How Indonesian Tax Office Calculate the Taxable Income

There is a question of how the tax office calculates the taxable income if a taxpayer doesn’t have any bookkeeping or accounting record, then how tax office can identify the revenue?

The answer is the tax office will use the methodologies under the Minister of Finance Regulation no. 15/2008 (effective as of February 12, 2018). 

This regulation is intended for taxpayers who compulsory to conduct Recording and Bookkeeping. It regulates that during a tax audit if the Taxpayer did not or did not fully conduct the Recording or Bookkeeping that causes actual Gross Revenue ("Revenue") is unidentifed, Tax Office will calculate the Revenue with other methods. 

The methods are as follows: Cash and Non-Cash Transactions; Source and Use of Funds; Units and/or Volume; Life Cost Calculation; Net Wealth Increase; Notice or Result of Examination of the previous Tax Year; Economic Value Projection; and Ratio Calculation.

The Regulation only briefly describes the methods, the provisions of the details technical calculation will be stated in the Director-General of Tax Regulation (“ DGTR”).

Prior to the enactment of this MoF-R, in these circumstances (Taxpayer did not or did not fully perform Recording or Bookkeeping), there is a possibility that the calculations of Revenue are performed inconsistently, which may cause the tax base will be higher or lower than it supposed to be. This Regulation is considered as a solution for tax auditors in performing their duties.

There is a possibility that the methods in the Regulation are inappropriate to implement, or there are other methods beyond them that more precisely to implement. This regulation only mentions the methods which can be applied, but does not introduce if there is the possibility of a combination of more than one method according to the Taxpayer conditions. 

There is a possibility that each method will generate a different amount of revenue. Therefore, it is necessary to regulate which method will generate the closest to the actual amount of the revenue.

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Mikail Jaman, Ak, M.Ak, CPA, CA, CPI - Partner

Yuli Aldyanti, SE, ACPA, BKP - Partner

Email: mj@au-partners.com Tel: +62(21)8319609

Disclaimer: The writer takes no responsibility to the readers for the use of the content in this publication in any action/decision on business activities, further specific analysis of the condition of your organization/personal tax shall be required.

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