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INDONESIA - GENERAL

LAW

NUMBER 16 YEAR 2000 DATE 02 AUGUST 2000

SUBJECT

THE SECOND AMENDMENT TO LAW NUMBER 6 YEAR 1983 CONCERNING GENERAL

PROVISIONS AND TAXATION PROCEDURES

WITH THE BLESSING OF ALMIGHTY GOD

PRESIDENT OF THE REPUBLIC OF INDONESIA,

Considering:

that in a bid to better provide justice and enhance service for taxpayers as well as to better assure legalcertainty, it is necessary to amend Law Number 6 Year 1983 on taxation general provisions andprocedures as already amended by Law Number 9 Year 1994;

In view of:

1. Article 5 paragraph (1), Article 20 paragraph (2) and Article 23 paragraph (2) of the Constitution ofthe Republic of Indonesia as already amended by the First Amendment of 1999;

2. Law Number. 6 Year 1983 on taxation general provisions and procedures (Statute Book Year1983 Number 49, Supplement to Statute Book Number 3262) as already amended by LawNumber 9 Year 1994 (Supplement to Statute Book Year 1994 Number 59, Supplement to StatuteBook Number 3566);

With the Approval of:

THE HOUSE OF REPRESENTATIVES OF THE REPUBLIC OF INDONESIA

DECIDES:

To stipulate:

THE SECOND AMENDMENT TO THE LAW NUMBER 6 YEAR 1983 CONCERNING GENERALPROVISIONS AND TAXATION PROCEDURES.

Article I

Several provisions in Law Number 6 Year 1983 on General Provisions and Taxation Procedures (StatuteBook Year 1983 Number 49, Supplement to Statute Book Number 3262) as already amended by LawNumber 9 Year 1994 (Statute Book Year 1994 Number 59, Supplement to Statute Book Number 3566)shall be amended as follows:

1. Provision Article 1 amended, so Article 1 entirely read as follows:

"Article 1

Referred to in this law as:

1. Taxpayers shall be individuals or statutory bodies which according to provisions oftaxation laws, are stipulated to perform taxation obligations, including certain taxcollectors or withholders.

2. Statutory bodies shall groups of persons, and/or capital which constitutes an unit,undertaking or not undertaking businesses, covering limited liability companies, limitedpartnership companies, other companies, state # or regional administration-owned

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companies in whatever names and forms, firms, joint companies, cooperatives, pensionfunds, partnerships, groups, foundations, mass organisations, social and politicalorganisations or organisations of the same type, institutions, permanent establishmentsand other forms of statutory bodies.

3 Companies/entrepreneurs shall be individuals or statutory bodies in whatever forms whichin their business activities or works/jobs produce goods, import goods, export goods,

undertake trading businesses, utilize untangle goods from regions outside the customsarea, provide services or utilize services from regions outside the customs area.

4. Taxable companies shall be the companies as meant in point 3 which deliver taxablegoods or services subjected to the collection of tax on the basis of the Value-Added TaxLaw of 1984 and its amendments, excluding small-scale businesses whose criteria arestipulated by the Minister of Finance, except small-scale businesses deciding to bevalidated as taxable companies.

5. Taxpayer Code Numbers shall be numbers given to taxpayers as means in the taxationadministration which are used as personal identities or identities of taxpayers inexercising and fulfilling taxation rights and obligations.

6. Tax Period shall be a period whose duration is equal to one calendar month or otherperiods stipulated by a decision of the Minister of Finance at the maximum of 3 (three)calendar months.

7. Tax Year shall be the period of 1 (one) calendar year unless taxpayers use accountingyears different from the calendar year.

8. Part of Tax Year shall be part of the period of one tax year.

9. Tax Due shall be amounts of tax which must be paid at a certain time, tax period, tax yearor part of tax year according to provisions of taxation laws.

10. Tax Return is the form used by a Taxpayer to report the calculation and payment of taxdue according to the provisions of tax law.

11. Periodical Tax Returns shall be tax returns for one tax period.

12. Annual Tax Returns shall be tax returns for one tax year or part of tax year.

13. Tax Payments shall be letters used by taxpayers to pay or remit tax due to the state cashthrough Post Offices and/or state- or regional administration-owned banks or other

payment point appointed by the Minister of Finance.

14. Tax Assessments shall be letters of stipulation of tax covering. Underpaid-TaxAssessments or Additional Underpaid-Tax Assessments or Overpaid-Tax Assessmentsor Nil-Tax Assessments.

15. Underpaid-Tax Assessments shall be letters of stipulation of tax determining amounts ofprincipal tax, tax credits, shortages of payment of principal tax, administrative sanctionsand the remainder which must be paid.

16. Additional Underpaid-Tax Assessments shall be letters of stipulation of tax determiningamounts in excess of tax payment because amounts of tax credits exceed tax due, or taxwhich should not be owned.

