A Brief of Tax Objection in Indonesia

  1. Tax Insight-04

An objection is the tax dispute resolutions governed under the general tax provision laws. With the changing environments and spirit to provide legal certainty for taxpayers, the regulations for objections had been reformed several times by the Minister of Finance lastly with the Minister of Finance Regulation (MoFR) number 9/PMK.03/2013 (MoFR). This guideline highlights the crucial changes in the objection rules as stipulated in MoFR number 9/PMK.03/2013 compared to previous regulation and their impacts to taxpayers.

 MoFR number 9/PMK.03/2013 asserts that taxpayers can only file objection based on the material content of a tax assessment which covers a fiscal loss, a tax due, a tax withheld based on the applicable tax regulations. The previous regulation, MoFR number 194/PMK.03/2007, has not given a clear guidance on reasons of objection whether formal or material matters that will be acceptable for proposing objection. As a consequence, article 8 of MoFR stipulates that matters other than the content of a tax assessment will not be considered in the tax objection process and that tax objection letter, therefore, will be rejected and cannot be appealed to the Tax Court.

 The new regulation confirms that a tax assessment issued under article 13A the general tax provision laws cannot be proposed in the tax objection. Article 13A is a remission clause provided by the laws for taxpayer who upon negligence fails to file Tax Return with incorrect or incomplete information, or attaches incorrect information which may cause loss to the state revenue shall not be imposed with criminal penalty if taxpayer commits the negligence for the first time and pays administrative penalty of 200% (two hundred percent) of the underpaid tax.

 The new regulation stated clearly a tax assessment resulted from audit and from verification that can be filed for tax objection. With enforcement of the government regulation number 74/2011 (GR 74), procedure to issue a tax assessment has been extended to include verification. This emphasizes the application of article 13 paragraph (1) number 1; that a tax assessment can be issued on the basis of a tax audit or other information. The spirit of verification procedure is to enable the issuance of tax assessment based on non-audit procedure, because of limitation audit officers.

 In the event that taxpayer files a tax objection and a mutual agreement procedure concurrently, MoFR asserts that DGT will uphold the tax audit result in the objection decision letter if the MAP is not yet concluded, however DGT will consider the MAP result if the mutual agreement has been reached before the objection is decided.

 All in all, the new regulation of tax objection aims to harmonize with the government regulation number 74/2011 especially with matters such as the content of objection, a tax assessment that are not sensible for objection, a tax assessment issued from verification, and the tax objection letter if MAP and objection are filed simultaneously. However MoFR is likely late to respond all answers related to difficulty in the application of GR 74 issued since 29 December 2011.

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