The Circular Letter of the Director-General of Taxes Number SE-15/PJ/2018 concerning Audit Policy is intended as a guideline and provides uniformity of steps in carrying out audit activities by the Audit Implementing Unit (UP2). This circular also aims to:

  1. Improving the order of the audit administration;

  2. Provide uniformity of steps in the implementation of audit activities;

  3. Improving the quality of the selection of Taxpayers to be audited;

  4. Improving the quality of tax audits; and

  5. Increase tax revenue from audit activities.

 

As taxpayers in Indonesia who apply a self-assessment system in calculating, depositing, and reporting their tax obligations, of course, we need to prepare ourselves if one day the DGT conducts an audit to monitor our compliance in carrying out tax obligations. Not all taxpayers have the potential to be audited by the DGT. There are variables used in determining the Taxpayer who will be the Priority Target for Potential Excavation (DSP3), including:

 

1. Indication of High Disobedient (tax gap)

The indication is that there is a gap between the taxation profile (profile based on the SPT) and the actual economic profile. The actual economic profile is known from various sources, both from internal data, external data, and field observations. Indications of disobedience by taxpayers are distinguished between taxpayers committed by 35 UP2 Determinants of Revenue and taxpayers registered at KPP Pratama.

a) Taxpayer non-compliance indicators on 35 UP2 Determinants of Revenue include:

  • Analysis of Corporate Tax to Turn Over Ratio (CTTOR), Gross Profit Margin (GPM), and/or Net Profit Margin (NPM) compared to similar industry benchmarking, such as based on industrial reports or benchmarking results in accordance with the provisions governing the benchmarking. The risk of non-compliance is high if the difference between the analysis and the industry average is greater than 10%;
  • Having transactions with related parties, especially with affiliated parties domiciled in countries that have an effective tax rate that is lower than the effective tax rate in Indonesia;
  • Have a domestic affiliated transaction (intra-group transaction) with a transaction value of more than 50% of the total transaction value;
  • Have a domestic affiliated transaction with a member of a business group that has compensation for losses;
  • Taxpayers have never been audited with the scope of all types of taxes (all taxes) in the last 3 years;
  • Taxpayers who issue Tax Invoices to buyers with NPWP 000 are more than 25% of the total Tax Invoices issued in one Tax Period; and/or
  • There are analysis results, information, data, reports, and complaints (IDLP) and/or Center for Tax Analysis (CTA).

b) Indicators of disobedience by taxpayers at KPP Pratama

Indicators of disobedience of taxpayers at KPP Pratama need to be distinguished between corporate taxpayers and individual taxpayers.

I) Indicators of disobedience with corporate taxpayers include:

  • Disobedience with payment and submission of SPT;
  • Taxpayers have never been audited with the scope of all types of taxes (all taxes) for the last 3 years;
  • The analysis of CTTOR, GPM, NPM is compared with the benchmarking results of similar industries at the relevant Regional Offices in accordance with the provisions governing benchmarking. The risk of non-compliance is high if the difference between the analysis and the industry average is greater than 20%;
  • The discrepancy between the SPT profile and the economic profile (business and wealth) is actually based on field facts;
  • Having transactions with related parties, especially with affiliated parties domiciled in countries that have an effective tax rate that is lower than the effective tax rate in Indonesia;
  • Have a domestic affiliated transaction (intra-group transaction) with a transaction value of more than 50% of the total transaction value;
  • Have a domestic affiliated transaction with a member of a business group that has compensation for losses;
  • Taxpayers who issue Tax Invoices to buyers with NPWP 000 are more than 25% of the total Tax Invoices issued in one Tax Period; and/or
  • There are results of IDLP and/or CTA analysis.

II) Indicators of Individual Taxpayer disobedient include:

  • Disobedience with payment and submission of SPT;
  • Taxpayers have never been audited with the scope of all types of taxes for the last 3 years;
  • The discrepancy between the SPT profile and:

(a) Taxpayer's business scale;

(b) Taxpayer's assets (investment, share ownership, etc.);

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(c) Taxpayer's lifestyle;

(d) Taxpayer loan profile.

  • There are results of IDLP and CTA analysis

 

2. Indication of Taxpayer disobedience Mode

a) Taxpayers do not report actual turnover;

b) Taxpayers charge unnecessary fees;

c) Mode of disobedience with Value Added Tax;

d) Taxpayers who carry out aggressive tax planning;

e) Misuse of Double Taxation Avoidance Agreement;

f) The Taxpayer does not report the actual value of the transfer of assets in the context of liquidation, merger, consolidation, expansion, division, and acquisition of the business, or;

g) Taxpayers do not report the actual acquisition value or sales value in the event of an exchange of assets.

 

3. Identify Potential Tax Value

The Head of KPP must first identify the potential tax value of the Taxpayer who will be proposed to become DSP3. Priority taxpayers are those with large tax potential.

 

4. Identification of Taxpayer Ability to Pay Tax Assessment

  • Identification of business continuity and assets owned by the Taxpayer based on the SPT;
  • Taxpayer's business existence (based on field facts); and/or
  • The tax bearer is known.

 

5. Considerations of the Director-General of Taxes

indonesia-tax tax pajak

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