17. Overpaid-Tax Assessment shall be letters of stipulation of tax determining amounts inexcess of tax payment because amounts of tax credits exceed tax due, or tax which

should not be owned.18. Nil-Tax Assessments shall be letters of stipulation of tax determining that principal

amounts of tax are equal to amounts of tax credits or tax is not owed and tax credits arenil.

19. Tax Collection Letters shall be letters to collect tax and/or administrative sanctions in theforms of interest and/or fines.

20. Distress Warrants shall be letters of order to pay tax due and costs of collection of tax.

21. Tax Credits for Value Added Tax shall be input tax creditable after being reduced by the

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amounts of preliminary restitution of overpaid tax or after being reduced by amounts oftax already compensated for, which are deductible from tax due.

22. Tax Credits for Income Tax shall be tax paid by taxpayers themselves plus principal taxdue in Tax Collection Letters because Income Tax for the currents year is not paid orunderpaid, added by tax on income paid or owed abroad, minus amounts of preliminaryrestitution to overpaid tax which are deductible from tax due.

23. Independent works/jobs shall be jobs executed by individuals having special expertise in abid to earn income not bound by certain working relations.

24. Audits shall be series of activities to seek, collect, process data and other kinds ofinformation for testing the compliance with taxation obligations and for other purposes inthe framework of the implementation of provisions of taxation laws.

25. Tax Guarantors shall be individuals or statutory bodies responsible for the payment of tax,including proxies exercising rights and fulfilling obligations of taxpayers according toprovisions of taxation laws.

26. Book keeping/accounting shall be a recording process executed in an orderly manner tocollect financial data and information covering property, liabilities, capital, income andcosts as well as prices of acquisition and delivery of goods and services which are closedby compiling financial statements in the form of profit/loss balances and statements at theend of tax years.

27. Examination shall be a series of activities executed to evaluate the completion of TaxReturns and attachments including the truth of the writing and calculation.

28. Investigation into Taxation Crimes shall be a series of actions executed by investigators toseek and collect pieces of evidence for clarifying the taxation crimes as well as to findsuspects.

29. Decisions on Rectification shall be decision correcting misprints, miscalculations and/ormisapplication of certain provisions of taxation or Abolition of Administrative Sanctions,Decisions of Reduction or Revocation of Incorrect Tax Assessments or Decisions onPreliminary Restitution of Overpaid Tax.

30. Decisions on Objections shall be decisions on objections raised by taxpayers to taxassessments or tax withholding or collection by the third parties.

31. Decisions on Appeals shall decisions of tax arbitration courts on appeals againstdecisions on objections submitted by taxpayers.

32. Decisions on Preliminary Restitution of Overpaid Tax shall be decisions determiningamounts of preliminary restitution of overpaid tax for certain taxpayers."

2. The title of CHAPTER II is amended so as to read as follows:

CHAPTER II

TAXPAYER IDENTIFICATION NUMBER,

VALIDATION OF TAXABLE COMPANIES.

NOTIFICATIONS AND PROCEDURES FOR PAYMENT OF TAX."

3. The provisions in Article 2 paragraphs (2), (3), (4) and (5) are amended so as to entirely read asfollows:

"Article 2

(1) Taxpayers shall register themselves at offices of the Directorate General of Taxationoverseeing their working areas, covering addresses and domiciles of Taxpayer CodeNumbers shall be granted to them.

(2) Taxpayers being taxable companies according the Value Added Tax Law of 1984 andamendments shall report their businesses to offices of the Directorate General ofTaxation overseeing their working areas, covering addresses and domiciles of thecompanies and places of business activities for validating as taxable companies.

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(3) The Director General of Taxation can stipulate:

a. registration and/or reporting places of businesses other than those stipulated inparagraphs (1) and (2);

b. registration places at offices of the Directorate General of Taxation whoseworking areas cover places where businesses are executed, other than theregistration places as meant in paragraph (1), by certain individual taxpayers of

certain companies.(4) The Director General of Taxation shall issue Taxpayer Code Numbers and/or validate

taxable companies functionally, in the case of taxpayers or taxable companies failing tofulfill the obligations as meant in paragraphs (1) and (2).

(5) The period of registration and reporting as well as procedures for registration andvalidation as meant in paragraphs (1), (2), (3) and (4) including the abolition of TaxpayerCode Numbers and/or revocation of validation as taxable companies shall be regulated bya decision of the Director of Taxation.

4. The provision in Article 3 is amended and new provisions are slipped between paragraph (1) and(2) and between paragraph (5) and (6) to become paragraph (a) and (5a) respectively, so thatArticle 3 entirely reads as follows:

"Article 3

(1) Taxpayers shall complete tax returns in the Indonesian language by using Latin letters,Arabic numbers, the rupiah denomination, as well as signing and conveying the taxreturns to offices of the Directorate General of Taxation where the relevant taxpayers areregistered or validated.

