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Tax flash June 2021

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Tax flash June 2021

  1. 1. TAX FLASH China, being the largest country in the world by population size and growing middle class poses a lucrative market for every firms in the world. From auto, electric consumer goods, high fashion and many more. And yet, it is the world largest manufacturing powerhouse that is capable to produce anything. Indonesia is a major supplier of commodities to China; oil, woods, iron ore, coal, vegetable oil and foods. However, export of highly value added goods is not large to China. Instead, Indonesia imports great amount of highly value added goods, especially machineries or heavy vehicles. Regional Comprehensive Economic Pact (RCEP), the largest trade bloc that Indonesia has joined last December should enable Indonesian firms to export more goods to China as there will be lower tariff and lesser trade barriers. This will strengthen bilateral trade between Indonesia and China, its largest trading partner. The RCEP has not been ratified yet by the Indonesian’s parliament though. "A successful economic development strategy must focus on improving the skills of the area's workforce, reducing the cost of doing business and making available the resources business needs to compete and thrive in today's global economy." ~ Rod Blagojevich Insights on China Market Trend KIB E-newsletter June 2021 In This Issue: - Insights on China Market Trend - Draft of the Fifth Amendment to Law no. 6 of 1983 concerning General Provisions and Tax Procedures (KUP) - Government plans to extend tax incentive until the end of 2021 - Transfer from registered KPP to KPP madya - 5 business strategies for success during the pandemic
  2. 2. Promoting Indonesian products in China will be a tremendous challenge itself. Our products are not famous worldwide yet. We don’t have brands that compete in international level while the Chinese does. Nevertheless, there are some areas where we can promote them. Partnering with local business has always been the orthodox action to be taken. In fact, most foreign firms created Joint Ventures(JVs) in China to operate. Whether it be the auto, finance and other sectors. Forming JVs in China requires great caution regardless the credibility of the Chinese partners, especially in copyright or intellectual property. Integrate with China’s E-commerce. It is the world largest due to its early adoption by 700 million users. Tiktok and Kuaishou has pioneered the livestreaming E-commerce, where young vendors or influencers promoted their products. Livestreaming e-commerce is expected to grow rapidly as Forbes estimated that it has been valued more than $60 billion last year. Baidu, Taobao and JD.com have installed new features to compete with Tiktok and Kuaishou in this area. Indonesian firms and entrepreneurs should use these opportunities to increase brand awareness of their products and also to spot the market trend in China. Lastly, we believe that product placements in Korean TV dramas would be vital to promote Indonesian products. Korean products have become more popular in China as the affluent consumers are more enamored with K Pops and K dramas. Maybe in the future, if we can produce great TV dramas similar to Korean, there will be more interests on our products worldwide, especially with Netflix producing more Asian dramas and movies. There is a major issue for firms to maintain its foothold in China’s economy; political tension. Chinese consumers are fervent in this field as they have boycotted a lot of products in past geopolitical tensions. They boycotted Japanese products during the Senkaku Island incident. Korean products were boycotted after the installation of THAAD missile defense system in Korea. Currently, they are boycotting western brands that have removed products associated with Xinjiang cotton slavery. It is not only boycott by the Chinese consumers that we should fear. It is the Chinese government’s actions too. They have made it clear that they will punish firms or governments mercilessly. The recent example was Australia’s wine faced a tariff up to 200% due to Australian government’s request of investigating the origin of COVID 19 virus last year. Or, stopping shipments of Taiwan pineapple entering China under the ‘pest’ issue to ramp up political pressure. Indonesia needs to reduce its overreliance on China to mitigate similar issues in the future. We have seen how countries that relied heavily on China can be punished easily. We must understand that China plays with its own rule as it rises to be a major superpower that might stand equal with United States in Asia Pacific. It is done with complying international rules. If anything were to happen, do not expect WTO to solve it. We are still living in “Might is Right” world. In conclusion, we believe that the Chinese market will be a great opportunity for Indonesian entrepreneurs and firms to sell their products. But, conditions are attached to it, especially political ones.
