TAXABLE ENTERPRISE / PERSON SERVICES

Category: Tax & Accounting
Written by Dewi Tri Utami on 05/09/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Not all business owners are considered taxable enterprises/persons (PKP/Pengusaha Kena Pajak). Those with a turnover of more than 4.8 billion who exports taxable goods and services and those who engage in activities to provide taxable goods and services meet the requirements for inclusion as a PKP.

WHAT IS A TAXABLE ENTERPRISE / PERSON?

Taxable enterprises/person (PKP/Pengusaha Kena Pajak) are business owners who engage in activities related to providing taxable goods and services. They are subject to taxation under the Indonesian Value Added Tax Law (VAT Law) of 1984 and its amendments. The scope of PKP is determined by an order issued by the Minister of Finance, and small business owners can choose to apply as a PKP.

Those who engage in business activities that produce, export, import, engage in trading, use intangible goods from outside the Customs Area, engage in service businesses including exporting services, and use services from outside the Customs Area are considered enterprises under the VAT Law.

The VAT Law’s Article 1 number 1 defines the term “Customs Area,” which was used above. The Republic of Indonesia’s territory, known as the Customs Area, consists of the following:

  1. Indonesian land area;
  2. Indonesian territorial waters;
  3. Indonesian airspace;
  4. Certain places in the Exclusive Economic Zone (EEZ) within which the Customs Act applies; and
  5. The Continental Shelf in which the Customs Act applies.

On the other hand, PKP refers to a business person who provides Taxable Goods (BKP/Barang Kena Pajak) or Taxable Services (JKP/Jasa Kena Pajak), which are both subject to tax under the VAT Law. Thus, the provided items or services set non-PKP apart from PKP. If the recipient is a BKP or JKP, the businessperson is referred to as PKP. Enterprises/individuals must declare their company to be verified as PKP if they submit BKP, hand over JKP, export BKP, JKP, or export intangible BKP within the Customs Area.

The Tax Service Office issued an official letter known as the inauguration letter. The letter is given to those registered as PKP. Enterprises/individuals will be taxed and have additional rights and obligations when it is registered as a PKP.
Suppose a small business owner who has not been confirmed as PKP conducts business activities involving the delivery of goods and services, including taxable products (BKP) and taxable services. Should they have not been confirmed as PKP, they are not required to collect or submit Value Added Tax (VAT).

Small business owners who do not have PKP status but wish to be recognized as PKP must register with the Tax Service Office (KPP/Kantor Pelayanan Pajak). Taxpayer Identification Number (NPWP/Nomor Pokok Wajib Pajak) and Taxable Enterprises Identification Number are obtained through self-registration (NPPKP/Nomor Identitas Pengusaha Kena Pajak).

WHO IS CONSIDERED AS A TAXABLE ENTERPRISE / PERSON?

Below are the requirements needed for someone to be considered as Taxable Enterprises/Persons (PKP):

  1. Companies or individuals who earn more than Rp 4.8 billion in gross revenue

    Companies or individuals who earn more than Rp 4.8 billion gross revenue or turnover per year are considered taxable enterprises. Unless they want to become a PKP, companies and individuals with gross income or turnover below Rp 4.8 billion do not count as PKP.

  2. Companies or individuals engaged in these commercial activities

    • Making Taxable Goods (BKP);
    • Engaging in business for Taxable Services (JKP);
    • Importing or exporting Taxable Goods (BKP);
    • Engaging in business ventures;
    • Using BKP (intangible taxable goods) that originate outside the customs area; and
    • Making use of Taxable Services (JKP) from outside the customs zone.

RESPONSIBILITIES OF A TAXABLE ENTERPRISE / PERSON

A PKP is subject to certain duties or requirements, such as:

  1. Every delivery of taxable products (BKP) or taxable services (JKP) generates a tax invoice.
  2. Obtain the owing taxes.
  3. Value Added Tax (VAT) that has not been paid in full must be deposited using a Tax Deposit Letter (SSP/Surat Setoran Pajak) no later than the last day of the month before filing the VAT Period Tax Return.
  4. The usage of the VAT Period Notification Letter (SPT Masa) to notify the Tax Service Office (KPP) of the tax collection, deposit, and calculation is no later than the end of the following month.
  5. Have the duty to deposit any unpaid Luxury Goods Sales Tax (PPnBM/Pajak Penjualan Atas Barang Mewah) that you hold.
  6. Value Added Tax (VAT) must be deposited and paid if the output tax exceeds the input tax credited.

WHY DO YOU NEED TO APPLY AS A TAXABLE ENTERPRISE /PERSON IF ABLE?

There are several advantages of being a Taxable Enterprises/Persons (PKP/Pengusaha Kena Pajak). Below are some of the benefits of being a PKP:

  1. The business and its owners are compliant because the taxpayer pays taxes on time and becomes a PKP;
  2. The PKP status can boost the confidence of business partners and business owners or taxpayers;
  3. Enterprises that have been recognized as PKPs may also conduct business with governmental organizations and take part in acquiring products and services.

Although there are benefits, PKP must maintain order and discipline when reporting tax invoices and VAT Period Tax Returns. If a PKP submits tax invoices and reports SPT Masa late, it may be subject to administrative penalties such as fines and/or interest as well as criminal penalties.

HOW TO APPLY AS A TAXABLE ENTERPRISE/PERSON?

There are two methods for PKP registration: manual and online.

  1. Manual

    You can apply as a PKP by submitting a written application on the PKP initial form. The PKP inaugural form must also be filled out and sent along with the necessary paperwork to the Tax Service Office (KPP) or the Tax Counseling and Consultation Service Office (KP2KP/Kantor Pelayanan, Penyuluhan, dan Konsultasi Perpajakan).

    You can submit the written application in person, through a courier, or through a service provider. The taxpayer then receives a letter of Proof of Receipt if the application is complete. A decision is made within five working days after the Proof of Receipt is issued. The request for PKP confirmation is deemed approved after five working days have passed and the KPP or KP2KP has not rendered a decision.

    The following clauses take effect if the KPP determines that the written application is inadequate:
    1. If an application is submitted directly, the WP receives a copy of the application.
    2. KPP issues a written notice of the incompleteness if it is delivered by courier service or expedition service firm.

  2. Online

    You can apply online by completing the form on the e-Registration application. The taxpayer then submits the necessary documents for the PKP registration to KPP, whose service area is close to the taxpayer's residence, domicile, or principal place of business.

    Documents may be sent by signing a Document Delivery Letter, uploading digital copies, utilizing the e-Registration program, or any combination of these methods. The application is deemed unsubmitted if KPP does not receive the necessary documents within 14 working days of the electronic submission of the first application. If all necessary paperwork has been submitted, KPP provides Proof of Letter Acceptance. The PKP confirmation request is deemed approved if the KPP or KP2KP has not decided after five working days.

HOW CAN WE HELP

The tax consultants at Putranto Alliance can assist you with determining your eligibility to become a PKP, applying for that status, calculating your monthly VAT liabilities, submitting monthly VAT reports to the Tax Authority, and assisting with the issuance of Tax Invoices. 

FAQs

Value Added Tax, also known as VAT, is a tax levied on the sale and purchase of goods and services made by individual taxpayers or company taxpayers who have qualified as taxable enterprises (PKP).

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