tax Return although the 2(two) year-limit from the end of the Taxable Year or Fraction of a Taxable Yearhas elapsed, provided that the Director General has not initiated an audit ofthe Taxpayer concerning his Tax Return.

Example:

a.

Corporation �A� filesAnnual Income Tax Return of year 2002 dated March 31, 2003, stating a fiscalloss of Rp100,000,000.00 (without any overpayment).

An audit is conductedon the Tax Return, and on January 6, 2006, a notice of tax assessment statinga fiscal loss of Rp50,000,000.00 is issued.

TheTaxpayer files an objection to the assessment on March 16, 2006. On November10, 2006, the objection is concluded and the decision on objection is issuedstipulating Corporation A�s fiscal loss for 2002 shall be Rp110,000,000.00.

Corporation �A� files Annual Income Tax Return of year 2003dated March 26, 2004, which states that:

Net Income

 

Rp 200.000.000,00

Loss carry over based on Annual

Income Tax Return of year 2002

 

Rp 100.000.000,00

Taxable Income

 

Rp 100.000.000,00

 

On November 21, 2006, the Annual Income TaxReturn of 2003 may be corrected based on paragraph (6) of Article 8, so thatbecomes:

Net Income

 

Rp 200.000.000,00

Loss based on the Objection Decision

 

Rp 110.000.000,00

Taxable Income

 

Rp 90.000.000,00

b.

Corporation �B� files Annual Income Tax Return of year2002 dated March 31, 2003, stating a fiscal loss of Rp150,000,000.00 withoutany overpayment.

An audit on the Tax Returnis conducted and on January 16, 2006, a notice of tax assessment stating afiscal loss of Rp100,000,000.00 is issued.

The Taxpayer files anobjection to the assessment on March 16, 2006.

On November 10, 2006,the decision on the objection is issued stating that the objection of theTaxpayer is disapproved.

The Taxpayer files anappeal on the decision on the objection on December 22, 2006. On May 18,2007, a Decision on Appeal is issued stating the loss of the Taxpayer shallbe Rp160,000,000.00.

Corporation �B� files Annual Income TaxReturn of year 2003 on March 26, 2004, which states that:

Net Income

 

Rp 250.000.000,00

Loss carry over based on Annual

Income Tax Return of year 2002

 

Rp 150.000.000,00

Taxable Income

 

Rp 100.000.000,00

 

On July 21, 2007, theAnnual Income Tax Return of year 2003 is corrected based on paragraph (6) ofArticle 8, so that:

Net Income

 

Rp 250.000.000,00

Loss based on Decision on Objection

 

Rp 160.000.000,00

Taxable Income

 

Rp 90.000.000,00

 

Article 9

 

(1)

The Minister of Finance shallstipulate due date for payment and remittance of tax payable at a time or ina Taxable Period for each type of tax, which shall not later than 15(fifteen) days from the due date of a tax or the end of a Taxable Period.

(2)

Any underpaid tax as calculatedon an Annual Tax Return shall be fully paid before or on the 25th of the thirdmonth after the end of a Taxable Year or Fraction of a Taxable Year, beforethe Annual Tax Return is filed.

(2a)

If a payment or remittance of taxpayable referred to in paragraph (1), or paragraph (2) is made after the duedate of the payment or remittance, an administrative penalty in the form of2% (two percent) interest monthly, calculated from the due date of payment upto the date of payment where fraction of the month is treated as a 1 (one)full month shall be imposed.

(3)

Any addition to the amount of taxpayable arising from the issuance of a Notice of Tax Collection, Notice ofTax Underpayment Assessment, Notice of an Additional Tax UnderpaymentAssessment, Notice of Tax Correction, Decision on Objection, or Decision onAppeal, shall be paid within one month from the date of the issuance.

(4)

On the request of a Taxpayer, theDirector General of Taxes may approve the Taxpayer to install or postpone thepayment of taxes, including underpayment referred to in paragraph (2) for notmore than 12 (twelve) months, the procedures of which shall be stipulated bya decree of the Director General of Taxes.

Elucidation of Article 9

Paragraph (1)

The due date forpayment and remittance tax payable for certain period or Taxable Period shallbe stipulated by the Minister of Finance, which may not exceed 15(fifteen) days from the date tax is payable or from the end of a TaxablePeriod. In case Taxpayer fail to pay or remit on orbefore the due date an administrative penalty in accordance with the prevailingprovisions will be imposed.

Paragraph (2)

If an Annual Income TaxReturn shows a tax underpaid, the underpaid tax shall be paid on or before thetwenty-fifth of the third month from the end of the Taxable Year or Fraction ofa Taxable Year and before the Annual Income Tax Return concerned is filed.

For instance, an AnnualIncome Tax Return must be filed on March 31; hence any tax underpayment must bepaid on or before March 25, prior to filing the Annual Income Tax Return.

Paragraph (2a)

This paragraphregulates the imposition of interest on late payment or late remittance. Toclarify the interest calculation, following is an exampleof the calculation:

-

the monthly installment ofArticle 25 of Income Tax for Year 2002 is Rp10,000,000.00

-

the installment forthe May 2002 is paid on June 18, 2002, and reported on June 19, 2002

-

on July 15, 2002 aNotice of Tax Collection is issued

-

the interest penalty in the Notice of TaxCollection is calculated for 1 (one)month =

1 x 2% xRp10,000,000.00 = Rp200,000.00

Paragraph (3)

Sufficiently clear.

Paragraph (4)

On the request of aTaxpayer, The Director General of Taxes may issue permission to aTaxpayer to install or postpone tax payment including the underpaid Income Tax,which still must be paid in the Annual Income Tax Return, even though the duedate for payment has been stipulated.

This concession will begranted cautiously for a maximum of 12 (twelve) months and limited to Taxpayersgenuinely experiencing liquidity problems.

Article 10

(1)

Taxpayer is obliged to pay orremit tax payable at state treasury through post office and or state-ownedbank or local-owned bank or any other place of payment stipulated by theMinister of Finance.

(2)

Procedures of payment,remittance, and reporting of tax payable as well as its installment andpostponement are stipulated by a decree of the Minister of Finance.

 

Elucidation of Article 10

Paragraph (1)

The Director General ofTaxes shall not be allowed to receive tax remittance from Taxpayers. Allremittances of the State�s taxes must be paid to the State Treasury throughplaces of payment as stipulated by the Minister of Finance, such as a postoffice or a state-owned bank or a local-owned bank or other places of paymentstipulated by the Minister of Finance.

The purposes of theeffort to expand the places of payment, which are easily reached by Taxpayers,are to make it easier for the Taxpayers to fulfill their obligation and at thesame time to eliminate the hesitation of the Taxpayers to pay their taxpayables.

Paragraph (2)

Procedures for taxpayment, tax remittance, and its filing as stipulated by a decree of theMinister of Finance as well as the procedures of installment and postponementof tax payment, will hopefully facilitate the Taxpayers in conducting taxpayment and its administration.

Article 11

(1)

On the request of a Taxpayer, anytax overpayment referred to in Article 17, Article 17B, or Article 17C shallbe refunded; however, if the Taxpayer has tax liabilities, the overpaymentshall be directly used to settle the tax arrears.

(2)

The refund of tax overpaymentreferred to in paragraph (1) shall be made within a maximum period of 1 (one)month after the acceptance of the request for tax refund as a result of theissuance of a Notice of Tax Overpayment Assessment referred to in Article 17,or after the issuance of a Notice of Tax Overpayment Assessment referred toin Article 17B, or after the issuance of a Decision on Pre-audit Refund ofTax Overpayment referred to in Article 17C.

(3)

If the refund of tax overpaymentis made after 1 (one) month period, the government shall pay interest of 2%(two percent) per month on any late refund, which is calculated starting fromthe end of the due date referred to in paragraph (2) to the date when therefund is made.

(4)

A procedure for calculating andrefunding a tax overpayment shall be stipulated by a decree of the Ministerof Finance.

Elucidation of Article 11

Paragraph (1)

If after calculatingthe actual tax payable and tax credit, a surplus is shown (the tax credit is higherthan the tax payable) or after payment of unrightfully tax payable, a Taxpayeris entitled to claim a refund of the overpayment, provided that the Taxpayerhas no other outstanding tax payables.

In a case that theTaxpayer has outstanding tax payable, including all kinds of taxes of the headoffice and the branch offices, the overpayment must be applied first to settlethe tax payable and the remaining, if any, can be refunded to the Taxpayer.

Paragraph (2)

To provide legalcertainty for the Taxpayer and for orderly administration, the due date forrefund by the Director General of Taxes is stipulated at a maximum of 1 (one)month:

a.

for a Notice of Tax OverpaymentAssessment as described in Article 17, calculated starting from the date of receiptof the written request for a refund;

b.

for a Notice of TaxOverpayment Assessment as described in Article 17B, calculated starting fromthe time of its issuance;

c.

for Decision onPre-audit Refund of Tax Overpayment as described in Article 17C, calculatedstarting from the date of issuance;

until the issuance of anOrder of Tax Overpayment Refund.

Paragraph (3)

In order to maintain abalance between the rights and obligations of a Taxpayer and the efficiency in serviceprovided by the Directorate General of Taxes, this paragraph prescribes thatfor any delay in the refunding of overpaid tax beyond the time limit providedin paragraph (2), the Taxpayer will be given compensation by the Government of2% (two percent) interest per month which is calculated starting from the endof the 1 (one) month period to the date when the payment is made; that is, thedate of a Notice of Payment of Tax Overpayment is issued.

Paragraph (4)

Sufficientlyclear.

CHAPTER III

TAX ASSESSMENT AND NOTICE OFTAX ASSESSMENT

Article12

(1)

Every Taxpayer shall be obligedto pay tax payable pursuant to the provisions of the tax laws without waitingfor the issuance of notice of tax assessment.

(2)

The amount of tax payable as statedin a Tax Return filed by a Taxpayer is the amount of tax payable pursuant tothe provisions of tax laws.

(3)

If the Director General of Taxeshas a proof that the amount of tax payable according to the Tax Return referredto in paragraph (2) is incorrect, the Director General of Taxes shalldetermine the correct amount of tax payable.

Elucidation of Article 12

Paragraph (1)

Principally, tax ispayable when there is a taxable object, but for the purpose of taxadministration, the time of tax payable is:

a.

at any time, forIncome Tax withheld by a third party;

b.

at the end of aTaxable Period, for Employment Tax withheld by the employer, or by otherparty on a business activity, or by a Taxable Person for VAT Purposes on thewithholding of Value Added Tax on Goods and Services and Sales Tax on LuxuryGoods;

c.

at the end of a TaxableYear, for Income Tax.

The amount of taxpayable, which has been withheld as well as which has to be paid by a Taxpayerhimself, after the time to be paid as stipulated in Article 9 and paragraph (2)of Article 10, by the Taxpayer, must be remitted to the State Treasury througha post office and or a state-owned bank or a local-owned bank or other placesof payment stipulated by the Minister of Finance.

Under this Law, theDirector General of Taxes shall no longer be obliged to issue a notice of taxassessment on each Tax Return filed by the Taxpayers. The issuance of thenotice of tax assessment is limited only to certain Taxpayers due to theincorrectness in completing the return or because the fiscal data is not fullydisclosed by the Taxpayers.

Paragraph (2)

The purpose of thisparagraph is that for a Taxpayer who has calculated and paid the amount of taxpayable properly under the provisions of the tax law and reported it in a TaxReturn, it is no need to be given any notice of tax assessment or any decisionletter from the tax administration.

Paragraph (3)

Where, based on theresult of audit or other information, the tax calculated and reported in theTax Return is incorrect, for instance a deduction is overstated, the DirectorGeneral of Taxes shall determine the amount of tax payable as it should be inaccordance with the tax law.

