Tax Consulting Services
- Transfer pricing issues of a multinational enterprise may cover various aspects such as global tax planning, transfer pricing documentation, defending your merit in transfer pricing cases before the tax authorities or the tax court, responding to the demand of corresponding adjustments from other tax authorities, etc. All these aspects have become more and more important in Indonesia given the explicit requirement to maintain transfer pricing documentation and to disclose transfer pricing-related issues in the 2009 corporate income tax returns.
The transfer pricing documentation requirement also applies to national enterprises engaged in domestic related party transactions, i.e. transactions with other domestic associated companies.
Depending on your need, SSP CONSULTANT will assist you with the following measures that you may need to take in response to a transfer pricing issue:
- Reviewing the appropriateness of your global tax planning in light of the Indonesian tax legislation taking into account the tax treaty in force and international standards (OECD Transfer Pricing Guidelines).
- Preparing or reviewing transfer pricing documentation pertaining to controlled transactions involving Indonesian entities.
- Defending your company’s merit in transfer pricing-related controversies against the ITO in a tax audit, a tax objection, or a litigation before the tax court.
- Representing or assisting you in dealing with the ITO, if required, in the event of mutual assistance agreement (MAP).
Tax Controversy & Litigation
Controversies with the Indonesian Tax Office (ITO) may arise at various stages. In a tax audit, this may concern with particular corrections put forward by the ITO to which you do not agree. If not settled during the audit, another controversy may arise over the tax assessment resulting from the audit. An objection letter will need to be filed with ITO as a way to solve the controversy.
Lengthy discussions with the ITO will follow after the filing of an objection letter. While deliberation is underway, another controversy may arise over the measures undertaken by the ITO to collect the tax assessment. Further, when the ITO ultimately releases a decision on the objection, another controversy may still arise, especially if the ITO concludes that there is no merit in your objection. Litigation would be the appropriate way to deal with the last controversy.
Once a tax controversy arises, immediate actions must be taken. Timing is essential as a delay may turn a tax controversy into a disaster.
SSP CONSULTANT understands well how to deal with tax controversies wherever they arise. Our professionals advise and provide assistance in handling tax audits and objections. Our support will continue in the litigation process if required. You do not need to be concerned about potential breach of Sarbanes-Oxley restrictions given that we are not involved in the statutory audit of your accounts and accordingly none of the independence restrictions are applicable to us. Hence, a change of tax consultants in litigation cases merely for the sake of the independence rule is not relevant. These should give you more confidence as a consistent and diligent approach to your case can always be maintained by a solid team of professionals who understand and follow up your case well from the first stage a controversy arises up to the litigation process.
Tax Planning & Advisory Service
Tax may or may not constitute your business expense depending on who should by law be held responsible for the tax. However, in practice this matter is not always clear. As a result, when a surprise tax assessment is issued by the ITO, controversies may arise not only between you and the ITO but also between you and your counter party to the relevant transaction. It is therefore advisable to consider tax implications of any transactions in advance. You may also need to revisit past transactions not supported by proper tax planning.
SSP CONSULTANT will help you identify the tax implications of your envisaged transactions or deals. Our professionals will assist you in putting tax-related issues in appropriate clauses in your agreements so as to flag up the tax implications and minimize controversy risks between you and your counter parties in the transactions.
With regard to past transactions, we will help you identify the tax exposures and recommend ways to mitigate the tax risks in the framework of prevailing tax regulations. When the exposures ultimately materialize into tax assessments and controversies with the ITO are unavoidable, our support is readily available to defend your merit in each case
Corporate Tax Complience
Corporate income tax will always constitute one of the biggest costs to your business even with the falling tax rates. An appropriate treatment of a particular expense or a type of income is absolutely important for the calculation of your corporate income tax. An inappropriate treatment will not only cost you an extra tax expense. It may also increase your tax audit or assessment risk. The bottom line is increasing compliance costs.
With our support you will ensure that appropriate treatments be applied to your company’s expenses and income. We will also highlight areas bearing significant tax exposures or increasing your tax audit risk for your attention and suggest the course of actions you need to take to mitigate them. This will be done as part of the preparation of your company’s annual corporate income tax return (Form 1771) or a review of the tax return that you have prepared by yourself.
