TAX PLANNING SERVICES

Category: Tax & Accounting
Written by Riza Zahrotun Nisa on 06/09/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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.

TAX PLANNING IN INDONESIA

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:

  • Tax calculations are following tax regulations so as not to cause sanctions or fines for Taxpayers; and
  • The tax costs are relatively low but still comply with the applicable tax regulations.

The requirements that must be met to carry out Tax Planning are:

  • Not violating the applicable tax regulations because violating them poses a risk for the taxpayer, making tax planning fail because it can cause fines or other tax sanctions;
  • Not falsifying supporting evidence or other data needed to pay taxes; and
  • The tax planning has to make sense because, otherwise, tax planning weakens the planning itself.

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.

TAX TYPES IN INDONESIA

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.

  1. Income Tax

    Income Tax or Pajak Penghasilan (PPh) is a tax imposed on income earned by taxpayers in a tax year. Taxpayers can be individuals or entities who have tax rights and obligations by the provisions of the applicable laws and regulations.

  2. Value Added Tax

    Value Added Tax (VAT) or Pajak Pertambahan Nilai (PPN) is a tax imposed on each value added of goods or services in circulation from producers to consumers. VAT includes indirect taxes because the tax is not paid directly by the consumer as the tax guarantor, but by other parties who are not tax bearers, in this case, traders or producers.

  3. Land & Building Tax

    Land and Building Tax or Pajak Bumi dan Bangunan (PBB) is a tax imposed on the ownership, utilization, and control of land and/or buildings. Earth is the surface of the earth which includes land and water. While buildings are technical constructions permanently planted or attached to the land, inland waters, and/or the sea.

  4. Stamp Duty

    Stamp Duty or Bea Materai is a tax on documents owed since an interested party signs the document or after the document is completed or submitted to another party if the document is only made by one party. Stamp duty is imposed on the use of documents when processing certain documents, such as notarial deeds and letters of agreement.

  5. Sales Tax on Luxury Goods

    Sales Tax on Luxury Goods or Pajak Penjualan atas Barang Mewah (PPnBM) is a type of tax imposed on goods classified as luxury. This tax is aimed at producers, especially those who produce or import goods in their business activities or work. PPnBM is only charged once at the time of delivery of goods to the manufacturer. The criteria for goods classified as luxury are:
    • Non-basic necessities item;
    • Goods consumed by certain people;
    • Goods generally consumed by high-income people; and
    • Goods consumed to show status.

BENEFITS OF TAX PLANNING

There are various benefits of tax planning, they are carried out are as follows:

  1. Saving cash out

    Tax planning can save tax which is a cost for the company.

  2. Manage cash flow

    Tax planning can estimate cash needs for taxes and determine the time of payment so that companies can prepare cash budgets more accurately.

  3. Get the right tax regulation

    Taxpayers with the status of normal entities and SMEs have different tax regulations. The regulation includes tax rates, tax reporting letters, and the number of incentives the government provides.

  4. Take advantage of tax incentives

    One of the tax incentives provided by the government is PMK No. 44/PMK.03/2020 about tax incentives for taxpayers who experience losses due to Covid-19. The Minister of Finance Regulation (PMK) provides for the expansion of the business sector for recipients of installment discount incentives for PPh 25, exemption from import PPH 22, VAT (PPN) incentives, and expansion of recipients of PPh 21 exemption.

TYPES OF TAX PLANNING

According to its type, tax planning can be divided into two, namely:

  1. National Tax Planning

    Domestic laws guide National Tax Planning. This type of tax planning is usually carried out by corporate taxpayers who only have businesses in Indonesia or only carry out transactions with domestic taxpayers.

  2. International Tax Planning

    International Tax Planning is usually carried out by corporate taxpayers who have business activities in the country and abroad. This tax planning is carried out if the taxpayer conducts transactions not only with domestic taxpayers but also with taxpayers abroad. In contrast to National Tax Planning, International Tax Planning must also pay attention to the laws or tax treaties of the countries involved.

TAX PLANNING STRATEGIES

In general, there are five strategies that companies usually use in doing tax planning:

  1. Tax Avoidance

    Tax avoidance is a company's effort to avoid taxation through transactions that are not tax objects. For example, the company changes employee benefits in the form of money into kind because natura is not an object of the PPh 21 tax. This effort is usually carried out by companies that are still experiencing losses.

  2. Tax Saving

    Tax saving is done by choosing an alternative tax imposition with a lower rate for the efficiency of the tax expense. For example, the company makes changes in giving in-kind to employees into benefits in the form of money.

  3. Optimizing Allowed Tax Credits

    Most corporate taxpayers do not know they can credit taxes that have been withheld as long as they do not deviate from the regulations. For example, Income Tax (PPh) 22 on the purchase of diesel and/or imports, PPh 23 on service or rental income, and foreign fiscal tax on official travel of employees.

  4. Delay in Paying Tax Obligations

    Companies as taxpayers can delay the payment of Value Added Tax (VAT) by delaying the issuance of the output tax invoice until the allowed time limit, especially for credit sales. VAT can be paid at the end of the following month after the month the goods were delivered.

  5. Avoiding Violations of Tax Regulations

    Corporate taxpayers must master the applicable tax regulations to avoid tax sanctions in the form of administrative sanctions, such as fines, interest, or increases, to criminal sanctions.

TAX PLANNING OBJECTIVES

Tax planning is carried out with the aim of:

  • Minimize the company's expenses to pay taxes to make the costs incurred efficiently;
  • Calculate and prepare tax payments following applicable regulations so that there are no sanctions or fines that increase tax expenditures;
  • Not to avoid paying taxes but to arrange so that the tax paid is not more than the amount that should be; and
  • Avoid double taxation.

HOW CAN WE HELP

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.

FAQs

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

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