As the first quarter of the year unfolds in Indonesia, Indonesian and expatriate taxpayers are required to file their Annual Tax Returns, known as Surat Pemberitahuan Tahunan (SPT). Beyond being a mere formality, the SPT serves as a comprehensive roadmap, shedding light on the intricate financial journey of the past year. However, this year brings an additional layer of complexity with the impending implementation of the Natura Tax in mid-2023, adding a new dimension to the tax landscape.
What is the Annual Tax Return or Surat Pemberitahuan Tahunan (SPT)?
The Annual Tax Return (SPT) is a crucial document for taxpayers to report their tax calculations, payments, taxable and non-taxable objects, as well as assets and liabilities, in alignment with tax laws. It's a form that taxpayers must file to report their income earned during the tax year. Personal incomes considered tax objectives and must be included in SPT are:
Incomes earned from work, such as salary, wages, bonuses, incentives, etc.
Incomes earned from an investment, such as dividends, revenue, royalty, etc.
Other incomes, such as prizes, tax refunds, etc.
Benefit in kind or Remuneration in-kind (natura)
To complete their SPT, the taxpayers require a withholding Article 21 Income Tax receipt (bukti potong PPh 21) that will be distributed by the employers at the end of the fiscal year. This document provides a comprehensive breakdown, including received income, deducted tax amounts, and any non-monetary taxable benefits, commonly referred to as natura tax.
Understanding the Implications of Natura Tax in the Annual Tax Return
Natura tax is a form of taxation applicable to non-monetary benefits, encompassing goods or services provided by companies to their employees for productive or economic activities; this is often referred to as "3M" (mendapatkan, menagih, memelihara penghasilan).
The natura tax is regulated under Law Number 7 of 2021 concerning the Harmonisation of Tax Regulations (HPP) and derivative regulations in Government Regulation Number 55 of 2022. Subsequently, the updated regulations were stipulated in PMK 66/2023 to make the implementation effective from July 2023.
The mid-year enforcement necessitates benefit recipients to be cautious when reporting their taxes, as it affects the calculation and reporting system, as follows:
Benefits received before the updated regulations in July 2023 should be reported in the annual tax return with self-calculated payment.
Benefits received subsequently require monthly withholding and remittance.
Enjoyments as Tax Object and Employee Exemptions
According to the HPP Law, specific types of non-cash benefits are exempt from taxation when provided by companies to employees for productivity and/or economic activities. These non-tax objects include enjoyments from specific area assignments; work-related obligations like uniforms; benefits funded by state (APBN), regional (APBD), or village budgets (APBDesa); and other enjoyments with specific types or limitations.
On the other hand, non-monetary benefits with a high value that do not directly contribute to the employee's productivity are classified as tax objects, for examples:
residences,
transportation,
meals,
vouchers,
and various amenities that possess a high value and do not directly contribute to the employee's productivity.
Nurturing Awareness During SPT and Natura Tax
Personal income tax (PIT) is a levy on employee earnings throughout the tax year, covering salary, dividends, and other income sources. Indonesia's endorsement of a worldwide income tax model means that tax residents must fulfill obligations for income earned both in Indonesia and abroad. In contrast, non-resident taxpayers are obligated to pay tax solely on income earned within Indonesia.
We often see cases where taxpayers only pay and report their income in Indonesia that was listed in the Indonesian withholding tax slip because they were genuinely unaware of the regulations, for instance:
A foreign citizen who is an Indonesian taxpayer and he didn't report his dividends on the SPT, or
A foreign citizen who is an Indonesian taxpayer, and he didn't include his income abroad on the SPT.
This year, taxpayers also need to be more careful in doing SPT because of the implementation of natura tax regulations amplifies the need for vigilance among employers and taxpayers to avoid misclassification or miscalculation of Natura benefits. Any error can significantly impact corporate tax reports and employees' income tax liabilities that may result in penalties, fines, and legal action.
How You Can Get Taxes Right with JAC Outsourcing
JAC Outsourcing offers comprehensive tax services to support your business growth in Indonesia, as well as ensure compliance with personal income tax. Our tax consultants provide you end-to-end tax activities for business and personal purposes from the calculation, payment, and reporting to the Directorate General of Taxes that covers:
Corporate income tax (CIT)
Personal income tax (PIT)
Tax calculations
Tax payment―monthly and yearly
Annual tax report
As Indonesian taxpayers are about to enter the SPT period, we suggest beginning the preparation shortly to avoid the burden and prevent becoming overwhelmed near the deadline.
Partnering with a tax expert can help you and your company navigate the complexities of handling tax returns. Get in touch with us today for more information on managing your corporate and personal taxes.