 

Article 13

(1)

Within ten years from the date atax is payable, or from the end of a Taxable Period, a Fraction of a TaxableYear, or a Taxable Year, the Director General of Taxes may issue a Notice ofTax Underpayment Assessment in the following conditions:

 

a.

based on the result of an auditor other information, a tax payable is unpaid or underpaid;

b.

a Tax Return is not filed withinthe period referred to in paragraph (3) of Article 3 and after being warnedin writing, the Tax Return is not filed within the time specified in theLetter of Reprimand;

c.

based on the result of an auditof VAT and Sales Tax on Luxury Goods, it is found that a tax overpaymentshould not have been carried over or that the 0% (zero percent) rate shouldnot have been applied;

d.

the obligations referred to inArticle 28 and Article 29 have not been met, so that the amount of taxpayable cannot be determined.

(2)

The amountof tax underpaid in a Notice of Tax Underpayment Assessment referred to inparagraph (1) subparagraph a shall be increased by an administrative penalty of2% (two percent) interest per month for a maximum of 24 (twenty four) months,calculated from the date a tax is payable or from the end of a TaxablePeriod, a Fraction of a Taxable Year, or a Taxable Year up to the issuance ofthe Notice of Tax Underpayment Assessment.

(3)

The amountof tax underpaid in a Notice of Tax Underpayment Assessment referred to inparagraph (1) subparagraph b, c, and d shall be increased by anadministrative penalty in the form of surcharge of:

 

a.

50% (fifty percent) of anyIncome Tax unpaid or underpaid in a Taxable Year;

b.

100% (one hundred percent) ofany Income Tax which has not been withheld or is under-withheld, notcollected or under-collected, not remitted or under-remitted, and withheldor collected but not remitted or under-remitted;

c.

100% (one hundred percent) ofany VAT for Goods and Services and Sales Tax on Luxury Goods unpaid orunderpaid.

(4)

The amount of taxpayable as shown in a Tax Return shall be final under the tax laws if, withinten years from the date the tax is payable or from the end of a TaxablePeriod, a Fraction of a Taxable Year, or a Taxable Year, no notice of taxassessment is issued.

(5)

If the ten year period referredto in paragraph (1) has elapsed, a Notice of Tax Underpayment Assessment maystill be issued, along with the imposition of an administrative penalty of48% (forty eight percent) interest of the amount of tax unpaid or underpaidin the event that a Taxpayer, after the ten year period, is convicted of atax crime under a definite court verdict.

Elucidation of Article 13

Paragraph (1)

The provisions in thisparagraph grant authority to the Director General of Taxes to issue a Notice ofTax Underpayment Assessment which, in fact, applies only to particular casessuch as those referred to in this paragraph, or in other words, applies only toTaxpayers who evidently, or based on the results of an audit, have notfulfilled their formal and or material obligations. The authority given to theDirector General of Taxes to make fiscal corrections is limited to a period of10 (ten) years.

Under the provisions ofparagraph (1) subparagraph a, a Notice of Tax Underpayment Assessment forIncome Tax is only issued if a Taxpayer fails to pay taxes in accordance withthe provisions of the tax laws.

A Taxpayer has not paidor underpaid his tax is known by conducting audit to the Taxpayer and from theresults of the audit, it is known the amount of the tax unpaid or underpaid. Anaudit can be conducted at the residence, place of domicile, and or location ofbusiness activity of the Taxpayer. A Notice of Tax Underpayment Assessment canalso be issued if the Director General of Taxes has data other than thatsubmitted by the Taxpayer and from those data it can be ascertained that theTaxpayer has not properly fulfilled his tax obligations. To confirm thecorrectness of the data, the Taxpayer can be subjected to an audit.

Under the provisions ofparagraph (1) subparagraph b, a Tax Return, which is not filed on time andafter being advised in writing, the Tax Return is not filed within the timespecified in the Letter of Reprimand, bears the consequence that a Notice ofTax Underpayment Assessment may be issued by the Director General of Taxesex-officio. The amount of tax in this notice of tax assessment will beincreased by an administrative penalty in the form of a surcharge as stipulatedunder paragraph (3).

A reprimand is alsointended, among other things, to give a good faith Taxpayer an opportunity toexplain the reasons or causes for not filing a Tax Return if it is due tomatters outside his control (force majeur).

A Taxpayer who deliberatelyviolates tax obligations involving Value Added Tax and Sales Tax on LuxuryGoods, which causes tax payable to be unpaid or underpaid referred to inparagraph (1) subparagraph c, will be subject to an administrative penalty bythe issuance of a Notice of Tax Underpayment Assessment with a surcharge of100% (one hundred percent).

If a Taxpayer fails tomaintain a bookkeeping referred to in Article 28 or upon auditing fails tocomply with the requirements of Article 29, so that the Director General ofTaxes is unable to ascertain the amount of the tax payable as described inparagraph (1) subparagraph d, then the Director General of Taxes is authorizedto issue a Notice of Tax Underpayment Assessment ex-officio which is calculatedbased on the data not only that provided by the Taxpayer.

The burden of proof forthe basis of calculation ex-officio made by the Director General of Taxes is inthe Taxpayer. For examples:

1.

bookkeeping as stipulatedin Article 28 are incomplete, so that the calculation of profit and loss orturnover is not clear;

2.

documents forbookkeeping are incomplete, so that figures in the accounts cannot beverified;

3.

based on a series ofauditing and or facts obtained, there is a strong suspicion that documents orother evidence are concealed somewhere, reflecting an absence of Taxpayer�sgoodwill in assisting the audit process.

The burden of proofapplies also for notice of assessment issued based on the provisions ofparagraph (1) subparagraph b above.

Paragraph (2)

This paragraphregulates administrative penalties imposed on a Taxpayer for violation of taxobligations as described in paragraph (1) subparagraph a. The administrativepenalty in the form of interest of 2% (two percent) is laid down in a Notice ofTax Underpayment Assessment.

Administrative penaltyin the form of interest is calculated on the basis of the amount of tax unpaidor underpaid; a fraction of a month is treated as one month.

Example: Notice of TaxUnderpayment Assessment with respect to Income Tax

A Taxpayer with respectto Income Tax whose accounting year is same as a calendar year, files hisannual Tax Return year 1995 on time along with the final payment. In April 1998a Notice of Tax Underpayment Assessment is issued showing a tax underpayment ofRp1,000,000.00 (one million rupiahs). Under theprovisions of this paragraph, an administrative penalty of interest of 2% (twopercent) per month will be added to the tax underpaid. Although the Notice ofTax Underpayment Assessment is issued more than two years after the end of theTaxable Year, the interest imposed is limited for a period of two years onlyand calculated as follows:

1.

Tax payable

 

Rp.1.725.000,00

2.

Tax credit:

 

 

 

a.

Tax withheld byemployer

Rp.150.000,00

 

 

b.

Tax paid by Taxpayer(periodic remittance)

Rp.400.000,00

 

 

c.

Tax collected inNotice of Tax Collection

(excluding interestand fines)

Rp. 75.000,00

 

 

d.

Tax collected abroad

Rp.100.000,00 (+)

 

 

Total tax credited

 

Rp. 725.000,00

3.

Tax underpaid

 

Rp.1.000.000,00

4.

Interest for twoyears = 2% x 2 x 12 x Rp1,000,000.00

 

Rp. 480.000,00

5.

Tax still payable

 

Rp.1.480.000,00

If the Notice of Tax Underpayment Assessment is issued in May1997, the calculation would be as follows:

1.

Tax underpaid

Rp.1.000.000,00

2.

Interest for 17months = 2% x17 x Rp1,000,000.00

Rp. 340.000,00

3.

Tax still payable

Rp.1.340.000,00

Paragraph (3)

This paragraphregulates administrative penalties in a notice of tax assessment for violationof tax obligations as described in paragraph (1) subparagraph b, c, and d. Thepenalties take the form of surcharges, namely the proportional amounts thatmust be added to the total taxes to be collected.

The amount of penaltiesin form of surcharges is as follows. For Income Tax paid by a Taxpayer himself,the surcharge is 50% (fifty percent); for Income Tax withheld by other parties,it is 100% (one hundred percent); and for Value Added Tax and Sales Tax onLuxury Goods, it is 100% (one hundred percent).

Paragraph (4)

To provide legalcertainty and legal guarantee to a Taxpayer in connection with theimplementation of tax collection under "self-assessment" system, ifwithin a period of 10 (ten) years from the time tax is payable, the end of aTaxable Period, Fraction of a Taxable Year, or the end of a Taxable Year, theDirector General of Taxes has not issued a notice of tax assessment, the amountof tax payment as reported in a Periodic Tax Return or an Annual Tax Returnbecomes final and finite in accordance with the provisions of the tax laws.

Therefore, theTaxpayer�s Tax Return becomes a final notice of tax assessment andunchangeable.

Paragraph (5)

In the case of aTaxpayer being convicted of a tax crime under a definite court verdict, aNotice of Tax Underpayment Assessment may still be issued together with apenalty in form of interest of 48% (forty-eight percent) of the total taxunpaid or underpaid even though the time limit of 10 (ten) years described inparagraph (1) has elapsed.

The definite courtverdict discloses the existence of fiscal data deliberately concealed by theTaxpayer.

Article 14

(1)

The Director Generalof Taxes may issue a Notice of Tax Collection if:

 

a.

Income Tax in the current yearis unpaid or underpaid;

b.

Based on a verification of aTax Return, there is a tax underpayment arising from errors in writing andor calculation;

c.

A Taxpayer is subject to anadministrative penalty in form of a fine and or interest;

d.

A firm which is subject to taxunder the VAT Law of 1984 and its amendments does not report its businessfor registration and confirmation as Taxable Person for VAT Purposes;

e.

A firm which is not confirmedas a Taxable Person for VAT Purposes issues a tax invoice;

f.

A firm which is alreadyconfirmed as a Taxable Person for VAT Purposes fails to issue a taxinvoice, or issues a tax invoice but fails to meet the due date or does notfill out the invoice completely.

(2)

The Notice of TaxCollection referred to in paragraph (1) has an equal legal stand as a noticeof tax assessment.

(3)

The total amount oftax unpaid as stated in the Notice of Tax Collection referred to in paragraph(1) subparagraph a and b shall be increased by an administrative penalty inthe form of 2% (two percent) interest per month for a maximum of 24 (twentyfour) months, calculated starting from the date when the tax is payable orfrom a Fraction of a Taxable Year or a Taxable Year to the date when theNotice of Tax Collection is issued.

(4)

For a Firm or Taxable Person forVAT Purposes referred to in paragraph (1) subparagraphd, e, and f shall respectively be subject to an administrative penalty in theform of fine of 2% (two percent) of the tax base.

Elucidation of Article 14

Paragraph (1)

Sufficientlyclear.

Paragraph (2)

Underthe provisions of this paragraph, a Notice of Tax Collection has an equal legalstand as a notice of tax assessment, so that the collection can be implementedthrough a Coerce Warrant.

Paragraph (3)

This paragraphregulates administrative penalties in the form of interest on a Notice of TaxCollection being issued because of:

-

a verification of a Tax Returnwhich reveals tax arrears due to errors in writing and or calculation;

-

Income Tax in thecurrent year which is unpaid or underpaid.

The following examplesillustrate the method of calculation:

1.

Resultof Tax Return verification

An Annual Income TaxReturn year 2002, which is submitted on March 31, 2003, reveals, afterverification, miscalculation resulting in underpaid Income Tax ofRp1,000,000.00 On the underpayment, A Notice of Tax Collection dated June 13,2003, is issued with the following calculation:

-

Underpaid Income Tax

=

Rp 1.000.000,00

-

Interest = 3 x 2% x Rp1,000,000.00

=

Rp 60.000,00 (+)

-

Amount to be paid

=

Rp 1.060.000,00

2.

IncomeTax in the current year which is unpaid or underpaid

Income Tax under Article 25 for year 2002 is Rp100,000,000.00 per month. The due date is, for instance, the15th of each month. In June 2002, Rp40,000,000.00was paid on time.

