Sanctions for Non-Compliance with Tax Reporting Obligations – Individuals and entities who have obtained a Taxpayer Identification Number (NPWP) or obtained profits such as wages, dividends, income and other sources of income are both required to report taxes to the Indonesian tax authorities.

Annual Tax is a tax that must be paid to the Indonesian tax agency, the Directorate General of Taxes (DJP), every year.

To submit an Annual SPT to the Indonesian Directorate General of Taxes (DJP), a person must be register as an individual or entity. Given the frequent and sudden changes in tax laws in Indonesia, registration will require the submission of several documents.

Through Circular Letter Number 4 of 2021 concerning the Implementation of Criminal Provisions Related to Taxation, the Indonesian Supreme Court imposed heavier sanctions on 29 November 2021. This article will discuss the most important points that must be remembered in terms of tax reporting, compliance in Indonesia and how to avoid these sanctions.

Reporting taxes in Indonesia

Tax calculation

Indonesia implements a self-assessment system where taxpayers are entrusted to calculate, pay and report their taxes in accordance with applicable laws and regulations. However, the DJP can send a Tax Assessment Letter to a particular Taxpayer if it is discovered that based on additional information provided by the Tax Auditor, the Taxpayer has not paid his tax.

Another factor that can cause the DGT to issue a tax assessment letter is not carrying out bookkeeping in accordance with established standards.

Tax payment and reporting obligations

Tax obligations for certain times of the year are usually deposited into the State Treasury through authorized perception banks and then reported to the DGT office through submission of relevant tax forms.

Depending on the tax liability involved, tax payments and returns must be filed electronically, either on a monthly or annual basis.

Direct payments, third-party deductions, or a mix of the two can be used to meet a company’s tax obligations.

If the entire amount of prepaid tax for the year is less than the total amount of corporate income tax payable, the company must cover the difference before completing the corporate income tax report.

Tax payment and reporting deadlines

Sanctions for non-compliance with tax reporting

• Late tax payment: Monthly fee of 2% for a maximum of 24 months
• Late Tax Reporting and Underpayment: Fine IDR 100,000 – IDR 1,000,000 depending on the type of tax
• Tax objections rejected: 50-100% of the underpayment portion
• Incomplete, late issuance, non-compliant issuance or unissued VAT invoice: 2% surcharge
• Filing or non-filing of an incorrect tax return: 3-12 months in prison or a fine of 200% of the unpaid tax
• Embezzlement, fraud, and incorrect accounting of export and import activities: maximum penalty of six years in prison or a fine of 200-600% of the actual payment

Tighter penalties for tax non-compliance

The Supreme Court of the Republic of Indonesia issued Circular Letter Number 4 of 2021 concerning the Implementation of Provisions in Criminal Acts in the Tax Sector which came into effect on 29 November 2021, with the following provisions:

• In the event of a request to terminate the prosecution, the pre-trial involving criminal acts in the field of taxation must be prosecuted by the district court where the investigator or public prosecutor is located.
• The criminal liability of the management and/or other parties for criminal acts in the field of taxation during the criminal act period is not forgiven by bankruptcy or liquidation of the company.
• Defendants of Tax-Related Crimes are not eligible for probation.
• Other (additional) criminal sanctions will be imposed on both individuals and corporations.

Criminal acts in the field of taxation can occur as a result of:

• Tax Evasion;
• Failure to submit SPT, whether intentionally or not; Falsifying data supporting tax reports or submitting incorrect tax reports;
• Refusal to audit tax officials;
• Failure to keep accurate records;
• Misusing Tax Number.

Report your taxes with tax consultation services in Indonesia

Many businesses prefer outsourcing their tax obligations compliance to Tax Consulting Services in Indonesia. Above all, outsourcing companies help businesses cut overhead costs and save crucial time that is better spent on the core business; provides security using the latest technology, secures your data, ensures error-free and enhanced compliance, and complete assistance in creating tax planning strategies. Additionally, by outsourcing, one gets access to a higher level of tax expertise, and an efficient document management system.

Indoservice always provides high quality services by trying to understand your problems and needs. Our solutions are personalized for each business. We assists businesses in preparing and submitting application for the taxation and provides consulting services with our expert to ensure tax non-compliance meet with requirements and regulations in Indonesia.

To ensure client satisfaction, we offer a complete package that includes accounting services and tax reporting services. Contact us at email: admin@indoservice.co.id or Call/Whatsapp +62877-1449-8500 for more detailed information.