  3. 3. Draft of the Fifth Amendment to Law no. 6 of 1983 concerning General Provisions and Tax Procedures (KUP) In the draft of the Fifth Amendment to Law no. 6 of 1983 concerning General Provisions and Tax Procedures (KUP), the government plan to do some tax changes. . 1. VAT Rate Increase to 12% The government plans to increase the rate of value added tax (VAT) from 10% to 12%. The change in the VAT rate is regulated by a Government Regulation after being submitted by the government to the House of Representatives (DPR) to be discussed in the preparation of the Draft State Revenue and Expenditure Budget (RAPBN). In paragraph 2 it is explained that the VAT rate of 0% is applied to exports of tangible taxable goods, exports of intangible taxable goods, and exports of taxable services. Article 7A paragraph 1 explains that VAT may be imposed at a different rate from the rate as referred to in Article 7 paragraph 1 or paragraph 3, namely on: - delivery of certain taxable goods and/or certain taxable services - import of certain taxable goods; and - utilization of certain intangible taxable goods and/or certain taxable services from outside the customs area within the customs area. "The rate of value added tax is 12%," reads Article 7 paragraph 1. Article 7A paragraph 2 explains that the different rates as referred to in paragraph 1 above are subject to a minimum of 5% and a maximum of 25%. And in paragraph 3, the VAT rate as referred to in paragraph 1 can be changed to a minimum of 5% and a maximum of 15%. 2. Companies that suffer losses will be subject to 1% tax The government decided to impose a minimum income tax for companies who suffer losses. Minimum income tax is calculated at a rate of 1% of the tax base in the form of gross income. The company referred to here is a corporate taxpayer which in a tax year has income tax payable not exceeding 1% of gross income. Gross income is all income received or earned by corporate taxpayers, both from business activities and from outside business activities in a tax year before deducting related costs, excluding income subject to final tax and income that is not a tax object. Corporate taxpayers with certain criteria are excluded from the minimum income tax. Then, in the event that an audit is carried out on a corporate taxpayer, the minimum income tax is calculated in the determination of the tax payable based on the results of the examination.
  4. 4. Provisions regarding the procedure for calculating the minimum income tax, corporate taxpayers with certain criteria and the calculated minimum income tax are regulated by a Regulation of the Minister of Finance. Provisions regarding the 1% limit of gross income and the rate or basis for imposition of minimum income tax can be amended by a Government Regulation. 3. Tax evasion will no longer be punished The government plans to eliminate the criminal sanction of confinement for tax evaders, and prioritize administrative sanctions or fines. "The fine as referred to in Article 39 and Article 39A cannot be replaced by imprisonment and must be paid by the convict," reads Article 44C paragraph 1 Described in UU KUP 28/2007, article 39 specifies any person who knowingly: • does not register to be given a Taxpayer Identification Number or does not report his business to be confirmed as a Taxable Entrepreneur; • misuse or use without right the Taxpayer Identification Number or Taxable Entrepreneur Confirmation; • does not submit a Notification Letter; • submit a Notification Letter and/or information whose contents are incorrect or incomplete; • refuse to carry out the examination as referred to in Article 29; • show books, records, or other documents that are false or falsified as if they were true, or do not represent the actual situation; • not keeping books or records in Indonesia, not showing or not lending books, records or other documents; • does not keep books, records, or documents that form the basis for bookkeeping or recording and other documents including the results of data processing from electronically managed books or online application programs in Indonesia as referred to in Article 28 paragraph (11); ori. not depositing taxes that have been withheld or collected Then, Article 39A describes any person who knowingly: - issue and/or use tax invoices, proof of tax collection, proof of tax withholding, and/or proof of tax payment that are not based on actual transactions; or - issues a tax invoice but has not been confirmed as a Taxable Entrepreneur shall be punished with imprisonment for a minimum of 2 years and a maximum of 6 years and a fine of at least 2 times the amount of tax in the tax invoice, proof of tax collection, proof of tax withholding, and/or proof of tax payment and at most 6 times the amount of tax in the tax invoice, proof of tax collection, proof of tax withholding, and/or proof of tax payment. Returning to the RUU KUP, article 44B paragraph 1 explains that for the sake of state revenue, at the request of the Minister of Finance, the Attorney General may stop the investigation of criminal acts in the taxation sector at the latest within 6 months from the date of the request letter.