For that underpaid Income Tax, a Notice ofTax Collection is issued on September 18, 2002, with the followingcalculation:

-

Underpaid Article 25 Income Tax of June,2002

=

Rp 60.000.000,00

-

Interest = 3 x 2% x Rp60,000,000.00

=

Rp 3.600.000,00 (+)

-

Amount to be paid

=

Rp 63.600.000,00

Paragraph (4)

If a Taxable Person forVAT Purposes does not report its business activities for registration as aTaxable Person for VAT Purposes, it has violated its obligation through badfaith and neglect of the trust placed in it. Consequently, in addition that hehas to remit tax payable without being allowed to credit any Input Tax, theTaxable Person for VAT Purposes is also subject to an administrative penalty inform of fine of 2% (two percent) of the tax base which arose before the entityregistered as a Taxable Person for VAT Purposes. Apart from that, under theprovisions of the tax laws, it is stipulated that a tax-invoice can only beissued by a Taxable Person for VAT Purposes. The prohibition on the issue of atax invoice by a Non-Taxable Person for VAT Purposes is intended to protectbuyers from improper tax collection; for this reason, a non-Taxable Person for VATPurposes which makes a tax invoice will be penalized in the form of anadministrative fine. Similarly, a Taxable Person for VAT Purposes, which isobliged to issue a tax invoice but fails to do so, does not fill out an invoicecompletely, or makes an invoice but not on time will be subject to the samepenalty.

Article 15

(1)

The Director Generalof Taxes may issue a Notice of an Additional Tax Underpayment Assessmentwithin 10 (ten) years from the date a tax is payable, the end of a TaxablePeriod, Fraction of a Taxable Period, or a Taxable Year if new data and ordata previously undisclosed are found resulting in an increase in the amountof tax payable.

(2)

The amount of taxunderpaid, which is stated in a Notice of an Additional Tax UnderpaymentAssessment, shall be increased by an administrative penalty in form ofsurcharge of 100% (one hundred percent) of the amount of underpaid tax.

(3)

A surcharge referredto in paragraph (2) shall not be imposed if an Notice of an Additional TaxUnderpayment Assessment is issued based on a written statement submitted by aTaxpayer on his own initiative, provided the Director General of Taxes hasnot commenced an audit.

(4)

If the 10 (ten) yearsperiod referred to in paragraph (1) has elapsed, a Notice of an AdditionalTax Underpayment Assessment may still be issued, plus the imposition of anadministrative penalty in form of interest of 48% (forty-eight percent) ofthe amount of tax unpaid or underpaid, in the event that the Taxpayer, afterthe 10 (ten) years period has elapsed, is convicted of a tax crime under adefinite court verdict.

Elucidation of Article 15

Paragraph (1)

To cover thepossibility of that a Notice of Tax Underpayment Assessment may be under-statedor that a tax refund as a consequence of the issuance of a Notice of TaxOverpayment Assessment is mistakenly given or that the amount of tax payable asstated in a Notice of Nil Tax Assessment is understated, the Director Generalof Taxes is authorized to issue a Notice of an Additional Tax UnderpaymentAssessment within 10 (ten) years from the time the tax is payable, the end of aTaxable Period, Fraction of a Taxable Year, or a Taxable Year.

A Notice of anAdditional Tax Underpayment Assessment is a correction for a previous notice ofassessment. The Notice of an Additional Tax Underpayment Assessment is onlyissued when a notice of tax assessment has already been issued. In other words,the Notice of an Additional Tax Underpayment Assessment will not in any way beissued prior to the issuance of a notice of tax assessment. The issuance of aNotice of an Additional Tax Underpayment Assessment is carried out if new data(novum) and or data hitherto undisclosed result in the amount of tax payable tobe greater than that stated in the preceding notice of tax assessment. In linewith this, if a Notice of Tax Overpayment Assessment is issued as a consequenceof the 12 (twelve) month period having elapsed as described in Article 17B, aNotice of an Additional Tax Underpayment Assessment will only be issued if newdata and or data previously undisclosed is discovered. Should furtherundisclosed data come to light at the time of issuance of a Notice of anAdditional Tax Underpayment Assessment, or new data is later discovered by theDirector General of Taxes, another Notice of an Additional Tax UnderpaymentAssessment can be issued.

The meaning of new datais data or information about everything which is needed to calculate the amountof tax payable which is not disclosed by the Taxpayer at the time of issuanceof previous notice of assessment in the Tax Return and its attachments as wellas in the bookkeeping of the company submitted upon audit.

While previouslyundisclosed data mean data or other information pertaining to everything whichis needed to calculate the amount of tax payable that is:

a.

not fully disclosed in a TaxReturn as well as its attachments (including balance sheet); and or

b.

upon audit for initialassessment, Taxpayers fail to disclose data and or fail to provide with otherrightful, complete and detailed information so as to allow the official toexercise the calculation of the amount of tax payable in accordance with thetax laws.

Although a Taxpayer hasdisclosed it clearly in his Tax Return or upon audit but if the information ordisclosure is in such ways that makes it impossible for the tax official tocalculate the amount of tax payable properly so that the amount of tax payableis under-stated, then those include in the meaning of initially undiscloseddata, for example:

1.

In the Tax Return and or balancesheet it is written that advertisement cost is Rp10,000,000.00 while actuallythat cost comprises an advertisement in a mass media of Rp5,000,000.00 andthe rest of Rp5,000,000.00 constitutes donation or present.

If at the time of initial assessment noticethe Taxpayer fails to disclose such details so that the tax official cannotmake any correction on the donation or present expenditure which results inthe tax payable is miscalculated, such data on expenditures on donation orpresent are deemed as previously undisclosed data.

2.

In the Tax Return and or balancesheet it is stated that the classification of amortized fixed assets is notattached by detailed information on the assets of each specified class, andat the time of audit for initial notice of assessment the Taxpayer fails todisclose such details, so that the tax official is unable to make sure thevalidity of the specified classification.

Actually, there is anerror in the classification, for example, what should be classified astangible asset non-building of class 3 is classified as class 2.

Since at the time of initial notice ofassessment the Taxpayer fails to disclose the detailed information, nocorrection imposed on misclassification of the assets and accordingly the taxpayable is not calculated properly. If later on some errors are found, thedata on the assets classification is the data initially undisclosed.

3.

A Taxable Person for VAT Purposescommences a purchase on several items from other Taxable Person for VAT Purposesand on the purchase the selling Taxable Person for VAT Purposes issues a taxinvoice. Some of the items are used in activities directly related to thebusiness activity and some are indirectly. All the tax invoices is creditedas Input Tax by the purchasing Taxable Person for VAT Purposes.

If at the time of initial notice of assessment the TaxablePerson for VAT Purposes fails to disclose the detail use of the items whichresults in the absence of correction on the crediting of Input Tax, and as a result,the Value Added Tax payable is miscalculated, then if later on any mistakeson the data or other information on the credit of Input Tax which has norelation whatsoever directly with the specified activities are discovered,the data or information is the data initially undisclosed.

Paragraph (2)

If, following theissuance of a notice of tax assessment, new or previously undisclosed data arediscovered which is not taken into account as the base for the assessment, theunderpaid tax will be collected under a Notice of an Additional TaxUnderpayment Assessment together with administrate penalty of 100% (one hundredpercent) of the underpaid tax.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

In the case a Taxpayer convicted ofa criminal tax offence under a definite court verdict, a Notice of anAdditional Tax Underpayment Assessment can be issued together with anadministrative penalty of interest of 48% (forty-eight percent) of the totaltax unpaid or underpaid, even though the period of 10 (ten) years as prescribedin paragraph (1) has elapsed.

Article 16

(1)

The Director Generalof Taxes on his own authority, or at the request of a Taxpayer, may correct aNotice of Tax Assessment, a Notice of Tax Collection, Decision on Objection,Decision on Deduction or Annulment of Administrative Penalties, Decision onDeduction or Cancellation of Inaccurate Tax Assessment, or Pre-audit Refundof Tax Overpayment containing errors in writing or calculation and ormistakes in the application of a particular provisions in the tax laws.

(2)

The Director Generalof Taxes, within 12 (twelve) months since the date of the request obtained,shall be obliged to issue a decision on the correction request proposed.

(3)

If the due datereferred to in paragraph (2) has elapsed and the Director General of Taxesfails to issue the decision, the correction request shall be deemed to begranted.

 

Elucidation of Article 16

Paragraph (1)

Correction on a noticeof tax assessment under this paragraph may be carried out in the context ofgood governance, so that if there is a mistake or human error in a notice oftax assessment, it should be corrected accordingly. The nature of the mistakeor error does not constitute a dispute between the tax authorities and aTaxpayer.

If the mistake or erroris detected by a tax official or is brought to light through a submission by aTaxpayer, then it must be corrected. A wrong or inaccurate notice of taxassessment which can be corrected is:

-

any notice of tax assessmentincluding, among others, a Notice of Tax Underpayment Assessment, a Notice ofan Additional Tax Underpayment Assessment, a Notice of Tax OverpaymentAssessment, and a Notice of Nil Tax Assessment;

-

Notice of Tax Collection;

-

Decision on Pre-audit Refund ofTax Overpayment;

-

Decision on Objection;

-

Decision on Deduction orAnnulment of Administrative Penalties;

-

Decision on Deduction orCancellation of Inaccurate Tax Assessment.

The scope of anycorrection regulated under this paragraph is restricted to mistakes ormisdemeanor because of:

a.

written mistakes which include, amongothers, a mistake on a name, address, Taxpayer Identification Number, TaxablePerson for VAT Purposes Confirmation Number, type of tax, Taxable Period orTaxable Year, and due date;

b.

miscalculation, namely a mistakeoriginating from addition and or subtraction and or multiplication and ordivision of figures;

c.

errors in applying certainprovisions of the tax laws, those are errors in the application of the rates,the percentage of Net Deemed Profit, theadministrative penalties, personal exemptions, the calculating of Income Taxin current year, and tax credits.

The meaning ofcorrection under this paragraph can be an addition or subtraction or deletion,depending on the nature of the mistake or misdemeanor.

If written mistakes,calculation errors, and or errors in the application of tax provisions stillexist in a notice of correction, a Taxpayer can resubmit a request forcorrection to the Director General of Taxes, or the Director General of Taxesmay make further correction officially.

Paragraph (2)

In order to give legalcertainty, request on correction from Taxpayer must be decided upon within thelimitation of 12 (twelve) months from the time the request is received.

Paragraph (3)

Ifthe 12 (twelve)-month periods has elapsed and the Director General of Taxes hasnot made any decision, the request deemed to be granted for the thingsproposed.

By the considerationthat the request has been granted, the Director General of Taxes shall issue aNotice of Correction Decision in accordance with the request. On any articledeemed granted, a correction cannot be re-requested.

 

 

Article 17

After conducting an audit, the DirectorGeneral of Taxes shall issue a Notice of Tax Overpayment Assessment if theamount of tax credit or the amount of tax paid exceeds the tax payable or ifthe tax payment, which has been made, should not have been payable.

Elucidation of Article 17

Under the provisions ofthis Article, a Notice of Tax Overpayment Assessment is issued where:

a.

for Income Tax, the amount of taxcredit exceeds tax payable or if the tax payment which has been made shouldnot have been payable.

b.

for Value Added Tax, the amount of taxcredit exceeds tax payable or if the tax payment which has been made shouldnot have been payable. For a VAT Withholding Agent, the amount of tax payableequals to Output Tax deducted by the tax withheld by him;

c.

for Sales Tax on Luxury Goods, the tax paid exceeds the tax payable or if the taxpayment which has been made should not have been payable.

The Notice of TaxOverpayment Assessment is issued after conducting an audit on a Tax Returnfiled by a Taxpayer declaring underpaid, nil, or overpaid tax, which is notaccompanied by a request for refund of overpayment.

A Taxpayer who, after receiving a Notice of TaxOverpayment Assessment, wishes a refund of the tax overpayment must submit awritten request referred to in paragraph (2) of Article 11.

A Notice of TaxOverpayment Assessment may be reissued if, based on the results of an audit,the amount of overpaid tax is greater than the tax already assessed.

