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Taxable Person/Enterprise Registration Service (Pengusaha Kena Pajak/PKP)

Written by Reyhan Adam Himawan on 15/08/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

Not all business owners qualify as taxable enterprises or persons (Pengusaha Kena Pajak/ PKP). Those with a turnover exceeding IDR 4.8 billion, who export taxable goods and services, and engage in the provision of taxable goods and services are included under this designation. Understanding who can be considered as PKP, the responsibilities, and the advantages of obtaining PKP status can significantly affect business operations within Indonesia. This article provides a comprehensive overview of PKPs, delineating their definition, importance, the optimal timing for application, benefits, the application process, and how Putranto Alliance can assist businesses in navigating this landscape.

Definition

Taxable enterprises or persons are business entities that supply taxable goods and services. Governed by the Indonesian Value Added Tax Law (VAT Law) of 1984 and its amendments, PKPs must meet specific criteria set by the Minister of Finance. These criteria include:

Exporting taxable goods and services;

Trading taxable goods and services;

Utilizing intangible goods from outside the customs area;

Engaging in service businesses, including export services.

Another important requirement is to have an annual turnover exceeding 4.8 billion IDR. However, you may also apply for PKP even if your annual turnover did not reach 4.8 billion IDR.

Being designated as a PKP is essential for properly imposing VAT on goods and services within Indonesia.

The Importance of Applying for PKP

Applying for PKP status is vital for businesses meeting certain criteria to comply with Indonesian tax laws and regulations. This designation ensures that businesses are legally compliant in their commercial activities and enables them to manage and submit VAT accurately.

The importance can be summarized as follows:

Business Credibility: PKP status enhances the credibility of businesses with partners and may be a prerequisite for engaging in contracts with government entities. It signals to clients and partners that the business is reliable, compliant, and capable of handling larger and more complex transactions.

Legal Compliance: Ensures businesses adhere to Indonesian VAT regulations, avoiding legal issues.

Tax Obligations and Rights: These aspects distinguish businesses in terms of their tax obligations and rights, particularly concerning the provision, exportation, and importation of taxable goods and services within the customs area.

Efficient Tax Collection: Aids in the streamlined enforcement of tax laws and facilitates the efficient collection of taxes.

The Best Time to Apply for PKP

For companies or individuals whose operations match the criteria, particularly those surpassing the 4.8 billion IDR turnover threshold or engaging in taxable goods and services, the optimal time to apply for PKP status is immediately upon meeting these conditions.

Early application ensures compliance with the Indonesian VAT Law, facilitating smoother business operations and enabling access to the associated benefits of PKP status without delay.

Key considerations for timing include:

Immediate Compliance: Applying as soon as the criteria are met ensures that the business complies with tax regulations.

Avoiding Penalties: Delaying the application can result in penalties for non-compliance, which can be financial and administrative.

Maximizing Opportunities: Early registration allows businesses to take full advantage of opportunities that require PKP status, such as government contracts and partnerships with other compliant businesses.

Operational Efficiency: Timely application helps seamlessly integrate VAT processes into business operations, avoiding disruptions.

Additionally, businesses with an annual turnover below 4.8 billion IDR can apply voluntarily.

Benefits of Applying for PKP

The benefits of using a professional service for taxable person/enterprise registration include:

Expert Guidance and Support: Using professional services ensures that the business receives expert assistance throughout the PKP registration process, from eligibility assessment to VAT reporting. This reduces the team’s administrative burden and ensures accuracy

Operational Efficiency: Early registration from a professional service helps integrate VAT processes into business operations smoothly, minimizing disruptions and ensuring a streamlined workflow.

Streamlined Operations: This service can streamline business operations by integrating VAT processes into the financial management system, making managing taxes and financial reporting easier.

Compliance Assurance: Professional service ensures compliance by providing additional requirements for PKP, such as the annual tax returns of previous 2 (two) years and a statement that the PKP applicant has no outstanding tax debts. If there are any issues, such as unreported annual tax returns, professional assistance can resolve them.

How to Apply for PKP

Registering as a PKP can be done through a manual process as follows:

Submit a Written Application: Complete the PKP initial form and submit it to the Tax Service Office (KPP) or the Tax Counseling and Consultation Service Office (KP2KP).
Delivery Options: The application can be delivered in person, via courier, or through a service provider.
Proof of Receipt: Upon completing the application, a Proof of Receipt is issued.
Decision Timeline: A decision is made within 3 (three) to 5 (five) working days.

For both methods, diligent submission of required documents and adherence to deadlines are crucial to ensure successful registration.

How We Can Help

Putranto Alliance stands ready to guide businesses through the complexities of achieving PKP status. The services include:

Application Assistance: Supporting the application process, ensuring all forms and documents are correctly completed and submitted.

VAT Liability Calculations: Providing accurate monthly VAT liability calculations to ensure compliance with tax obligations.

Monthly VAT Reporting: Assisting with submitting monthly VAT reports to the Tax Authority, ensuring timely and accurate reporting.

Annual tax return documentation: Calculating annual tax returns when needed, ensuring accurate and timely documentation in specific situations.
Tax Invoice Issuance: Helping with issuing tax invoices required for PKPs and ensuring they meet regulatory standards.

The team of tax consultants ensures that businesses navigate the PKP registration process smoothly, maximize compliance benefits, and minimize the risks of penalties for non-compliance.

FAQs

What is Value Added Tax (VAT)? 

VAT is a consumption tax levied on the sale, production, and use of goods and services within a country. In Indonesia, VAT applies to transactions conducted by taxable enterprises (PKP), impacting how goods and services are taxed in the business cycle.

What is the turnover threshold for PKP registration? 

Businesses with an annual turnover exceeding 4.8 billion IDR are required to register as PKPs. However, businesses with a lower turnover can also apply voluntarily to gain the associated benefits.

What happens if the criteria are met but the business does not register for PKP?

The KPP will investigate, and if the criteria are indeed met, the individual or entity will be designated as in officio (PKP Secara Jabatan). Subsequent transactions will be subject to tax collection, and a Notice of Tax Assessment (Surat Ketetapan Pajak/SKP) will be issued. Administrative sanctions, including fines, may also be imposed by the SKP.

What are the benefits of voluntary PKP registration for smaller businesses? 

Voluntary PKP registration can enhance business credibility, provide a competitive edge, prepare the business for future growth, and allow access to benefits such as VAT refunds and eligibility for certain contracts.

How long does the PKP registration process take? 

The decision on the application is typically made within 3 (three) to 5 (five) working days, provided all necessary documents are submitted on time.

What happens if the necessary documents are submitted after the deadline? 

The application is only considered submitted if the required documents are submitted within 14 working days of the electronic submission.

Can Putranto Alliance assist with the entire PKP registration process? 

Yes, Putranto Alliance offers comprehensive support, including eligibility assessment, application assistance, VAT liability calculations, monthly VAT reporting, and tax invoice issuance.

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