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VAT Restitution

Written by Avelia Zahara on 15/07/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Introduction

VAT restitution is a method to reclaim overpaid Value Added Tax/Pajak Pertambahan Nilai (VAT/PPN). This reclaiming of VAT plays a significant role in a cash flow of a company and operational efficiency, Understanding and applying VAT restitution processes can lead to effective and efficient refunds.

Definition

Tax Restitution is the refund of tax overpayments filed by the taxpayer to the state. Tax Restitution is closely related to VAT because VAT is one of the taxes that often indicates overpayment. Thus, VAT restitution is a condition in the Tax Period that is caused by the Input Tax greater than the Output Tax. The legal basis for tax restitution payments is based on Law Number 7 Year 2021 , concerning harmonising tax regulations (hereinafter called UU 7/2021).

The Importance and Benefits of Tax Restitution 

The importance and benefits of VAT restitution include: 

Enhanced Cash Flow: By reclaiming overpaid VAT, businesses can significantly improve their cash flow, allowing for greater flexibility in operations and investment. 
Financial Burden Relief: Particularly for small and medium enterprises, recouping VAT payments can lessen financial strain, freeing up capital for development and innovation. 
Compliance Incentive: The process encourages adherence to tax laws, as timely and accurate VAT restitution applications reflect good tax practices. 
Error Correction: It offers a way to correct VAT miscalculations or overpayments, ensuring financial accuracy.

The Best Time to Conduct VAT Restitution

The ideal timing for initiating the VAT restitution process is crucial for its success. Applications should be submitted at the end of the financial year, specifically in December. This timing ensures that taxpayers can efficiently engage with the Directorate General of Taxation (DGT) to process their refunds in alignment with fiscal schedules and compliance requirements. 

How to Conduct VAT Restitution

The process of VAT restitution involves several steps, guided by the legal framework provided in UU 7/2021 and PMK 209/2021. It includes:

Application Submission: Taxpayers must submit their restitution applications to the DGT office at the end of the financial year. 
Tax Audit: Following approval, the Tax Office conducts a tax audit to verify the claim. 
Tax Assessment Letter: If the audit is successful, the DGT issues a Tax Assessment Letter for Overpayment/Surat Ketetapan Pajak Lebih Bayar (SKPLB). However, if the audit reveals underpayment, DGT will issue an Assessment Letter for Underpayment/Surat Ketetapan Pajak Kurang Bayar (SKPKB) and impose a 100% VAT penalty.
Refund Process: The excess VAT is then refunded by the DGT, completing the restitution process.

How We Can Help

At Putranto Alliance, we understand the complexities of VAT and STLG compliance and the unique challenges businesses face in navigating these tax obligations. Our comprehensive suite of services is designed to provide tailored solutions that ensure your business aligns seamlessly with current regulations, minimizing the risk of fines and penalties. Our offerings include:

Tax Registration Assistance: Guidance in registering as Taxable Entrepreneur.
Tax Compliance Consulting: Expert advice on VAT and STLG regulations.
Tax Return Preparation and Filing: Assistance in preparing and filing tax returns.
Tax Audit and Objection Handling: Support in managing audits and objections.
Dispute Resolution: Assisting businesses in resolving disputes with the tax authorities regarding VAT assessments and penalties.

By partnering with Putranto Alliance, businesses can navigate the intricacies of VAT and STLG with confidence, ensuring compliance, and focusing on their core operations without the administrative burden of tax management.

FAQs

What documents are required for VAT restitution applications? 

The documents required include, but are not limited to, the Output Tax Invoice and Input Tax Invoice related to the VAT refund request and financial statement.

What is the difference between tax restitution and tax compensation?

A tax restitution is a reimbursement for overpayments or erroneously paid taxes, while tax compensation allows for the use of overpaid VAT to offset underpayment debts in subsequent periods.

When can the DGT grant the refund of tax overpayment?

The DGT can grant a refund when the overpaid tax has been deposited to the state treasury, reported by the collector, and not credited or objected to in any tax returns. 

How long does the restitution process take? 

The VAT restitution process typically concludes at the end of the fiscal year, with refunds granted after an audit, approximately 12 months after the application is submitted to the DGT. 

Are there any special mechanisms in tax restitution for certain taxpayers?

Yes. That can be apply the special mechanism such as that we called preliminary tax restitution is in place that offers a streamlined process with potentially shorter restitution periods, usually in a period of no longer than 1 until 3 months after the tax refund request letter is received in full.

Who are eligible for preliminary VAT restitution?

Taxpayers with certain criteria (submit tax return on time, financial statement audited by public accountant with unqualified opinion for 3 consecutive years).
Taxpayers with certain requirements (who submit Annual Tax Return with an overpayment of restitution with a maximum amount of IDR 100 million, Corporate Taxpayer who submits an Annual Tax Return overpaying restitution with a maximum amount of Rp1 billion)
Taxable Entrepreneurs (PKP) who have low risk (Exchange (IDX), companies whose majority shares are directly owned by the central/regional government, are designated as main customs partners)

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VAT Restitution

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Introduction

Definition

The Importance and Benefits of Tax Restitution

The Best Time to Conduct VAT Restitution

How to Conduct VAT Restitution

How We Can Help

FAQs

Contact Us

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The Importance and Benefits of Tax Restitution 