 

 

Article 17A

After conducting an audit,the Director General of Taxes shall issue a Notice of Nil Tax Assessment if theamount of tax credit or the amount of tax paid is equal to the amount of taxpayable, or if no tax is payable and there is no tax credit or no tax payment.

Elucidation of Article 17A

Under the provisions of this Article, a Notice of Nil TaxAssessment will be issued where:

a.

for IncomeTax, the amount of tax credit equals to the amount of tax payable or there isno tax credit;

b.

for Value Added Tax, the amount oftax credit equals to the amount of tax payable or there is no tax credit. Fora VAT Withholding Agent, the amount of tax payable equals to Output Taxdeducted by the tax withheld by him;

c.

for SalesTax on Luxury Goods, the amount of tax paid equals to the amount of taxpayable or where there is no tax payable and tax paid.

 

 

Article 17B

(1)

After conducting anaudit on a request for refund of tax overpayment, other than a request forrefund of tax overpayment from Taxpayer having particular criteria asreferred to in Article 17C, the Director General of Taxes shall issue anotice of tax assessment at the latest of 12 (twelve) months since theacceptance of the request except for certain activities as otherwisestipulated by a decree of the Director General of Taxes.

(2)

If the period of timereferred to in paragraph (1) has elapsed and the Director General of Taxesfails to issue a decision, a request for refund of tax overpayment shall bedeemed to be granted and a Notice of Tax Overpayment Assessment shall beissued at the latest within one month from the end of the period.

(3)

If a Notice of TaxOverpayment Assessment is issued after the time referred to in paragraph (2),a Taxpayer shall be given compensation of 2% (two percent) interest per monthcalculated starting from the end of the period referred to in paragraph (2)up to the date of issuance of the Notice of Tax Overpayment Assessment.

Elucidation of Article 17B

Paragraph (1)

A claim to refund ofoverpaid tax, other than the claim of tax overpayment refund by a Taxpayer withcertain criteria as described in Article 17C, a notice of tax assessment mustbe issued at the latest of 12 (twelve) months after the receipt of a fullycompleted request as stipulated in Article 3.

For certain activities,namely an export and the supply of taxable goods and or rendering taxableservices to a VAT Withholding Agent, the due date may be reduced by a decision ofthe Director General of Taxes. The claim may be submitted by completing theappropriate column in the Tax Return or in a separate letter.

A notice of taxassessment may be in the form of a Notice of Tax Underpayment Assessment or aNotice of Tax Overpayment Assessment or a Notice of Nil Tax Assessment.

Paragraph (2)

The due date stipulatedin paragraph (1) is intended to give legal certainty to the request of aTaxpayer or a Taxable Person for VAT Purposes, whereby if the due date iselapsed and the Director General of Taxes has not issued a decision, therequest is considered approved. The due date is also stipulated in the interestof orderly tax administration.

Paragraph (3)

If the Director General of Taxes fails toissue a Notice of Tax overpayment Assessment on time, the Government willprovide compensation of 2% (two percent) interest per month to the Taxpayer,calculated starting from the end of the period as stipulated in paragraph (2)to the time the Notice of Tax Overpayment Assessment is issued, fraction of amonth counted as one whole month.

 

Article 17C

(1)

Director General ofTaxes, after verifying request for refund from Taxpayers with certaincriteria, shall issue Decision on Pre-audit Refund of Tax Overpayment notmore than 3 (three) months from the date of receipt of the request for IncomeTax Refunds, and not more than 1 (one) month from the date of receipt of therequest for VAT Refunds.

(2)

The Minister ofFinance stipulates a decree to determine certain criteria referred to inparagraph (1).

(3)

The Director Generalof Taxes stipulates a decree to determine Taxpayers with certain criteriareferred to in paragraph (2).

(4)

After the pre-auditrefund, the Director General of Taxes may conduct audit to Taxpayers referredto in paragraph (1) and issue a notice of tax assessment.

(5)

The Director General of Taxes issues a Notice of Tax Underpayment Assessmentif the audit referred to in paragraph (4) results in tax underpayments, thetax deficiencies are subject to administrative penalty in the form ofsurcharge of 100% (one hundred percent) of the amount of tax underpaid.

Elucidation of Article 17C

Paragraph (1)

Upon the request fortax overpayment refund from Taxpayers having certain criteria, after aninvestigation, a Notice of Initial Tax Overpayment Refund must be issued notlater than:

a.

3 (three) months forIncome Tax;

b.

1 (one) month forValue Added Tax;

after the complete requestis received, which means that the Tax Return is thoroughly completed asprovided for in Article 3 paragraph (1), paragraph (1a), and paragraph (6). Therequest can be submitted by way of completing the columns in the Return or by aseparate form.

Paragraph (2)

Certain criteria mean:

1.

Taxpayers with highcompliance, covering the filing of the Return and no tax payable;

2.

Financial statementaudited by a Public Accountant with unqualified opinion;

3.

The calculation ofthe turnover and the tax easily observed due to its connection with otherGovernment regulations, such as the turnover and Value Added Tax of cigaretteproducers can be assessed from the duty conducted.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

The Director General ofTaxes shall issue a notice of tax assessment within 10 (ten) years after conductinginvestigation on a Taxpayer who receives initial refund as provided for inparagraph (1). The notice may be in the form of Notice of Tax UnderpaymentAssessment or Notice of Tax Overpayment Assessment or Notice of Tax NilAssessment.

Paragraph (5)

To encourage Taxpayersin reporting the amount of tax payable as provided for in the provisions of thevalid tax law regulation, if the investigation as prescribed in paragraph (4)resulting in the issuance of a Notice of Tax Underpayment Assessment togetherwith an administration penalty of 100% (a hundred percent) surcharge of theamount of tax underpaid.

For a clearerunderstanding of calculating the Notice of Tax Underpayment Assessment and theimposing of an administration penalty of surcharge as such, the following aresome examples:

1)

Income Tax

 

-

Taxpayer has obtainedPre-audit Tax Overpayment Refund of Rp 80,000,000.00

 

-

An audit shows thefollowing facts:

a.

Income Tax payable

Rp100,000,000.00

b.

Tax credits are asfollows:

 

-

Article 22 IncomeTax

Rp 20.000.000,00

 

-

Article 23 IncomeTax

Rp 40.000.000,00

 

-

Article 25 IncomeTax

Rp 90.000.000,00

 

 

Based on the audit, aNotice of Tax Underpayment Assessment is issued with the calculation follows:

-

Income Tax payable

Rp100.000.000,00

Tax Credits:

 

-

Article 22 IncomeTax

Rp 20.000.000,00

 

-

Article 23 IncomeTax

Rp 40.000.000,00

 

-

Article 25 IncomeTax

Rp 90.000.000,00(+)

 

 

 

Rp 150.000.000,00

 

-

Initial taxoverpayment refund

Rp 80.000.000,00(-)

 

 

Tax that can becredited

Rp 70.000.000,00 (-)

 

Unpaid/underpaidtax

Rp 30.000.000,00

 

Administrativepenalty of 100% increment

Rp 30.000.000,00(+)

 

Amount to be paid

Rp 60,000,000.00

2)

Value Added Tax

 

-

A Taxable Person forVAT Purposes has obtained Pre-audit Tax Overpayment Refund of Rp60,000,000.00

 

-

The audit shows:

a.

Output Tax

Rp100.000.000,00

b.

Tax Credits are asfollows:

 

- Input Tax

Rp150.000.000,00

 

-

Based on the audit, a Notice of TaxUnderpayment Assessment is issued with the calculation as follows:

-

Output Tax

Rp100.000.000,00

Tax Credits:

 

-

Input Tax

Rp150.000.000,00

 

-

Pre-audit TaxOverpayment

Rp 60.000.000,00(-)

 

 

Tax that can becredited

Rp 90.000.000,00(-)

 

Unpaid/underpaidtax

Rp 10.000.000,00

 

Administrativepenalty of 100% increment

Rp 10.000.000,00(+)

 

Amount to be paid

Rp20.000.000,00

 

CHAPTER IV

TAX COLLECTION

Article 18

(1)

A Notice of TaxCollection, Notice of Tax Underpayment Assessment, Notice of an AdditionalTax Underpayment Assessment, Notice of Tax Correction, Decision on Objection,or Decision on Appeal that increase the amount of tax payable shall be thebasis of tax collection.

(2)

Deleted.

 

Elucidation of Article 18

Paragraph (1)

A Notice of Tax Collection,a Notice of Tax Underpayment Assessment, a Notice of an Additional TaxUnderpayment Assessment, a Notice of Tax Correction, a Decision on Objection,or Decision on Appeal, which causes the amount of tax payable to increase, areadministrative instrument for the Director General of Taxes to collect tax.

Paragraph (2)

Deleted.

 

 

Article 19

(1)

If tax payable undera Notice of Tax Underpayment Assessment or Notice of an Additional Tax UnderpaymentAssessment, and additional tax payable under a Notice Tax Correction,Decision on Objection, or Decision on Appeal, are not paid or underpaid uponthe due date, the amounts of underpaid or unpaid tax are subject to anadministrative penalty in the form of interest of 2% (two percent) per monthcalculated from the due date up to the date of payment or the date ofissuance of the Notice of Tax Collection, and fraction of a month is deemedas a 1 (one) month period.

(2)

If a Taxpayer isallowed for installments or postponements to pay tax, an interest of 2% (twopercent) per month is also applied, and fraction of the month is deemed as a1 (one) month period.

(3)

If a Taxpayer is allowedto postpone for filing Tax Returns and the tentative calculations of taxpayable referred to in paragraph (5) of Article 3 turn out to be less thanthe actual tax payable, the shortages are subject to 2% (two percent)interest per month, calculated from the end of the period of obligation tofile Tax Return referred to in paragraph (3) subparagraph (b) of Article 3 upto the date of payment of the shortages, and fraction of the month is deemedas a 1 (one) month period.

Elucidation of Article 19

Paragraph (1)

Thisparagraph prescribes the imposition of interest of collection on the amountthat still has to be paid pursuant to the Notice of Tax Underpayment Assessmentor Notice of an Additional Tax Underpayment Assessment, and additional amount oftax that still has to be paid under the Notice of Tax Correction, Decision onObjection, or Decision on Appeal which is unpaid or under paid at due date orpaid not in time. The following are examples of calculating interest:

1.

Upon the underpaidtax

Notice of Income TaxAssessment

Tax payable orcollected (deemed there is no amount of tax credited) is Rp100,000.00. A notice of tax assessment is issued on October10, 2002. It must be paid in full at the least on November 9, 2002, but isonly paid the sum of Rp60,000.00 on November 1,2002. Until due date ends (November 9, 2002), the remaining underpaid amountis not paid by the Taxpayer.

On November 18, 2002, a Notice of TaxCollection is issued by the Director General of Taxes with the followingcalculation:

Tax payable

Rp100.000,00

Paid in time

Rp 60.000,00

Underpaid

Rp 40.000,00

Interest calculated of a month =

1 x 2% x Rp40.000,00 = Rp800,00

 

 

Bunga tersebut ditagih denganSurat Tagihan Pajak.

2.

Upon overdue tax amount.

The basis is similarto example 1.

Paid in full but notin time, for example paid on November 20, 2002. On November 24, 2002, aNotice of Tax Collection is issued.

Interest payable in theNotice of Tax Collection is calculated of a month =

1 x 2% x Rp100.000,00 = Rp2.000,00.

3.

Upon underpaid oroverdue tax amount.

The basis is similarto example 1.

Paid a sum of Rp60,000.00 on November 20, 2002. On November 24, 2002, aNotice of Tax Collection is issued.

Interest payablecalculated for month =

1 x 2% x Rp100.000,00 = Rp2.000,00.

Paragraph (2)

Sufficientlyclear.

Paragraph (3)

Sufficiently clear.

