Tax Planning is a plan carried out so that tax payments will be decreased without violating tax regulations. Tax Planning or tax planning is the company’s first step in tax management (Corporate Taxpayer). In doing this Tax Planning, it is necessary to research tax regulations to take legal tax savings actions. There are 5 most common taxes in Indonesia: Income Tax, Value Added Tax (VAT), Land and Building Tax, Stamp Duty, and Sales Tax on Luxury Goods. The main goal of tax planning is to reduce the company’s tax-related expenses as much as possible to make the costs incurred more cost-effective. There are five strategies to do tax planning, tax avoidance, tax saving, optimizing allowed tax credits, delay in paying tax obligations and avoiding violations of tax regulations.
According to William H. Hoffman in a book entitled The Accounting Review (1961), tax planning is an effort for taxpayers to get tax savings through tax avoidance procedures systematically following the provisions of the Taxation Law (UU Perpajakan). Tax Planning is allowed as long as it does not violate tax regulations. Tax planning is carried out while still complying with applicable tax regulations. Legal means that tax savings are carried out by utilizing things that are not regulated by law (loopholes) so that there is no violation of the constitution or the applicable Taxation Law.
Companies need to do tax planning because taxes are a burden that can reduce the company’s net income. The main objectives that need to be carried out by Tax Planning are:
The requirements that must be met to carry out Tax Planning are:
The implementation of Tax Planning in Indonesia can be done by considering the form of business such as CV (Comanditaire Venootschap) and PT (perseroan terbatas). The tax treatment between business entities in the form of PT and CV is different because the tax base of CV is more straightforward than that of PT because CV is the development of a partnership or individual business.
Profit on CV received at the end of the year is only subject to tax once, namely PPh 25/29, and profits received by CV members are not taxed and are included in non-object PPh as stipulated in UU No. 36 Tahun 2008 Pasal 4 Ayat (3) huruf i.
CV is different from the PT because the PT separates the company’s assets from the owner, so there is the potential for double taxation on each party who receives income. Income earned by the PT is subject to PPh 25/29, and the share of profits (dividends) distributed to owners of either entity or shares is also subject to PPh 23 or PPh Final Pasal 4 Ayat (2). Management salaries are also subject to PPh 21 (Income Tax).
In addition, taxpayers have the right to be able to save the amount of tax paid. The method is to utilize and optimize tax reduction facilities from the government. For example, when a Tax Amnesty is held. Indonesia has done Tax Amnesty five times, including the one carried out in May 2022. President Soekarno first implemented the Tax Amnesty policy in 1964.
The potential to reduce tax costs is significant by following the tax amnesty. Tax reduction is a program from the government that aims for business actors to reduce tax costs by cutting several tax sectors that should be deposited. Taxpayers can also take advantage of the tax incentives provided by the government during the pandemic.
Taxes are a significant source of national income and are essential in implementing various state policies in the social and economic fields.
According to Article 1 paragraph (1) of Law Number 28 of 2007 concerning the Third Amendment to Law Number 6 of 1983 concerning General Provisions and Tax Procedures, Tax is a mandatory contribution to the state owed by an individual or a coercive body based on the law, without receiving direct compensation and being used for the state for the greatest prosperity of the people.
Taxes have several types based on the tax collection agency and their nature. The types of taxes based on the collection agency are Central Taxes and Regional Taxes. Then, the types of taxes based on their nature are Direct Tax and Indirect Tax.
There are at least five types of taxes in Indonesia: Income Tax, Value Added Tax (VAT), Land and Building Tax, Stamp Duty, and Sales Tax on Luxury Goods.
There are various benefits of tax planning, they are carried out are as follows:
According to its type, tax planning can be divided into two, namely:
In general, there are five strategies that companies usually use in doing tax planning:
Tax planning is carried out with the aim of:
Taxpayers who feel less familiar with tax regulations and provisions can carry out tax planning (Tax Planning) by using the services of a tax consultant. If you still need help with tax planning or a specific tax strategy for business actors, please discuss the solution with an experienced tax consultant from the Putranto Alliance.
Tax planning can be carried out by individual and corporate taxpayers, especially for those with large incomes, so it is possible to have a large tax burden as well.
Tax planning can be risky if done by reducing revenue or alternative receipts because this is usually done by falsifying documents or posting fictitious amounts, where transactions are recorded incorrectly.
Thank you for sharing
Subscribe to our newsletter
Subscribe to our newsletter to get the latest information about the laws & regulations in Indonesia.