  5. 5. The termination of the investigation of criminal acts in the field of taxation as referred to in paragraph 1 is only carried out after the taxpayer or suspect has paid off the loss on state income as referred to in article 39 plus an administrative sanction in the form of a fine of 3 times the amount of loss in state income. Then it is explained in Article 44C paragraph 2 that in the event that the convict does not pay the criminal fine as referred to in paragraph 1 no later than 1 month after the court's decision has obtained permanent legal force, the prosecutor shall confiscate and auction the assets of the convict to pay the fine according to the provisions. 4. The Authority of Tax Officers Will be Expanded The government plans to expand the investigatory authority of the Directorate General of Taxes (DGT) of the Ministry of Finance on tax crimes. Later, investigators can arrest and confiscate the suspect's property. Article 44 of the RUU KUP explains that the investigation of criminal acts in the taxation sector can only be carried out by certain Civil Servant Officials within the Directorate General of Taxes who are given special authority as investigators of criminal acts in the taxation sector. Additional authority given to investigators is to make arrests and/or detention of suspects. Then confiscate and/or block assets belonging to taxpayers, tax bearers and/or other parties who have been designated as suspects. GOVERNMENT PLANS TO EXTEND TAX INCENTIVE UNTIL THE END OF 2021 The government has decided to extend the period of providing tax incentives, such as income tax (PPh) Article 21 borne by the government (DTP), final PPh DTP for MSMEs, exemption from import PPh Article 22, and a 50% reduction in installments of PPh Article 25 in PMK 9/2021 until the end of the year. As is known, the period of giving 6 tax incentives in PMK 9/2021 ends at the end of this month. In addition to the four incentives, there are also final PPh incentives for DTP construction services for the Program for the Acceleration of Improved Irrigation Water Use (P3-TGAI) and accelerated VAT refunds. As previously reported, the realization of tax incentives for businesses in the national economic recovery program (PEN) until June 18, 2021 has reached Rp36.02 trillion. This realization is equivalent to 63.5% of the Rp56.73 trillion ceiling. Finally, the sales tax incentive on luxury goods (PPnBM) on DTP motorized vehicles was also extended. The incentive arrangement is currently contained in PMK 31/2021. The incentives for Income Tax Article 21 • 90.317 Employers The incentives for Final Income Tax • 127.549 MSME Taxpayers The incentives for Income Tax Article 22 •15.7009 Taxpayers The incentives for Income Tax Article 25 • 69.087 Taxpayers The incentives for VAT • 819 Taxpayers
  6. 6. TRANSFER FROM REGISTERED KPP TO KPP MADYA WHY TRANSFER? Taxpayers can transfer from KPP Pratama to KPP Madya if they are considered large and meet the criteria as referred to in Article 7 (PER-08 / PJ / 2012), namely: Average realization of tax payments, both those listed in the State Revenue Module (MPN) system and those not listed in the MPN system and the average taxpayer business turnover listed in the Annual Corporate Income Tax Return for the last 3 (three) years, specifically for Corporate Taxpayers, which is determined with a weighting of 80% for the realization of tax payments and 20% for business circulation. Consideration of the Director General of Taxes. WHERE IS THE PAYMENT & REPORTING DONE AFTER THERE IS A NOTICE LETTER OF REGISTERED PLACE AT MADYA KPP? Taxpayers will be given a new Tax ID number to do their tax obligation, however if taxpayers are still using their old Tax ID, it will still be considered valid within 2 months from the time of SMT Registration (especially for imports). For reporting, taxpayers should use their new Tax ID and reports to the New KPP, but if the taxpayer reports to the previous KPP it can still be accepted for a maximum of 2 months from the time of registration (SMT). WHAT IF THE COMPANY ALREADY PRINTED LOTS OF TAX INVOICE AND TAXATION FORMS, CAN IT STILL BE USED? Taxpayers can still use the Old Taxation Form up to 3 months from the SMT. The use of the Old Taxation Form is carried out by replacing the KPP Code on the Old Taxpayer Identification Number listed on the Old
  7. 7. Taxation Form by crossing out the KPP Code where the Taxpayer was previously registered and replacing it with a New Code. And for the use of the Old Tax Invoice can be done by adding a new KPP code above / below the old KPP code, and adding a new tax invoice serial number above / below the old tax invoice serial number, by typing it without any streaks / corrections that can cause the Tax Invoice to be defective. HOW ABOUT THE TAX INVOICE NUMBER, DOES IT START FROM ONE OR KEEP ON NEXT NUMBERS? The Tax Invoice numbering is continued with the number as stipulated in Attachment 12 PER-06 / PJ / 2012 (revoking PER-11 / PJ / 2008) which reads "PKP is required to use a new NPWP in accordance with the applicable provisions and continue the Old Tax Invoice serial number". WHEN LISTED DATE AT MADYA KPP, WHAT ARE THE TAXATION OBLIGATIONS THAT SHOULD BE REPORTED TO MADYA KPP? In accordance with Article 5 (PER-08 / PJ / 2012) states "The tax obligations for taxpayers registered with the KPP as referred to in Article 2 paragraph (1) in this case, the Intermediate KPP includes": • Corporate Income Tax • Value Added Tax on Goods and Services and Sales Tax on Luxury Goods; • Withholding and Collection of Income Tax as a result of transactions conducted by the Taxpayer's head office and / or branches. WHAT ARE THE OBLIGATIONS OF TAX PAYERS AT MADYA KPP WITHIN 1 APRIL 2021 THE TAXPAYERS ARE REGISTERED IN MADYA KPP WITH CENTER CODE (000) AND THE COMPANY IS OUTSIDE OF THE CITY / DISTRICT AREA? In Article 5 paragraph 3 (PER-08 / PJ / 2012) it says "For taxpayers with central status who