Article 20

(1)

The amounts of taxpayable under a Notice of Tax Collection, Notice of Tax UnderpaymentAssessment, Notice of an Additional Tax Underpayment Assessment, and Noticeof Tax Correction, Decision on Objection, or Decision on Appeals resulting anincrease to the amounts of tax payable, which is unpaid by the Tax Bearers inaccordance with the due date referred to in paragraph (3) of Article 9, shallbe collected by Coerce Warrant.

(2)

Notwithstanding theprovisions referred to in paragraph (1), the Prompt and Outright Collectionis conducted where:

 

a.

Tax Bearers are about to leave Indonesiapermanently or intend to do so;

b.

Tax Bearers transfer movable orimmovable goods owned or controlled in order to terminate or significantly reducebusiness activities or employment in Indonesia;

c.

there are indications that TaxBearers are going to dissolve their business entities, or merger, or expandtheir business, or transfer the company they own or control, or executeother forms of changes;

d.

the business entities is to bedissolved by the Government; or

e.

Third parties confiscatemovable or immovable goods owned by the Tax Bearers or there areindications of bankruptcy.

(3)

The collection of taxby a Coerce Warrant shall be executed in accordance with the provisions oflaw.

Elucidation of Article 20

Paragraph (1)

Where the amount of taxpayable is unpaid or underpaid by the due date, or by the postponement ofpayment due date, or tax installments are not fulfilled, the collection shallbe conducted by a Coerce Warrant. The collection using a Coerce Warrant isconducted on the Tax Bearer.

Paragraph (2)

Referred as Prompt andOutright Collection is the act of collecting tax by a Tax Confiscator to theTax Bearer without waiting for the payment due date, covering all types oftaxes, Taxable Period, and Taxable Year.

Paragraph (3)

Sufficiently clear.

Article 21

(1)

The State haspreemptive rights over the assets owned by Tax Bearers for the purpose ofcollecting tax.

(2)

The provision on thepreemptive rights referred to in paragraph (1) covers principal tax,administrative penalty in the form of interest, fines, and surcharges, andtax collection expenses.

(3)

The preemptive rightof priority for the purpose of tax collection supercedes all otherpriorities, except for:

 

a.

legal expenses arising solely froma court order to auction movable and or immovable goods;

b.

expenses incurred for securingthe goods;

c.

legal expenses, arising solely fromthe auction and settlement of inheritance.

(4)

The preemptive rightsshall be elapsed after 2 (two) years from the date of issuance of a Notice ofTax Collection, Notice of Tax Underpayment Assessment, Notice of anAdditional Tax Underpayment Assessment, Notice of Tax Correction, Decision onObjection, or Decision on Appeal which result in an increase in tax payableunless, during the two years period, a Coerce Warrant for paying isofficially issued, or postponement of payments is granted.

(5)

If a Coerce Warrantfor paying is officially issued, the 2 (two) years period referred to inparagraph (4) shall be calculated from the date of issuance of the CoerceWarrant; or, if postponement of payments are granted, the 2 (two) yearsperiod shall be extended with the due date of granted for postponement ofpayment.

Elucidation of Article 21

Paragraph (1)

This paragraphstipulates the status of the state as a preferential creditor havingpre-emptive right over goods belonging to a Tax Bearer, which are to be publiclyauctioned.

Only after tax payablehas been paid can payment be made to other creditors.

The purpose of thisparagraph is to give the Government priority over other creditors in obtaininga share of the proceeds from the public auction of goods belonging to a TaxBearer to defray or pay tax debts.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Sufficiently clear.

Article 22

(1)

The right to collect taxes,including interest, fines, surcharges and tax collection expenses shallelapsed after 10 (ten) years from the date the tax is payable, or from theend of the Taxable Period, Fraction of the Taxable Year, or Taxable Year.

(2)

The elapsing of taxcollection rights referred to in paragraph (1) may be deferred as a resultof:

 

a.

the issuance of a Letter ofReprimand or Coerce Warrant;

b.

Taxpayers admits directly orindirectly of the tax payables;

c.

theissuance of a Notice of Tax Underpayment Assessment referred to inparagraph (5) of Article 13 or Notice of an Additional Tax UnderpaymentAssessment referred to in paragraph (4) of Article 15.

Elucidation of Article 22

Paragraph (1)

There shall bedetermined an elapsing date for the Directorate General of Taxes to collecttaxes in order to provide legal certainty as to when tax payable is no longercollectible.

Paragraph (2)

The 10 (ten) yearlimitation can be extended where:

a.

The Director General of Taxesissues a Letter of Reprimand and a Coerce Warrant to a Tax Bearer who failsto pay tax payable by the due date. In such a case, the ten-year limitationperiod starts from the time the Coerce Warrant received.

b.

A Taxpayer acquiescesthe tax payable by:

 

-

submitting a request to pay byinstallments or for postponement of payment of tax payable before the duedate of payment. In such case, the period of limitation begins from the daythe request is received by the Director General of Taxes;

 

-

lodging an objection;in this case, the limitation period begins from the day the objection isreceived by the Director General of Taxes;

 

-

making partial payment of taxpayable, in which case the statue of limitation is began from the day thatpart of the tax payable is paid.

c.

Notice of TaxUnderpayment Assessment or Notice of an Additional Tax UnderpaymentAssessment is issued to a Taxpayer due to a criminal tax offence under adefinite court verdict. In such case, the period of limitation begins fromthe day the notice of tax assessment is issued.

Article 23

(1)

Deleted.

(2)

Lawsuits of Taxpayers or TaxBearers against:

 

a.

execution of a Coerce Warrant,Notice of Seizure or Notices of Auction;

b.

decisions that relate to theexecution of tax decisions, other than those stipulated in paragraph (1) ofArticle 25 and Article 26;

c.

correction decision referred toin Article 16 that relate to a Notice of Tax Collection;

d.

decisions referred to inArticle 36 that relate to Notice of Tax Collection,

 

shall only be filed to a tax court.

(3)

Deleted.

Elucidation of Article 23

Paragraph(1)

Deleted

Paragraph (2)

Sufficientlyclear.

Paragraph (3)

Deleted

Article 24

Procedures forwriting-off of tax payable and a stipulation of an amount written-off shall beregulated by a decree of the Minister of Finance.

Elucidation of Article 24

The Minister of Finance shall regulate the procedures ofelimination and determine the amount of non-performing loans due to the reasonsthat, among other, an individual Taxpayer has died and has no inheritance orassets, an entity has completed the insolvency process, a Taxpayer fails tomeet the requirements as Taxable Person and the right to collect tax iselapsed. By doing so, the amount of debts possible to be collected orliquidated can be estimated effectively.

CHAPTER V

OBJECTION AND APPEAL

 

Article 25

(1)

Taxpayers shall onlyfile objections to the Director General of Taxes for the following matters:

 

a.

Notice of Tax UnderpaymentAssessment;

b.

Notice of an Additional TaxUnderpayment Assessment;

c.

Notice of Tax OverpaymentAssessment;

d.

Notice of Nil Tax Assessment;

e.

withholding by third parties under theprovisions of the tax laws.

(2)

Objections shall be submitted inwriting in Indonesia Language by stating theamounts of tax payable or the amounts of tax withheld, or the amounts oflosses as calculated by the Taxpayers, supported by clear reasons.

(3)

Objections shall be filed within3 (three) months as from the date of issuance of assessments, or the date ofwithholding referred to in paragraph (1), unless the Taxpayers candemonstrate that the period cannot be fulfilled due to circumstances beyondtheir control.

(4)

Objections that do not meet the requirementsreferred to in paragraphs (1), (2), and (3) shall not constitute validobjections, and as such will not be taken under consideration.

(5)

A receipt of objection request givenby appointed officials of the Directorate General of Taxes or a dispatch ofobjection request sent by registered mail shall constitute evidence ofreceipt of the objection request.

(6)

If requested by Taxpayers for thepurpose of submitting objections, the Director General of Taxes shall beobliged to provide written information on matters, which constitute the basisfor imposition of tax, calculation of losses, withholding of tax.

(7)

The submission of objectionsshall not defer the obligation to pay tax and collect tax.

Elucidation of Article 25

Paragraph (1)

If a Taxpayer believesthe amount of loss or the tax payable or the withholding tax by a third party isincorrect, the Taxpayer may lodge an objection only to the Director General ofTaxes.

An objection can onlybe made against the substance or content of a notice of tax assessment, namelythe amount of loss, the amount of tax, or the amount of tax withheld based onprovisions in the tax laws.

In other words, aseparate objection must be lodged for each type of tax and for each TaxableYear. For example, Income Tax for the 1995 and 1996 Taxable Years, an objectionmust be lodged for each in separate objection letters. For the 2 (two) TaxableYears, 2 (two) objection letters must be lodged.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

The due date forlodging an objection is 3 (three) months from the issuance notice of a taxassessment as provided in paragraph (1), in order to give the Taxpayersufficient time to prepare an objection letter together with the reasons forobjection.

In the event that aTaxpayer is unable to meet the time limit for reasons beyond his control (forcemajeur), the period of 3 (three) months may be considered and extended by theDirector General of Taxes.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Proof of receiptprovided by the official of the Directorate General of Taxes or the post officeserves as the receipt of objection letter if the letter meets the requirementsas such. Thus, the due date for objection is calculated from the date theletter received.

If the letter of theTaxpayer fails to comply with the requirements as objection letter and iscorrected by the Taxpayer, the period of completion for the objection is begansince the time of the receipt of the next letter that complies with therequirement as an objection letter.

Paragraph (6)

To enable a Taxpayerpreparing an objection with sound reasons, the Taxpayer is given the right torequest for the bases for assessing tax imposed, withheld, and the DirectorGeneral of Taxes is obliged to meet such a request.

Paragraph (7)

To prevent attempts toavoid or postpone tax payment through an objection, lodgment of the objectiondoes not impede collection being carried out up to point of holding an auction.

This provision is required in orderthat a Taxpayer shall not use the filing of an objection as an excuse for notpaying tax assessed, and thus avoids interference with the state revenue.

Article 26

(1)

The Director General of Taxeswithin 12 (twelve) months as from the date of receipt of the objectionapplications shall decides the submitted objections.

(2)

Taxpayers may submit additionalreasons or written explanations before objection decisions are issued.

(3)

The decisions of Director Generalof Taxes on the objections can be in the form of total or partial acceptance,refusal, or increasing the amounts of tax payable.

(4)

If Taxpayers propose objectionson tax assessments referred to in paragraph (1) subparagraph b and d ofArticle 13, the Taxpayers shall prove incorrectness in the tax assessments.

(5)

Where the period referred to inparagraph (1) has elapsed and the Director General of Taxes has not made anydecision, the requested objections are considered granted.

Elucidation of Article 26

Paragraph (1)

The Director General ofTaxes is authorized to settle an objection requested by a Taxpayer on the firstlevel and required to grant a decision no later than twelve months after thereceipt of the letter.

By determining the duedate to settle a tax objection, this law provides law certainty for Taxpayersin addition to the completion of tax administration.

Paragraph (2)

Sufficientlyclear.

Paragraph (3)

Sufficientlyclear.

Paragraph (4)

The provisions in thisparagraph provides that a Taxpayer has burden of proof to demonstrate theincorrectness of a notice of tax assessment in the case that the Taxpayer filesan objection upon taxes assessed ex-officio, the Notice is issued due to thefacts that the Taxpayer does not file the Annual Tax Return after a writtenwarning, or does not fulfill the obligation to maintain bookkeeping, or refuseto allow tax auditors enter certain places necessary in order to assess theamount of tax payable. In the event that the Taxpayer fails to demonstrate theincorrectness of the notice, the objection is refused.

Paragraph (5)

Sufficientlyclear.

Article 27

(1)

Taxpayerscan only submit a request for appeals to the tax court against Decision onObjection stipulated by the Director General of Taxes.

(2)

The decisions of the tax courtshall not constitute decisions of the State Administration Court.

(3)

The applications referred to inparagraph (1) shall be submitted in writing in Indonesian Language along withclearly stated reasons not later than 3 (three) months after the date ofreceipt of Decision on Objection, attached with copies of the Decision.

