Written by Wulan Azzahra Fitka on 16/07/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
Joint Operation (JO), known as “Kerja Sama Operasi (KSO)“ in Indonesia, refers to a collaborative effort where two or more entities pool their resources and expertise to complete a project, commonly undertaken in various industries such as oil and gas exploration, mining, and infrastructure development.
Based on the Director General of Taxes Letter Number S-323/PJ.42/1989 Year 1989 concerning Taxation Issues for Joint Operation, a joint operation is an association of two or more entities that join forces to complete a project.
Before starting a joint arrangement, parties should understand the difference between Joint Operations (JO) and Joint Ventures (JV). These two forms are often confused and even mistakenly interpreted as the same. The following are some distinctions that may help in understanding the difference between JO and JV:
Joint Operation (JO) | Joint Venture (JV) | |
---|---|---|
Arrangement’s Rights | JO has rights to the assets and liabilities of the joint arrangement. | JV has rights to the net assets of the joint arrangement. |
Establishment of a Legal Entity | There is no establishment of a new legal entity. Each party participates to achieve a common goal in a specific project or activity. | The establishment of a new legal entity is owned by two parties or more. |
The Substance of Contractual Arrangements | The contractual arrangement establishes the allocation of revenues and expenses based on the relative performance of each party to the joint arrangement. | The contractual arrangement establishes each party’s share in the profit or loss relating to the activities of the arrangement. |
Term of Arrangement | The parties often use JO for short-term projects or activities requiring collaboration for a specific purpose without creating a new legal entity. | The parties often use JV for long-term projects and to establish a stand-alone legal entity. It represents a more formalized form of joint arrangement, involving legal entities with long-term and sustainable business goals. |
The types of JO can be categorized into:
In addition, the type of JO will affect the taxation obligations and mechanism of the JO. The following are several aspects of JO taxation that can be considered:
Administrative JO | Non-Administrative JO | |
---|---|---|
Requirement to Register as a Taxpayer | Not required to have a Taxpayer Identification Number (Nomor Pokok Wajib Pajak/NPWP). | |
Obligation to Conduct Bookkeeping | Has the obligation to conduct separate bookkeeping from its members. As regulated in the Decree of the Director General of Taxes Number Kep-214/PJ./2001, when submitting the Periodic Tax Return of Income Tax Article 21, the JO must attach a Financial Report on the JO activities. | Do not have the obligation to conduct bookkeeping. |
Obligation to Divided Separately the Proof of Income Tax Withholding or Collection | There is no obligation to divided separately the proof of income tax withholding or collection (bukti pemotongan atau pemungutan pajak penghasilan). | Has obligation to divide separately the proof of income tax withholding or collection (bukti pemotongan atau pemungutan pajak penghasilan). |
The best time to plan the accounting system and tax planning for a joint operation is right from the establishment phase of the collaboration. Starting early ensures that financial transactions are accurately recorded from the outset, promoting transparency and accountability among the parties involved. This early planning also allows for effective tax planning, which can help minimize tax liabilities and ensure compliance with tax laws throughout the process.
The Benefits of prioritizing the proper and correct accounting and taxation system in the JO include:
According to Statement of Financial Accounting Standards (Pernyataan Standar Akuntansi Keuangan/PSAK) 66 the parties shall recognize their interest in a JO:
The tax mechanism for JO based on the Director General of Taxes Letter Number S-251/PJ.313/1998:
Putranto Alliance provides comprehensive assistance regarding JO activities such as:
A response to the inquiry will be sent to the provided email within 2 working days.
putranto@putranto-alliance.com
Jl. Denpasar Raya Blok C4/24
Kompleks Menteri, Kuningan
Jakarta Selatan, 12950, Indonesia
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