are still registered at the same Intermediate KPP but domiciled outside the area as stipulated in Attachment II of this Regulation of the Director General of Taxes, which is an integral part. From this Regulation of the Director General of Taxes, the obligation of Value Added Tax is carried out at KPP Pratama whose working area includes the domicile of the Taxpayer by issuing a branch NPWP, effective January 1 of the following year after the year of SMT." In addition, Article 8 (PER-08 / PJ / 2012) states "In the event that Taxpayers who are registered at the KPP Intermediate have a place of business outside the region as stipulated in Attachment II of this Regulation of the Director General of Taxes, which is an integral part of This Regulation of the Director General of Taxes requires that the place of business activity be concentrated at the Intermediate KPP, the Taxpayer must submit notification of the concentration of the Value Added Tax due to the Head of the Intermediate KPP. " Thus, specifically for the VAT obligation, taxpayers before December 31, 2021 have the option of reporting whether to remain at the KPP Madya or at KPP Pratama, if they want to remain at the KPP Madya, they must submit notification of the concentration of the value added tax due to the Head of the KPP Madya.
  8. 8. 5 business strategies for success during the pandemic June 27, 2021: Indonesia, the hardest-hit nation in Southeast Asia, has reported more than 2.1 million COVID-19 cases with 57,138 deaths. Indonesia set a record for daily coronavirus cases on Sunday with more than 21,000, as hospitals are flooded with patients in Jakarta and other COVID-19 hotspots across Southeast Asia's hardest-hit nation. The figure brings the country's tally for the pandemic to more than 2.1 million coronavirus cases with 57,138 deaths. Indonesia's COVID-19 case rates have soared in recent weeks after millions travelled at the end of the Muslim fasting month of Ramadan in May, and as authorities identified the presence of highly infectious newer virus strains. Placing an emphasis on opportunities to innovate — instead of making blind, blanket budget cuts — can help organizations emerge stronger. Current coronavirus pandemic led to limited lockdowns and restrictions that drastically slowed business and disrupted supply chains, many companies were forced to make financial cuts. But every slash of the budget is not created equal, and companies that are making strategic decisions with their clients and customers in mind will likely fare better than others. In some cases, this might be the time to invest in new opportunities. Here is our advice on how companies can emerge from the pandemic intact — and maybe stronger than ever. Make strategic cuts. Facing a crisis, it can be tempting for business leaders to take a “peanut butter approach” to cost-cutting. Too often organizations take a blanket approach when they take costs down, “So some’ll say, ‘We’re going to take every budget down by 2%, or we’re going to take every region down by 5%.’” Companies need to make strategic cost-cutting decisions based on their customers’ changing needs. Airlines like GARUDA naturally laid off thousands of workers because it will likely take several years for the industry to rebound. But many other industries will come back sooner and do not require a massive reduction in labor. One reasonable area to cut is real estate, since many employees are working from home and companies have realized, they can be just as successful remotely.
  9. 9. Continue innovating! Companies have so many opportunities now to try new things that will help them be more successful in the long run, there are risks in continuing to do what we did. Certain company did not lay off workers despite a slowdown in business, it utilized workers who were “on the bench” and invested in building new solutions, leveraging existing experience around supply chain reporting and planning. Now, this has formed a new business unit and is giving presentations to potential clients. Warung MADE and MONOLOG at Plaza Senayan are another example of innovation. The restaurant opened its first digital-only restaurant this year in which all customers must pre-order online through barcode scanning instead of interacting with service line waiters. They are funding the right people internally at MONOLOG to think about innovation at a time when other companies in the restaurant space are just trying to get their costs under control. We would see an opportunity of keeping them even if nothing is happening immediately. We would use that opportunity to enhance the knowledge and competencies of those people. So, when things turn around, they can be put to good use. Keep customers informed. Big 4 as well as KIB Consulting provide regular bulletin for its client so that they update with economic and tax current situation. Providing constant business opportunities and solution, will make the client feel updated. Accommodate business situation and proposing new or revised regulation through many channels is an important thing. Increasing awareness that the government should walk together with private sector, is a must. Letting customers know about the new regulation in advance. Being informed, our client can make a better business strategy. In addition, company leaders talked to customers quarterly to keep them in the loop. Most of the customers were appreciative of the information supply reliability during the pandemic. Streamline processes. When companies need to cut costs, a common reaction is to add more layers of bureaucracy, they might introduce new pre-approval requirements for spending on travel, technology or other compensation benefit. But such measures can slow things down unnecessarily. All these controls clamp down the ability of the organization to move quickly. The organizations that are going to recover more quickly did not clamp down too far or too fast.
