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Indonesia: Commencement of AEOI and priority target for tax audit

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It has been reported that by the end of September 2018, the Directorate General of Tax (DGT) will commence the automatic exchange of information (AEOI) through the common transmission system (CTS). There are five types of data that are expected to be exchanged within the AEOI framework: (i) identity of bank account holder; (ii) bank account number; (iii) identity of financial institution; (iv) bank account balance; and (v) income deriving from the bank account (interest). Effective implementation of the AEOI may increase tax revenue, especially in terms of income tax. The DGT is authorised to utilise the collected data to evaluate taxpayers' compliance with their taxation obligations, including reporting requirements such as the submission of annual tax returns.

Separately, the DGT issued Circular Letter No. SE-15/PJ/2018 (CR 15) concerning audit policy on August 13 2018, which principally stipulates detailed provisions on the subject, object, and procedures of a tax audit. CR 15 focuses on revitalising an audit process that is implemented by, among others, preparation of a compliance map and a list of priority targets of potential excavation (Daftar Sasaran Prioritas Penggalian Potensi, or DSP3) and a list of priority targets of audit (Daftar Sasaran Prioritas Pemeriksaan, or DSPP). DSP3 is a list of taxpayers regarded as priority targets for potential excavation throughout the relevant year, whether in the form of supervision or audit. DSP3 serves as the basis of the relevant tax office in determining which taxpayers will be included in the DSPP.

CR 15 uses various variables to determine whether a taxpayer is shortlisted in DSP3 or not, including indication of a high level of non-compliance by a taxpayer (tax gap). The indicators of non-compliance are classified based on the type of taxpayer (corporate or individual) and the type of tax office the taxpayer is registered at (pratama or non-pratama tax office). In general, the indicators for corporate taxpayers include: (i) the existence of an intra-group transaction with a value of more than 50% of the total transaction value; (ii) the issuance of more than 25% of tax invoices to taxpayers whose taxation registration numbers begin with 000 in a tax period; (iii) non-audit on all taxes for the last three years; and/or (iv) results of the analysis of the information, data, report, and complaint (Informasi, Data, Laporan, dan Pengaduan, or IDLP) and/or Center for Tax Analysis (CTA). For individual taxpayers, the indicators include: (i) non-compliance of tax payment and submission of annual tax returns; (ii) non-audit on all taxes for the last three years; and/or (iii) results of analysis of IDLP and/or CTA.

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