(4)

Deleted.

(5)

The submission of applicationsfor appeals shall not postpone the obligations to pay and collect taxes.

(6)

A tax court referred to inparagraph (1) of this Article and paragraph (2) of Article 23 shall beregulated by law.

 

Elucidation of Article 27

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Deleted

Paragraph (5)

Sufficiently clear.

Paragraph (6)

Sufficiently clear.

Article 27A

(1)

If the submissions objections orrequest for appeals are accepted partly or fully, as long as the tax payableprescribed in the Notice of Tax Underpayment Assessment and or Notice of anAdditional Tax Underpayment Assessment has already been paid that results inoverpaid tax, the tax overpayment shall be refunded plus compensation of 2%(two percent) interest per month for a maximum of 24 (twenty-four) monthscalculated from the date of payment resulting in the tax overpayment up tothe date of the issuance of Decision on Objection or Decision on Appeal.

(2)

The Interest compensationreferred to in paragraph (1) shall also be granted to overpayment of fines ofadministrative penalty referred to in paragraph (4) of Article 14 and or interestreferred to in paragraph (1) Article 19 based on the Decision on Deduction orAnnulment of Administrative Penalties, as a result of the issuance ofDecision on Objection or Decision on Appeal that partly or fully acceptingapplications from Taxpayers.

(3)

The procedure of calculating theoverpayment refund and granting the interest is regulated by a decree of theMinister of Finance.

 

Elucidation of Article 27A

Paragraph (1)

Compensation oninterest is given in relation to Decision on Objection or Decision on Appealthat relates to Notice of Tax Underpayment Assessment or Notice of anAdditional Tax Underpayment Assessment.

Paragraph (2)

Compensation oninterest is also given to overpayment of Notice of Tax Collection issued underparagraph (4) of Article 14 and paragraph (1) of Article 19 pertaining to theissuance of Notice of Tax Underpayment Assessment or Notice of an AdditionalTax Underpayment Assessment, of which the administrative penalty of fine orinterest is deducted or revoked.

Such deduction orrevoke is the result of Decision on Objection or Decision on Appeal on theNotice of Tax Underpayment Assessment or Notice of an Additional TaxUnderpayment Assessment concerned, which grants in part or in full Taxpayer�srequest.

Paragraph (3)

Sufficiently clear.

 

CHAPTER VI

BOOKKEEPING AND AUDITING

Article 28

(1)

Individual Taxpayers conducting business activities or independent personalservices, and entity Taxpayers in Indonesia shall be obliged tomaintain bookkeeping.

(2)

Taxpayersexempted from the obligation to maintain bookkeeping referred to in paragraph(1) but obliged to keep records are individual Taxpayers engaged inbusinesses or independent personal services, and who according to theprovisions of the tax laws are permitted to calculate net income by using theNet Deemed Profit and individual Taxpayers who are not engaged in businessesor independent personal services.

(3)

The bookkeeping or recordingshall be conducted in good intention and shall reflect the real conditions or business activities.

(4)

The bookkeeping orrecording shall be conducted in Indonesia by using Latinalphabet, Arabic numeral, and Rupiah currency, and shall be written inIndonesian Language or in any foreign language approved by the Minister ofFinance.

(5)

The bookkeeping shall be maintained consistently in either accrual orcash basis.

(6)

Any change in the methodof bookkeeping and or book year shall secure approval from the DirectorGeneral of Taxes.

(7)

The bookkeeping shall at least consist of records of assets,liabilities, equity, income, and expenses as well as sales and purchases, sothat the amounts of tax payable can be calculated.

(8)

Taxpayers mayperform their bookkeeping in foreign languages and currencies after securingapproval from the Minister of Finance.

(9)

The recordingreferred to in paragraph (2) shall consist of data collected regularly ongross turnover or revenue and or gross income as the basis forcalculating amounts of tax payable, including income that is not classifiedas non-taxable object and or final taxable income.

(10)

Taxpayers not requiredto submit Annual Income Tax Returns are exemptedfrom the obligation to maintain bookkeeping and recording.

(11)

Books, records, anddocuments upon which the bookkeeping or recording is based and other documentsshall be kept for 10 (ten) years in Indonesia, at the place ofbusiness activities or residences, for individual Taxpayers, or at the placeof domiciles for entity Taxpayers.

(12)

The procedures ofrecording referred to in paragraph (2) shall be stipulated by a decree of theDirector General of Taxes.

 

Elucidation of Article 28

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

A consistency principleprovides the same accounting principles shall be used from year to year, toprevent any shifting of profit or loss. The principle, for example, applies to:

a.

income recognition;

b.

the accounting year;

c.

the inventoryvaluation method;

d.

the depreciation andamortization method.

The accrual basismethod is one method of calculating income and expenses in the sense thatincome is recognized at the time of accrual and expenses at the time they areincurred. Thus, the method is not dependent on when income is received and whenexpenses are paid in cash.

Included in thedefinition of accrual basis method is the recognition of income based on thepercentage method for staged completion of a job, which is generally used inthe construction sector, and other methods used in particular fields ofbusiness, for instance, Build, Operate, and Transfer (BOT), Real Estate, andothers.

A cash basis method isa method whereby calculations are based on income received and expenses paid incash.

Under this method,income shall be accrued if actually received in cash within a specific period,and expenses are only shall be accrued if actually paid in cash within aspecific period.

Cash basis is normallyused by individuals, small businesses, or service companies, such astransportation and entertainment businesses and restaurants, having a shorttime span between the delivery of service and receipt of payment. In a purecash basis, income from the delivery of goods or services is determined at thetime payment is received from a customer, and expenses assessed at the time ofpayment for goods, services, and other operational outlays.

Under this method, theuse of a cash system can result in a unclear calculation of income, that is,the amount of income from year to year can be adjusted by arranging cashreceipts and cash payments. Hence, in the calculation of Income Tax based on acash basis, attention needs to be paid to the following:

1)

Calculation of the amount ofsales within one period should include all sales, whether it is made in cashor not. In calculating cost of goods sold, all purchasing and inventoriesmust be counted;

2)

In acquiring assetsand rights that are subject to depreciation or amortization, expensesdeducted from income can only be effected through depreciation andamortization;

3)

The use of cash basismust be consistent.

Thus, the use of a cashbasis for taxation purposes can also be termed as a mixed system.

Paragraph (6)

Basically, bookkeepingmethods must be consistent, namely, they must be the same as in previous years,for instance, in the determination of income and costs (cash or accrual basis),the method of depreciation of fixed assets, the method of inventories valuationand so on. Nevertheless, changing the bookkeeping method is still possiblesubject to prior consent from the Director General of Taxes. Any proposedchange must be submitted to the Director General of Taxes prior to the relevantaccounting year, giving logical and acceptable reasons and the possibleconsequences of such a change.

Change of thebookkeeping method may result in changing in the consistency principle by, forexample, a change from the cash to accrual method or conversely; or a change tothe income and cost recognition method itself, for instance, a change in themethod of cost recognition in relation to the depreciation of fixed assets.

Example:

In 2002, a Taxpayer uses the straight-line depreciationmethod. In 2003, the Taxpayer wishes a change to the declining balance method.

For this purpose, theTaxpayer must obtain prior approval from the Director General of Taxes beforethe commencement of the 2003 accounting year, stating the reasons for thechange and its consequences.

In addition, a changein the accounting year may also change the total income or losses of theTaxpayer; hence, such a change must obtain the approval of the Director Generalof Taxes.

A Taxable Year is thesame as a calendar year, except where a Taxpayer uses an accounting year thatdiffers from a calendar year.

Where the Taxpayer usesan accounting year different from a calendar year, a reference to the taxableyear concerned shall be determined based on the year of which the first 6 (six)months or more fall into.

Example:

a.

Accounting year covering July 1,2002 to June 30, 2003, shall be the Taxable Year of 2002.

b.

Accounting year coveringOctober 1, 2002 to September 30, 2003, shall be the Taxable Year of 2003.

Paragraph (7)

The meaning ofbookkeeping is already referred to in Article 1 point 26. The provisions ofthis paragraph are intended to enable the amount of tax payable to becalculated from the accounts.

In addition to thecalculation of Income Tax payable, the accounts should enable the calculationof other taxes payable. In order that Value Added Tax and Sales Tax on LuxuryGoods can be calculated correctly, the accounts must also record the amount ofthe acquisition or import value, the sale price or export value, the sale priceof goods subject to Sales Tax on Luxury Goods, the payment for utilization ofIntangible Taxable Goods from outside the Customs Area within the Customs Areaand or the utilization of Taxable Services from outside the Customs Area withinthe Customs Area, Input Tax that can or can not be credited.

Hence, the bookkeepingmust be conducted using a method or system commonly used in Indonesia, forinstance, based on the Indonesian Accounting Principles, unless stipulatedotherwise in the tax laws.

Paragraph (8)

Sufficiently clear.

Paragraph (9)

Accounting recordsrequired to be kept by a Taxpayer engaged in business and or independent personalservices shall include gross or income turnover and other income received,whereas for those primarily receiving income from other than a business andindependent personal services, the accounting records shall only pertain togross income, deductible, and net income that is subject to Income Tax.

In addition, theaccounting records include income that is classified as non-taxable object andor income subjected to a final tax.

Paragraph (10)

Sufficiently clear.

Paragraph (11)

Accounts, records, anddocuments, including the output of electronic data processing, which form thebasis of accounts or records, must be retained in Indonesia for 10 (ten) years,so that if the Director General of Taxes needs to issue a notice of taxassessment, the necessary accounts or records will be available and can bereadily presented. Such period of 10 (ten) years of retainingaccounts, records, and documents, including the results of electronic dataprocessing, which form the basis of accounts or records, conforms to theregulations on the Statute of Limitations for a tax assessment.

Paragraph (12)

Sufficiently clear.

Article 29

(1)

The Director Generalof Taxes is authorized to conduct audits to test Taxpayers� compliance and forother purposes in respect to the implementation of the tax laws.

(2)

For audit purposes, atax auditor must posses an auditor identity card and an Audit Warrant, andmust show them to the audited Taxpayer.

(3)

A Taxpayer underaudit is obliged to:

 

a.

show and or lend books,records, or documents upon which the tax is based, and other documentsrelated to income received, business activities, independent personalservices of the Taxpayer, or taxable object;

b.

grant access to places oroffices as deemed necessary and assist tax auditors in carrying out theaudit;

c.

provide information requested.

(4)

If, in disclosingbooks, records or documents and information requested, a Taxpayer is bound byduty to maintain confidentiality, such duty shall be negated upon request foraudit purposes referred to in paragraph (1).

 

Elucidation of Article 29

Paragraph (1)

In the framework ofexercising administrative supervision, the Director General of Taxes shallundertake tax audit:

a.

to test Taxpayers�compliance in fulfilling tax duties; and

b.

for other purposes inthe framework of implementing regulations in the tax laws;

An audit may be carriedout at a tax office (for office audit) or at the place of a Taxpayer (for fieldaudit), and may cover previous years as well as the current year.

An audit may beconducted on any Taxpayer, including any government agency and other bodiesacting as Withholding Agent

The audit to testcompliance in fulfilling tax duties will include proving the truth of a TaxReturn, the bookkeeping or accounting methods, and fulfillment of other taxobligations, by analyzing the actual conditions or business activities of theTaxpayer, and will be carried out by:

a.

applying audittechniques normally used in an audit in general, which is called a CompleteAudit;

b.

applying audit techniques thatare simple in terms of degree and depth in accordance with the scope ofexamination conducted in either the office or field, which is called a SimpleAudit.

In addition, a SimpleAudit may be conducted for other purposes, including:

-

designating one ormore places where Value Added Tax and or Income Tax under Article 21 ispayable;

-

confirming orrevoking the registration of a Taxable Person for VAT Purposes;

-

issuing the Taxpayer IdentificationNumber of a Taxpayer and or the Registration Number of a Taxable Person forVAT Purposes ex-officio.