Monthly Tax Compliance
Besides the annual compliance applicable for corporate income tax, companies are required to account for value added tax (VAT) and withholding tax (WHT) on a monthly basis.
Monthly obligations pertaining to VAT will typically include the following aspects:
- Issue of VAT invoices to your customers pertaining to the sales of products or provision of services to them (output tax)
- Obtaining VAT invoice from your vendors pertaining to goods purchased or services received from them (input tax)
- Offsetting one month’s output tax against the input tax of the same month and determining whether your company has underpaid or overpaid tax for that month
- Settling underpaid tax for that month if any
- Preparing and filing VAT return for that month
Monthly obligations pertaining to WHT will typically include the following aspects:
- Determining the appropriate WHT type applicable for a particular service fee payable to a service provider or some other types of payment. There are broadly three types of WHT under Indonesian tax legislation including the one applicable for payments to non-resident parties.
- Issue of appropriate WHT slips with the appropriate WHT rate. WHT rates may vary by the type of payment. For payments to non-resident parties, they may also vary by the applicable tax treaty.
- Settlement of total WHT due for a particular month
- Filing a WHT return for that particular month
Depending on your need, we will assist you in some or the whole aspects of the monthly tax compliance obligations. This should release you from clerical works so that you can focus more on your business.
Individual Tax Compliance
Individuals qualifying as Indonesian residents and generate income exceeding the non-taxable threshold is required to register with the ITO to obtain a Tax Identification Number (TIN) and file individual income tax returns (Form 1770) on a annual basis. Indonesian tax legislation adopts a worldwide income basis and accordingly all income of an individual for a particular year, including that generated from foreign sources, must be accounted for in his/her annual income tax return along with the income tax due thereon. Tax withheld by third parties over the year from the income, including the one due or paid abroad can generally be claimed as a tax credit.
SSP CONSULTANT will assist you with the preparation of annual individual income tax returns and dealing with some other pertinent issues such as tax registration, cancellation of TIN, etc.
We understand that you have various interests pertaining to your company’s payroll. To mention some, you will need to ascertain that each of your employees receive a salary payment as agreed between the Company and the employee along with the relevant pay slip. Then you will need to determine the amounts due thereon for the worker security contribution( BPJS) and payroll tax (Art. 21 income tax) as well as to settle those amounts on time followed by filing the relevant reports with the BPJS office and the ITO. Additionally, you will need to generate a journal voucher summing up all of one month’s payroll-related payments and deductions as a basis to make a journal entry pertaining to payrolls to your books. While most of the work is routine in nature, variation may arise as new employees join in and existing employees go out, bonus is paid to certain employees in particular month, medical reimbursements are provided to some other employees, etc.
Depending on your need, we will assist you with the preparation of payroll-related documents including BPJS payments and reporting as well as filing of employee income tax returns.
M & A and Other Business Restructuring
Business mergers and acquisitions (M&A) and some other types of business restructuring will typically entail various tax implications. At the pre-merger or pre-acquisition stage, the main issue would typically be concerned with the tax exposures of the targets and determining who will be responsible for those exposures if they materialize into tax assessments. Options are available at this stage under certain circumstances. For instance, a tax-neutral merger may be carried out following specific approval of the ITO. During the implementation stage, close monitoring would be required to ascertain that tax-related deals are carried out as planned. At the post-merger stage, various tax issues typical of a transition period may arise such as cancellation of the tax identification number of the merging entities, dealing with tax audits, etc.SSP CONSULTANT will assist you in conducting a due diligence review aimed at identifying tax exposures of the target companies. We will also advise whether or not it is worth pursuing the tax-neutral merger and assist you in obtaining the ITO approval if it fits to your case. Monitoring the implementation of approved deals or plans is another area in which we could give our assistance. Our support will continue in the post-merger stage to ascertain that appropriate transitional measures are taken and all tax-related issues arising at this stage are dealt with in an appropriate manner.