Client Alert | June 2024 - 1st Issue

1. Upcoming Tax Reform in Indonesia

The Indonesian government has announced comprehensive tax reforms aimed at modernizing the tax system and improving compliance. These reforms will have significant implications for both individual and corporate taxpayers operating in Indonesia.

1.1 Integration of National ID into TIN

The Directorate General of Taxes (DGT) is implementing a new system that integrates the National ID number into the Taxpayer Identification Number (TIN). This integration aims to streamline tax administration and reduce duplicate registrations.

Taxpayer Registration

All existing taxpayers will be required to update their registration information through the new integrated system. The DGT will provide detailed guidance on the registration process and required documentation.

Grace Period

A grace period of 12 months will be provided for taxpayers to complete the registration process. During this period, existing TINs will remain valid for tax filing and compliance purposes.

Taxpayer Support

The DGT has established dedicated support channels to assist taxpayers with the transition process. This includes online tutorials, helpdesk services, and regional office assistance.

1.2 Implementation of the Core Tax Administration System (CTAS)

The Core Tax Administration System (CTAS) represents a significant technological advancement in Indonesia's tax administration. This system will integrate various tax functions into a unified platform, improving efficiency and reducing administrative burdens.

The CTAS implementation will be phased over the next 24 months, with priority given to high-volume taxpayers and critical tax functions. The system will feature enhanced security measures, real-time processing capabilities, and improved user interfaces.

Key benefits of the CTAS include:

• Streamlined tax filing and payment processes
• Enhanced data security and privacy protection
• Improved audit and compliance monitoring
• Better integration with other government systems
• Reduced processing times for tax returns

2. DGT Releases Circular Letter on Implementation of Tax Obligations in Bonded Zones

The Directorate General of Taxes has issued a new circular letter addressing tax obligations for businesses operating within bonded zones. This guidance clarifies the application of VAT and other tax provisions in these special economic areas.

The circular letter provides comprehensive guidance on various aspects of tax administration within bonded zones, including the treatment of goods entering and exiting these areas, VAT collection requirements, and compliance procedures.

(a) Entry of Taxable Goods (BKPs) into Bonded Zone

When taxable goods enter a bonded zone, specific documentation and procedures must be followed. The circular clarifies the requirements for proper documentation, including customs declarations, tax invoices, and supporting documentation.

(b) Requirements for Non-Collection of PPN or PPNBM

Under certain circumstances, VAT (PPN) and Luxury Goods Sales Tax (PPNBM) may not be collected on goods entering bonded zones. The circular outlines the specific conditions and requirements that must be met to qualify for this exemption.

(c) Release of BKPs from Bonded Zone

The process for releasing taxable goods from bonded zones involves specific tax considerations. The circular provides detailed guidance on the documentation requirements, tax calculations, and compliance procedures for such transactions.

(d) Release of BKPs owned by Foreign Tax Subjects from Bonded Zone

Special provisions apply when foreign tax subjects release goods from bonded zones. The circular addresses the unique considerations and requirements for these transactions, including documentation and tax treatment.

3. Indonesia's Import Quota Policy Faces Challenges and Revisions

Indonesia's import quota policy has been subject to significant challenges and revisions in recent months. The government has been working to balance the need for economic protection with the requirements of international trade agreements.

The policy revisions address concerns raised by trading partners and domestic businesses regarding the implementation and enforcement of import quotas. Key changes include more transparent quota allocation processes, improved appeal mechanisms, and enhanced monitoring systems.

Looking forward, the government has indicated that further policy adjustments may be necessary to address emerging challenges and ensure the policy effectively serves its intended purpose of protecting domestic industries while maintaining compliance with international trade obligations.