7 Things You Should Know About Tax Amnesty

Since the tax amnesty program announced by President Joko Widodo last July, we often heard the term mentioned in many discussions. As the government’s flagship program to repatriate Indonesian assets parked overseas and increase tax revenues, it is not something to be taken for granted.

“As we are approaching the automatic exchange of information in 2018, there will be a bilateral agreement that will reveal financial information. That way, those who used to avoid taxes by parking their assets overseas will be identified by the government,” says Dian Puspa Wahono, Marketing Communication Specialistat PT Achilles Advanced Systems, the company behind Online Pajak, an online tax software which aims to help tax reporting activities by individuals and companies.

By declaring assets that have been out of reach from the Taxation Directorate General, the Indonesian government hopes to get the information of asset ownership without force.

Tax amnesty program will run for nine months, until 31 March 2017, so it is not too late to know some of these things:

1. It is aiming at tax evaders and avoiders

Tax amnesty provides an opportunity for taxpayers to break away from past tax liabilities that could potentially be charged and get sanctioned in the form of interest and penalties in the future. Moreover, this program will eliminate tax crime sanctions. This means it would enable taxpayers to start with a clean slate.

2. Redemption Money = Tariff x Net Asset Value

Until the end of March next year, the government is giving a low redemption money rates based on the Asset Declaration Letter for Tax Amnesty (SPHPP) submission period, which is 2%-5% for onshore assets declaration, 4%-10% for offshore assets declaration, and 0.5%-2% for SME with assets declaration up to Rp 10 billion. The first period of this program with lowest redemption rate will end by 30 September 2016. The net asset is a total of assets minus liabilities.

3. There won’t be any tax-related examinations

Through this program, the government will ensure that taxpayer who has obtained SPHPP will not go through a tax audit, preliminary evidence examination, or investigation of tax crimes for the tax period up to 31 December 2015. All data and information contained in SPHPP cannot be used as the the basis of an investigation, criminal investigation or prosecution against the taxpayer.

This also means that net asset value declared on SPHPP is fully based on the taxpayer’s valuation and will not be corrected or tested by the Taxation Directorate General.

4. With tax amnesty, tax return revision cannot be done

One of the requirements of tax amnesty is the revocation of all applications for reductions, cancellations, tax objections, revisions, lawsuit, and appeals.

"If the taxpayer has submitted a tax return but made an error, it is possible to file a revised return correcting the error,” Dian suggests, especially for employees who earn all of their income from one company and have their income taxes paid by the company.

Acoording to the Genral Taxation System (KUP) Law, if a taxpayer made a tax return revision by declaring an asset that has been taxed, the taxpayer will not have to pay taxes. If the asset is not yet taxed, the taxation Directorate General has the right to conduct tax examinations.

5. The additional assets cannot be depreciated

For tangible assets, the depreciation calculation typically begins in the month the asset is used to obtain, collect, and preserve income. However, additional assets – tangible or intangible – declared in the SPHPP cannot be depreciated or amortized for tax purposes

6. Tax amnesty affect the next fiscal reports

If you decide to participate in tax amnesty program, make the best out of it by declaring all of your assets. If in the future there is information that there are assets that have not been declared in the SPHPP, the assets will be deemed as additional income at the time of finding by three years following the enactment of this law at the latest, and will be subject to tax and sanction in accordance with the prevailing tax regulation.

After participating in the program, taxpayers should also maintain tax compliance in order to be efficient and not cause problems.

7. The requirements to qualify for Tax Amnesty

If you are interested in participating in this program, simply go to the nearest tax administration office (KPP) to get the complete information. After that, consult with a professional and start calculate your assets carefully to pay the redemption money. Some of the attachment required in the SPHPP:

  • Settlement evidence of all outstanding tax liabilities
  • List of liabilities along with its supporting documents
  • A copy of the latest annual income tax return
  • Payment slip of the redemption money
  • Statement letters

After taxpayer submit the SPHPP along with its supporting documents to KPP or other designated locations, taxpayer will be given a receipt. Within the following 10 days, taxpayer will be issued Tax Amnesty Approval (Surat Keterangan Pengampunan Pajak/ SKPP). 

Read also: Common Mistakes People Do When Filing a Tax Report

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