  10. 10. Companies should allow managers enough flexibility to do what they know is best. Other than intensive IT usage such as an electronic approval process, part of that decision was based on necessity — fewer people are in administrative offices — but it also allowed the company to move faster. In manufacturing company, BOD may give factory managers more power to spend quickly, and urgent approvals can be handled via phone calls or WA with the company’s chairman or board. Companies that introduce complicated and time-consuming processes are “placing an anchor on our ability to move as quickly as our competitors”. Worry less and learn valuable lessons! When the pandemic being declared in March 2020, some companies were caught off guard and many initiatives were shut down. That made us worry the most. Looking back, we wish we could tell ourselves to worry less. We see companies taking a different approach as COVID-19 cases spike again across much of the world. We notice businesses are reacting to it a lot more maturely. We have seen it before. We know what is going to keep running. We know that we’re going to get through it, so we see less of this wild cost-cutting. Organizations made similar budget mistakes during the global recession in 2007– 2009, but some saw it as an opportunity “to pick up smart resources, smart people”. Despite the market downturn, they began hiring people, so when the situation turned around, who was ahead of the curve? Learning valuable lessons during the pandemic is key. Increasing demand in Oxygen and daily mask, should make some company or factories to increase surplus capacity in situations like these. A common household item — toilet paper — is a prime example of pandemic miscalculations as much employee work from home. Mask manufacturers ramped up production as people stockpiled ahead of lockdowns. In addition, some household did the similar. And then there was too much mask alternative supply, much of it sold at discounted prices. Things happened that should not have happened, that’s perhaps because people were not really thinking through and modelling the consequences.
  11. 11. Business Consulting Business Matching Investigation Merger & Acquisition Financial Valuation Due diligence: Operational & Legal Accounting & Tax Outstanding debt collection Business & Asset Appraisal Transfer Pricing Documentation (TP-Doc) Company Setup & Liquidation Copyrights & Patent Dispute Copyrights & Patent Registration Tax and Custom Consulting Diagnostic Review Planning Compliance Dispute Audit Objection Appeal Tax ruling Tax Conciliation PT. Konsultan Indonesia Bersama is a boutique company serving Finance, Business, Accounting and Tax Advisory since 2008. KIB has been immensely successful in creating a local business network of small-medium-and-big businesses. We highly adept intelligent workforce that can help a company achieve their mission-critical projects and goals. Keeping pace with projects and being on the look-out for every opportunity to grow with our clients has become our mission statement. KIB commits to bring the best suited services for our clients and stakeholders. All of our resources are multifaceted and come with years of commended performance. Project completion rate of our consultants is 97%, 3% is attributed to unforeseen situations like changes of clients’ decision issues, natural disaster, etc. We appreciate the experience that our team bring and together we thrive to grow and prosper together. Accounting and Assurance Independent Audit Actuarial report (PSAK 24) Accounting SaaS Migration with Jurnal.id (Mekari) About Us Contact Us Phone: (62-21) 2929 5870-73 Bambang B. Suwarso bambang.suwarso@kib- consulting.com Rachmat Kurniawan rachmat@kib- consulting.com Yosefine Amelia yosefine@kib- consulting.com Raden Roro Ratna Indah Wulandari wulan@kib- consulting.com Addresses: North Jakarta -14450 The Koppel Building Suite IB. Jalan Pluit Selatan Raya no. 10 Gold Coast Tower Eiffel Unit N Pantai Indah Kapuk www.kib-consulting.com Disclaimer: The facts and opinions stated or expressed in this publication are for information purposes only, and are not necessary and/or must not be relied upon as being to those of the publisher or of the Institutions for which the contributing authors work. Although every part of content has been taken to ensure the accuracy of the information contained within this publication, it should not be by any person relied upon as the basis for taking any action or making any decision. KIB Consulting and its representative, cannot be held liable or otherwise be responsible in any way for any advice, action taken or decision made on the basis of the facts, surveys, and opinions stated or expressed within this publication.

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