Paragraph (2)

The audit is conductedby a tax auditor with a clear identity, who is able to show an audit identitycard and attached with Audit Warrant to the Taxpayer to be examined. Theofficial shall be obliged to state his purpose for conducting such act on theTaxpayer.

The auditor is obligedto have undergone sufficient technical training as well as skills as an examiner.In conducting his duty, the auditor shall be obliged to uphold honesty,responsibility, understanding, attitude, and objectivity as well as to avoidany wrong doing or misdeed.

Opinion and conclusionof the auditor shall be based on solid evidence and the valid tax laws.

The auditor shall beobliged to build up the Taxpayers in fulfilling taxation obligation inaccordance with the provisions of tax laws.

Paragraph (3)

A Taxpayer under anaudit to assess his compliance to tax duties or other purposes as prescribed inparagraph (1) is obliged to show and submit books, records, documents, and suchother necessary information pertaining to income received or business activity.

If the Taxpayer avoidsproviding the necessary books, records, or documents, based on this paragraph,the auditor shall be entitled to enter a place or room which the auditorsuspects is used to store books, records, and other such documents.

Paragraph (4)

To prevent misuses ofthe obligation to confidentiality as a reason for not providing books, records,documents, or other necessary information by the Taxpayer, this paragraphprovides that the obligation can be eliminated.

Article 30

The Director General of Taxes is authorized to seal certain placesor rooms, in the case that a Taxpayer does not fulfill his obligation referredto in paragraph (3) subparagraph b of Article 29.

Elucidationof Article 30

Individual or corporate taxpayers who duringtax audits is not willing to giving tax auditors opportunities to enter certainplaces/rooms suspected to be places to store books of accounts, documents, andrecords, so that necessary books of accounts, documents, and records can not beobtained, shall be deemed to obstruct the implementation of tax collection.

In that case, theDirector General of Taxes is authorized to seal certain places places or roomssuspected to be places to store books of accounts, records, and documents inorder to secure or prevent the loss of those of accounts, records, anddocuments.

Article 31

A procedureof an audit shall be stipulated by the Minister of Finance.

Elucidation of Article 31

Sufficiently clear.

CHAPTER VII

SPECIALPROVISIONS

Article 32

(1)

In exercising rights andfulfilling obligations in accordance with the provisions of the tax laws, aTaxpayer shall be represented, in the case of:

 

a.

an entity, by the management;

b.

an entity in dissolution or bankruptcy,by the individual or entity assigned to execute settlement;

c.

an estate, by one of thebeneficiaries, the executor or the administrator of the estate;

d.

a minor or person underguardianship, by the guardian or custodian.

(2)

A representativereferred to in paragraph (1) shall be responsible individually and orseverally for payment of tax payable, except where he can prove to andconvince the Director General of Taxes that it is not in his capacity torightfully assume such responsibility.

(3)

An individual orentity may appoint a proxy by a power of attorney to exercise rights andfulfill responsibilities of the individual or entity in accordance with theprovisions of the tax laws.

(3a)

A proxy referred toin paragraph (3) shall have to meet the requirements stipulated by theMinister of Finance.

(4)

There shall be included in thedefinition of executive board referred to in paragraph (1) subparagraph a any individualwho factually has the authority to participate in setting policies and ormaking decisions in the management of an enterprise.

 

Elucidation of Article 32

Paragraph (1)

This law stipulates theperson who shall represent a Taxpayer in exercising his tax rights andresponsibilities in relation to an entity, an entity in dissolution, unsettledinheritance, minors, or a person placed under guardianship. The Taxpayer mustdecide who shall be the representative or authorized person by reason of hisinability to perform such legal actions on his own.

Paragraph (2)

This paragraph providesthat the representative of a Taxpayer as prescribed in this law shall beindividually or collectively responsible for the payment of taxes payable.

Exceptions may beconsidered by the Director General of Taxes if the representative of theTaxpayer can convincingly demonstrate that in his position, and under normaland reasonable circumstances, it is impossible for his to bear theresponsibility individually or collectively.

Paragraph (3)

This paragraph providesscope and opportunity to a Taxpayer to seek assistance from another party whounderstands taxation issues to become the Taxpayer�s legal representative andon his behalf assist in exercising his taxation rights and responsibilities.

Such assistance shallinclude performing formal and material duties as well as securing the rights ofa Taxpayer as stipulated under the rules in the taxation laws.

Paragraph (3a)

Sufficientlyclear.

Paragraph (4)

A person who isactually authorized to decide policies and or make decisions in the context ofmanaging the activities of a company, such as the authority to sign contracts withthird parties, sign cheques and so on, even though his name is not listed amongthe board of directors in the company�s article of incorporation or in anyrevised article, is nevertheless included in the definition of management. Thisprovision is also applied for the Commissioners (Board of Directors) and themajor or controlling shareholders.

Article 33

Thebuyer of taxable goods or the receiver of taxable services referred to underthe VAT Law of 1984 has full responsibility upon the tax payment, so long as noproof of any sort can be produced that the tax is paid.

 

Elucidation of Article 33

In accordance with the principles of tax burden for ValueAdded Tax on Goods and Services and Sales Tax on Luxury Goods is on the buyeror consumer of goods or the service receiver. Therefore, it is appropriate thatthe buyer or consumer of goods or the service receiver be responsible severallyon the payment of tax payable if it turns out that the tax payable isnon-collectible to the seller or the service provider, and the buyer or servicereceiver fails to show proof of tax payment to the seller or the serviceprovider.

Article 34

(1)

An official shall be prohibited togive an unauthorized party any information learned or provided to thatofficial by a Taxpayer in the course of his duties or work in implementingthe provisions of the tax laws.

(2)

The prohibition referred to in paragraph(1) shall also apply to an expert appointed by the Director General of Taxesto give assistance in implementing the provisions of the tax laws.

(2a)

There shall be excluded from theprovisions of paragraphs (1) and (2):

a.

officials and experts acting aswitnesses or expert witnesses in a court.

b.

officials and experts giving informationto other parties that are stipulated by the Minister of Finance.

(3)

For the interest of the state, theMinister of Finance is authorized to give written approval to an officialreferred to in paragraph (1) and to an expert referred to in paragraph (2) toprovide information and present written evidence from or concerning aTaxpayer to a party designated by the Minister.

(4)

For the purpose of the courtsession in a criminal or civil suit, and on the request of the judge pursuantto the Law on criminal Procedures and the Law on Civil procedures, theMinister of Finance may issue a written permit to request from an officialreferred to in paragraph (1) or an expert as referred to in paragraph (2)written evidence and information in his possession about a Taxpayer.

(5)

A request from the judge referredto in paragraph (4) shall identify the name of the suspect or accused, theinformation requested and the relationship between the criminal or civil suitand the information requested.

Elucidation of Article 34

Paragraph (1)

Any official, either taxofficial or any one involved in taxation, is prohibited from disclosingTaxpayers confidentiality pertaining to taxation, among others:

a.

Tax Return, FinancialReport, and other related forms reported by a Taxpayer;

b.

data obtained to conductan audit;

c.

documents and or dataof classified confidential obtained from a third party;

d.

documents and or confidentialinformation of a Taxpayer pursuant to the provisions of related lawregulations.

Paragraph (2)

Experts, such aslinguists, accountants, lawyers, and so on, who are appointed by the DirectorGeneral of Taxes to assist in the implementation of the tax laws, have the sameobligation as tax official that is prohibited from disclosing confidential informationconcerning a Taxpayer as prescribed under paragraph (1).

Paragraph (2a)

Referred to as a thirdparty, among others, is the state or government institution having authority toconduct an investigation in the context of state finance. The meaning of anyinformation that is available for disclosure, among others, the Taxpayer�sidentity and any information of general nature on taxation.

Paragraph (3)

In the interest of theState, for example, in the framework of investigation, prosecution, or co-operatingwith other government agencies, information or written evidence from or about aTaxpayer shall be given or shown to specific parties appointed by the Ministerof Finance.

The written permissionissued by the Minister of Finance shall state the name of the Taxpayer, theparty appointed and the officials or experts authorized to give information orshow written evidence from or about the Taxpayer. Such permission shall berestricted to matters deemed necessary by the Minister of Finance.

Paragraph (4)

To conduct an audit ina criminal or civil court connected with tax matters, in the interest ofjustice, the Minister of Finance may exempt tax officials and experts from theobligation to maintain confidentiality as referred to in paragraph (1) and (2),and on a written request of the Judge heading the court.

Paragraph (5)

The purpose of thisparagraph is as a restriction and a confirmation, that tax information sorequested shall relate only to a criminal or civil case about an act orcircumstance in tax matters and shall be restricted only to the accusedconcerned.

Article 35

(1)

If, in implementing theprovisions of the tax laws, information or evidence is required from a bank, publicaccountant, notary public, tax consultant, administrative office or otherthird party with a relationship to a Taxpayer under audit or investigation,the party concerned shall provide the information or evidence when sorequested by the Director General of Taxes.

(2)

Where the parties referred to inparagraph (1) has a duty to withhold confidential information, such duty toshall be negated for the purpose of tax audit or investigation, except for abank for which the duty to maintain confidentiality shall be waived by awritten order from the Minister of Finance.

 

Elucidation of Article 35

Paragraph (1)

To implement theprovision of the tax laws, upon a written request from the Director General of Taxes,a third party, namely bank, public accountant, public notary, tax consultant,administrative office, and other third parties related to business activitiesof Taxpayers audited or investigated, is obliged to provide information orevidence requested by the Directorate General of Taxes� official.

Paragraph (2)

Sufficiently clear.

Article 36

(1)

The Director General of Taxesmay:

 

a.

reduce or cancel administrative penaltyin the form of interest, fine, and surcharge payable pursuant to the taxregulation in the event that the penalty is exercised due to Taxpayer�sdisregard or other than his intentional faults;

 

b.

reduce or cancel incorrect taxassessment.

(2)

Procedures of reducing,eliminating or canceling tax payable tax referred to in paragraph (1), isstipulated by the Minister of Finance.

 

Elucidation of Article 36

Paragraph (1)

There may happen in practice,an administrative penalty imposed to a Taxpayer that due to negligence on thepart of the official, burdens a Taxpayer who is not guilty or unaware of thetax regulations. In such cases, administrative penalty of interest, fine, andsurcharge previously determined may be cancelled or deducted by the DirectorGeneral of Taxes.

As such with theDirector General of Taxes due to his authority and based on justice, may deductor cancel incorrect notice of tax assessment as in, for instance, the Taxpayerwhose petition is denied due to improper fulfillment of the formal requirements(lately in filing the Decision on Objection), despite fulfilling the materialrequirements.

Paragraph (2)

Sufficiently clear.

Article 36A

If a taxauditor in calculating or determining the tax is not conformant with the taxregulation resulting a loss for the State, theofficial denoted is liable to penalty as provided by the law.

Elucidation of Article 36A

In efforts to enhance services to Taxpayers andcapabilities of tax officials, for the tax official counting or determining taxirrelevant with the valid tax laws resulting in the State loss, a penalty shallbe imposed in accordance with the provisions of the valid law regulations.

Article 37

Theamount of change of compensation interest and administrative penalty in theform of interest, fine, and surcharge shall be stipulated by a GovernmentRegulation.

 

Elucidation of Article 37

In accordance with themonetary condition, the currency value is not at a constant state. Hence, thelaw allows the Government, whenever necessary, to issue Government Regulationto change and adjust the amount of interest compensation and administrative penaltyin the form of interest, fine, and surcharge, in accordance with the monetary condition.

CHAPTER VIII

CRIMINALPROVISIONS

Article 38

Whomsoever,due to his negligence:

a.

fails to filea Tax Return; or

b.

files an incorrect orincomplete Tax Return, or attaches incorrect information, which may cause losses to the revenues of thestate, shall be punished by imprisonment for a maximum of 1 (one) year and amaximum fine equal to 2 (two) times the amount of unpaid or underpaid tax.

