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Indonesia: Update on tax audit regulations


Freddy Karyadi

Nina Cornelia Santoso

On April 28 2017, the Directorate General of Tax (DGT) issued Circular Letter No. SE-11/PJ/2017 concerning the plan, strategy, and measurement of audit performance of 2017 (Circular Letter 11). The circular is essentially issued to increase tax audit effectiveness that will ultimately increase the results of tax audits and be used as a deterrent to promote tax compliance. The DGT stipulates that the 2017 tax audit will focus on, among others, the implementation of the tax amnesty programme. The DGT will differentiate tax audit treatment between taxpayers who have and those who have not joined the tax amnesty programme. For those who have not joined the tax amnesty programme, the DGT may conduct a tax audit for a tax period, part of a tax year or a tax year in which the tax stipulation has not expired. In the event that such a taxpayer is undergoing a tax audit, the tax auditor may also conduct asset tracing for any undisclosed assets in income tax annual tax returns.

As for those who have joined the tax amnesty programme, the head of a regional tax office may conduct asset tracing for any undisclosed or less disclosed assets obtained prior to and during 2015 as stated in the statement letter submitted for tax amnesty. The tax office may also conduct a tax audit for compliance with land and building tax and/or duty stamp obligations for a specific tax period. Findings related to these assets may lead to the commencement of a special audit in accordance with the prevailing laws and regulations. Moreover, Circular Letter 11 mentions optimisation of newly launched electronic applications such as the Open Secret Application (Aplikasi Buka Rahasia, or AKASIA), to ensure the implementation of exchange of information (EOI).

The DGT also issued Regulation No. PER-07/PJ/2017 concerning guidelines of field audit in the framework of audit to test compliance with tax obligations (Regulation 07) and Circular Letter No. SE-10/PJ/2017 (Circular Letter 10) concerning technical guidance of field audit in the framework of audit to test compliance with tax obligations, both on April 21 2017. In brief, Regulation 07 and Circular Letter 10 stipulate that as an initial procedure of a field audit, the DGT will deliver to the concerned taxpayer a notification letter of field audit together with a summons letter for a meeting between the tax auditor and the concerned taxpayer. The summons shall specify the time, place and purpose of the meeting, along with a list of required documents.

The meeting must be attended by:

  • A representative of a corporate taxpayer in accordance with Law No. 6 of 1983 as amended several times, lastly by Law No. 16 of 2009 concerning general provisions and procedures of taxation, as follows:

  • Management of corporate taxpayer;

  • A curator for a corporate taxpayer declared bankrupt;

  • A person or entity assigned to conduct settlement for a corporate taxpayer in the dissolution process;

  • A liquidator for a corporate taxpayer in the liquidation process.

  • The concerned individual taxpayer;

  • One of the heirs, executor of testament or administrator of estate, for an undivided inheritance; or

  • A guardian for underage children or those who are under wardship/guardianship.

The concerned taxpayer may be accompanied by an employee or a tax consultant who understands such taxpayer's business activities or freelance activities.

During the meeting, the tax auditor shall brief the concerned taxpayer on the reason and purpose of the audit. The tax auditor shall at least request explanation of the following matters: (i) identity; (ii) business process; (iii) bookkeeping or recording including its documentation; (iv) information on main customer and supplier; (v) specific transactions; or (vii) clarification between the data found by the tax auditor with the data reported in tax returns, which shall be recorded in a minutes of the meeting. The minutes of the meeting serves as a basis for the tax auditor to conduct a field audit in accordance with the prevailing laws and regulations. In the event that the concerned taxpayer fails to attend the meeting, the tax auditor will issue a minutes of absence and will directly proceed with the field audit.

Separately, on May 12 2017, the DGT issued Regulation No. PER-08/PJ/2017 concerning the certificate of domicile for Indonesian resident tax subject in relation to implementation of approval of avoidance of double taxation, which was effective from the date of issuance (Regulation 08). Regulation 08 regulates the requirements and procedures for obtaining the Certificate of Domicile for an Indonesian Resident Tax Subject (Surat Keterangan Domisili Bagi Subjek Pajak Dalam Negeri, or SKD SPDN).

The SKD SPDN is used by a taxpayer to get a benefit from approval of avoidance of double taxation (Persetujuan Penghindaran Pajak Berganda, or P3B). The SKD SPDN will be issued by request to any tax subject who fulfils the following criteria:

  • The tax subject must be an Indonesia resident tax subject as stipulated in the Article 2 paragraph (3) of the IITL; and

  • The tax subject has a taxpayer identification number (Nomor Pokok Wajib Pajak, or NPWP).

In addition, the SKD SPDN may be requested for:

  • A tax year or part of a tax year as the date of the SKD SPDN application; or

  • A tax year of part of a tax year prior to the year of the SDK SPDN application which has not passed the expiration date pursuant to the prevailing tax regulations.

The SKD SPDN is issued for one tax year or part tax year stating the counterparty of a transaction in the partner country of the partner jurisdiction and is valid for 12 months as of the issuance date. In the event the SKD SPDN is issued for the tax subject whose business activities are in the field of financial institutions such as banking, capital market, insurance, pension fund, financing, and other financial institutions or the tax subject is the publicly listed company, then the SKD SPDN is issued without stating the counterparty of the transaction and is valid for 36 months from the issuance date.

Furthermore, Regulation 08 also regulates a special form or a form issued by tax authority of partner country or partner jurisdiction containing a confirmation request of status of an Indonesian resident tax subject (special form). A tax subject who has complied with the requirements may also request for a legalisation of the special form (if required by the tax authority of the offshore jurisdiction). In the event that the tax subject requests for a legalisation of the special form, the tax subject must apply for the application of the SKD SPDN to the DGT through the head of the relevant tax office which attaches the special form. The special form which is intended to legalise must comply with the following requirements:

  • Be in English;

  • State the name, NPWP, address of the tax subject, and tax year or part tax year;

  • Provide details on the status of a resident tax subject; and

  • Provide a space for the signature of the head of the relevant tax office.

The process of a legalisation shall take approximately 10 business days commencing from the date of the receipt of the SKD SPDN application. In the event the period of 10 business days for the application of the SKD SPDN and/or legalisation of special form has lapsed and the head of relevant tax office has not issued SKD SPDN or a rejection of the SKD SPDN application, then the application of the SKD SPDN and/or the request for legalisation of the special form is deemed to have been granted.

Freddy Karyadi ( and Nina Cornelia Santoso (, Jakarta

Ali Budiardjo, Nugroho, Reksodiputro, Law Offices

Tel: +62 21 250 5125


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