Elucidation of Article 38

A violation of tax obligations by a Taxpayer, insofar asit concerns a matter of tax administration, shall be subject to anadministrative penalty, whereas that connected with a crime in tax matters, isliable to a penalty. An act or deed as referred to under this Article is not anadministrative violation, but a criminal act.

By the existence of thecriminal penalty concerned, it is hoped that Taxpayers will be aware of theneed to comply with their tax obligations as prescribed in the tax lawregulation.

In this Article,negligence means unintentional neglect, carelessness or lack of appreciationfor tax obligations, so that the act causes a loss to the state revenue.

 

Article 39

(1)

Whomsoeverdeliberately:

 

a.

fails to register, or misuses oruses without authority a Taxpayer Identification Number or a Confirmation ofTaxable Person for VAT Purposes Number referred to in Article 2; or

 

b.

fails to file a Tax Return; or

 

c.

files a false or incomplete TaxReturn and or information; or

 

d.

refuses to be audited referred toin Article 29; or

 

e.

shows an account, record or otherdocument that is false or forged; or

 

f.

fails to keep books of accounts orrecords, or fails to show or make available accounts, records or otherdocuments; or

 

g.

fails to remit tax alreadywithheld or collected;

 

thus causes losses to thestate�s revenue, shall be punished by imprisonment for a maximum of 6 (six)years and a maximum fine equal to 4 (four) times the amount of unpaid orunderpaid tax.

(2)

The criminal penalties referredto in paragraph (1) shall be multiplied by 2 (two) if an individual commitsanother criminal tax offence within 1 (one) year after the completion of theprevious prison sentence.

(3)

Whomsoever, in the course ofclaiming a tax refund or a tax carryover, attempts to commit a criminal taxoffence by misusing or using without authority a Taxpayer IdentificationNumber or a Confirmation of Taxable Person for VAT Purposes Number referredto in paragraph (1) subparagraph a, or files a Tax Return and or attachesinformation which is false or incomplete as referred to in paragraph (1)subparagraph c, shall be punished by imprisonment for a maximum of 2 (two)years and a maximum fine equal to 4 (four) times the amount of the refund andor carryover claimed by the Taxpayer.

Elucidation of Article 39

Paragraph (1)

An act or deed asreferred to in this paragraph that is carried out intentionally is subject to aheavier penalty in view of the importance of tax receipts to State income.

Paragraph (2)

To prevent therecurrence of a criminal act in tax matters, those who repeat a tax crimebefore a year has elapsed since serving part of or the full previous prisonterm shall be liable to a heavier criminal penalty, which is twice the sentenceas prescribed in paragraph (1).

Paragraph (3)

Abuse or illegal use of a TaxpayerIdentification Number or a Taxable Person for VAT Purposes Registration Number,or the submission of a false or incomplete Tax Return in connection with afalse request for an unrightfully tax refund and or tax credit, is extremelyharmful to the State. Therefore, any attempt to commit such a crime constitutesa separate litigation.

Article 40

Anindividual committing a criminal tax offence shall not be prosecuted if 10(ten) years have elapsed since the date of tax is payable, or the end of therelated Taxable Period, the Fraction of the Taxable Year, or the Taxable Year.

Elucidation of Article 40

Taxcrime statue of limitation is ten years beginning from tax becoming payable,from the end of the related Taxable Period, or Fraction of Taxable Year, orTaxable Year. This will give a legal certainty to Taxpayers, general prosecutorand judge. The ten-year period is in line with the retention of tax documentson which the calculation of tax payable is based.

Article 41

(1)

An official who, due to his/hernegligence, fails to fulfill the obligation to withhold confidential informationas referred to in Article 34, shall be punished by imprisonment for a maximumof 1 (one) year and a maximum fine of Rp4,000,000.00 (four million rupiahs).

(2)

An official who deliberately failsto fulfill his duties, or anyone who causes the official to fail in hisduties referred to in Article 34, shall be punished by imprisonment for amaximum of 2 (two) years and a maximum fine of Rp10,000,000.00 (ten millionrupiahs).

(3)

A criminal prosecution referredto in paragraph (1) or (2) shall only be conducted on a suit filed by anindividual whose confidentiality has been breached.

Elucidation of Article 41

Paragraph (1)

To ensure thatconfidential tax matters are not revealed to third parties and in order that aTaxpayer will not be dissuaded from providing data and explanations in thecontext of implementing the tax laws, it is necessary that criminal penalty beimposed on any official breaching confidentiality.

A breach ofconfidentiality under this paragraph is done due to negligence in the sense ofunintentional neglect, carelessness, or lack of appreciation of duty, such thatthe legal obligation to keep information or evidence from a Taxpayer confidential, is violated. Because of such negligence, theofficial is subject to an appropriate penalty.

Paragraph (2)

An act or deed referredto in this paragraph, which is committed intentionally, is subject to a heavierpenalty compared to the act or deed committed through negligence, in order thatofficial concerned will be more careful not to breach the confidentiality of aTaxpayer.

Paragraph (3)

A criminal suit againsta breach of confidentiality as referred to in paragraph (1) and (2), by its natureaffects the private interest of an individual or an entity as a Taxpayer;hence, it can only constitute an alleged criminal offence.

Article 41A

Whomsoeverobliged under Article 35 of this law to provide information or evidence asrequested, but deliberately fails to do so, or provides information or evidencethat is false, shall be punished by imprisonment for a maximum of 1 (one) yearand a maximum fine of Rp10,000,000.00 (ten million rupiahs).

Elucidation of Article 41A

In order that a third party complies with therequest of the Director General of Taxes as prescribed in Article 35, it isnecessary to impose a penalty on any third party that commits such acts ordeeds as are referred to in this Article.

Article 41B

Whomsoeverdeliberately obstructs or hinders a tax criminal investigation shall bepunished by imprisonment for a maximum of 3 (three) years and a maximum fine ofRp10,000,000.00 (ten million rupiahs).

 

Elucidation of Article 41B

Anyone committing an act of obstructingor hindering an investigation of a criminal tax offence, such as by obstructingan investigator from conducting a search, by concealing evidence and so on,shall be liable to a criminal penalty as prescribed in this Article.

Article 42

Deleted(by the Law No. 9 of 1994)

Elucidation of Article 42

Deleted (by the Law No. 9 of 1994)

Article 43

(1)

The provisionsreferred to in Article 38 and Article 39 shall also apply to anyrepresentative, third party with power of attorney, or employee of aTaxpayer, who orders, participates in, proposes, or assists in the executionof a criminal tax offence.

(2)

The provisionsreferred to in Article 41A and Article 41B shall also apply to whomsoever orders,proposes, or assists in the execution of a criminal tax offence.

Elucidation of Article 43

Paragraph(1)

Prosecution on acriminal tax offence shall not be limited to Taxpayers, their representativesor employees, but shall also include those who order, participate, propose orassist the tax criminal offence.

Paragraph (2)

Sufficientlyclear.

CHAPTER IX

INVESTIGATION

Article 44

(1)

Particular officialsof the Directorate General of Taxes shall be granted special authority asinvestigators to investigate criminal tax offences, as provided under theregulating law on Criminal Procedures.

(2)

An investigatorreferred to in paragraph (1) is authorized to

 

a.

receive, seek, gather, andexamine information or reports connected with criminal tax offences, so thatthe information or reports shall be made more comprehensive and clearer;

 

b.

examine, seek, and gatherinformation on individuals or entities with respect to truth of actscommitted in connection with criminal tax offences;

 

c.

request information and evidencefrom individuals or entities in connection with criminal tax offences;

 

d.

examine accounts, records, andother documents in connection with criminal tax offences;

 

e.

conduct search in order to obtainevidence such as accounts, records and other documents, and to confiscatesuch evidence;

 

f.

seek the assistance of experts inthe context of conducting an Investigation into criminal tax offences;

 

g.

prevent and or prohibit anyonefrom leaving a room or place while an Investigation is in progress and toexamine the identity of individuals and or confiscated documents as referredto in subparagraph e;

 

h.

photograph any individualsconnected with tax offences;

 

i.

summon an individual to provideinformation and examine him as a suspect or witness;

 

j.

terminate an investigation;

 

k.

conduct such other activities as may benecessary to expedite the investigation of a tax offence, in conformity withand accountable to the law.

(3)

An investigator referredto in paragraph (1) shall notify the start of an Investigation and submit itsresults to the Public Prosecutor through the State Police InvestigationOfficial pursuant to the provisions of the regulating Law on CriminalProcedures.

 

Elucidation of Article 44

Paragraph (1)

A tax investigator is aspecial official in the Directorate General of Taxes who is appointed by theofficial in charge in accordance with the applied tax law regulation.Investigation of a tax crime is conducted in accordance with regulationsprescribed on the valid Criminal Law Procedures.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Article 44A

An investigator referred to in paragraph (1) of Article 44 shall terminatean investigation referred to in paragraph (2) subparagraph j of Article 44where there is insufficient evidence, or where the case does not constitute acriminal tax offence, or where the case is overdue, or the suspect has passedaway.

 

Elucidation of Article 44A

Wherean investigation on a criminal tax offence is terminated, other than due to itsstatue of limitations, a notice of assessment can still be issued.

Article 44B

(1)

For the purposeof the state�s revenue, upon request from the Minister of Finance, theGeneral Attorney may terminate an investigation of a criminal tax offence.

(2)

The termination of investigation referred to inparagraph (1) shall only be approved after the Taxpayer fully paid tax whichis unpaid, is underpaid, or should not have been refunded, increased by anadministrative fine equal to four times the tax unpaid, underpaid, or whichshould not have been refunded.

 

Elucidation of Article 44B

Paragraph(1)

Sufficientlyclear.

Paragraph (2)

Sufficientlyclear.

CHAPTER X

TRANSITIONPROVISIONS

Article 45

The provisions of the previous tax laws shall remain in force untilDecember 31, 1988, with respect to taxes payable at a time, a Taxable Period, aFraction of a Taxable Year, or a Taxable Year ending before the enactment ofthis law.

Elucidation of Article 45

Notwithstandingthe revocation of the previous law upon the enactment of this law, toaccommodate the settlement of tax assessed in the period or Taxable Year priorto the enactment of this law, the implementation of which was still based onthe old law, this law provides the validity of the old law up to December 31,1988. The five years determination is in line with tax collection statue oflimitation.

Article 46

Withthe enactment of this law, the implementing regulations of the previous taxlaws shall remain in force provided they do not conflict with the provisions ofthis law.

Elucidation of Article 46

Sufficiently clear.

Article 47

Deleted (by the Law No. 9 of 1994)

Elucidation of Article 47

Deleted (by the Law No. 9 of 1994)

Article 47A

To alltaxation rights and obligation that have not been completed, Law Number 6 Year1983 on the General Provisions and Tax Procedures as has been amended with LawNumber 9 Year 1994 shall be enacted upon.

Elucidation of Article 47A

In efforts to givecertainty to Taxpayers concerning the tax rights and obligations that has notbeen settled for Taxable Year 2000 and previously, Law Number 6 year 1983 onGeneral Rules and Procedures of Taxation as amended by Law Number 9 Year 1994are still applied.

CHAPTER XI

CLOSINGPROVISIONS

Article 48

 

Allmatters not covered under this law shall be dealt with by a GovernmentRegulation.

Elucidation of Article 48

To accommodate tax matters not adequately provided,regarding procedures or completeness, those matters will be regulated furtherin Governments regulations. Therefore, it will be less laborious to makeadjustments on the implementation of this law and necessary procedures.

Article 49

The provisions ofthis law shall have the same validity as other tax laws unless otherwisestipulated.

Elucidation of Article 49

Sufficiently clear.

 

© PajakOnline.com |  ‹ Dibaca 10494 kali ›


Pencarian Artikel Tax Learning
Kata Kunci :
Match  
AND  
OR  
Topik :  
Cari di :
Judul  
Isi  
 
Hasil per halaman :