(1a) Taxpayers already securing licenses from the Minister of Finance to adopt bookkeeping by using foreign languages and currencies other than the Rupiah, shallconvey tax returns in the Indonesian language and currencies other than Rupiahwhich are permitted, whose implementation is regulated by a decree of theMinister of Finance.

(2) The taxpayers as meant in paragraphs (1) and (1a) shall take themselves the notificationsin places stipulated by the Director General of Taxation.

(3) The deadline of conveyance of tax returns shall be:

a. not later 20 (twenty) working days after the date of expiration of tax period, in thecase of periodical tax returns;

b. not later than 3 (three) months after the date of expiration of tax period, in thecase of annual tax returns.

(4) Based on the applications from taxpayers, the Director General of Taxation can extendthe deadline of conveyance of annual tax returns as meant in paragraph (3) letter b to 6(six) months at the maximum.

(5) The applications as meant in paragraph (4) shall be conveyed in writing, along withstatements on provisional calculation of tax due in one tax year and evidence ofsettlement of underpaid tax due.

(5a) In the case of tax return being not conveyed in accordance with the deadline asmeant in paragraph (3) or the extended deadline of conveyance of tax returns as

meant in paragraph (4), warnings shall be issued.(6) Models and contents of tax returns as well as information and/or documents which must

be accompanied shall be stipulated by a Decree of the Minister of Finance.

(7) Tax returns shall be considered not be conveyed in the case of the returns being notsigned in accordance with the provision in paragraph (1) or being not completelyaccompanied by information and/or documents as meant in paragraph (6).

(8) Certain taxpayers of income tax stipulated by a Decree of the Minister of Finance shall beexempted from the obligation as meant in paragraph (1)."

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5. The provision in Article 4 paragraph (4) is amended and a paragraph is supplemented to becomeparagraph (5) so that Article 4 entirely reads as follows:

"Article 4

(1) Taxpayers shall complete and convey tax returns correctly, completely, clearly and signthe returns.

(2) In the case of taxpayers being statutory bodies, the tax returns shall be signed byexecutives or executive directors.

(3) In the case of the tax returns being completed and signed by parties which are nottaxpayers, they shall be accompanied by letters of special authorization.

(4) Annual Income Tax Returns completed by taxpayers obliged to adopt book keeping shallbe accompanied by financial statements in the form of profit/loss balances or reports aswell as other kinds of information required for calculating amounts of taxable income.

(5) Procedures for the receipt and processing of tax returns shall be regulated by a decree ofthe Minister of Finance."

6. The provisions in Article 6 paragraphs (2) and (3) are amended so that Article 6 entirely reads asfollows:

"Article 6

(1) Officials appointed shall put the date of receipt on tax returns directly conveyed bytaxpayers to offices of the Directorate General of Taxation, while evidence of receipt shallalso be given to annual tax returns.

(2) Tax returns can be dispatched through post offices in registered letters or other meansstipulated by a decision of the Director General of Taxation.

(3) Evidence of receipt and date of dispatch of tax returns as meant in paragraph (2) shall beconsidered evidence and date of receipt as long as the returns have already beencomplete."

7. The provision in Article 7 is amended and made to become paragraph (1), and a new provision issupplemented to become paragraph (2), so that Article 7 entirely reads as follows:

"Article 7

(1) In the case of tax returns failing to be conveyed in the deadline as meant in Article 3paragraph (3) of the extended deadline of conveyance of tax returns as meant in Articleparagraph (4), an administrative sanction in the form of a fine shall be imposed as muchas Rp. 50.000 (fifty thousand rupiahs) for annual tax returns and Rp. 100.000 (onehundred rupiahs) for annual tax returns.

(2) The administrative sanction in the form of a fine as meant in paragraph (1) shall not beimposed on certain taxpayers stipulated by a decree of the Minister of Finance.

8. The provisions in Article 8 paragraphs (1), (3), (4) and (5) are amended and a new provision issupplemented to become paragraph (6), so that Article 8 entirely reads as follows:

"Article 8

(1) Taxpayers on the basis of their own intention can rectify tax returns already conveyed byputting forward written statements in the period of 2 (two) years after the expiration of taxperiod, part of tax year or tax year with the provision that the Director General of Taxation

has not yet examined.

(2) In the case of taxpayers rectifying tax returns on the basis of their own intention whichcause tax due to be higher, the relevant taxpayers shall be subjected to fine of 2% (twopercent) of the amounts of underpaid tax per month, calculated from the moment ofexpiration of conveyance of tax returns to the date of payment because of rectification ofthe tax returns.

(3) In the case of examination being already executed, but as long as investigation into theuntruth made by taxpayers as meant in Article 38 has not yet been executed, the untruthmade by the relevant taxpayers shall not be investigated if the taxpayers on the basis of

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their own intention reveal the untruth accompanied by the settlement of shortages ofpayment for amounts of tax which should be owed, along with a fine as high as twice ofamounts of underpaid tax.

(4) Even though the deadline of rectification of the tax returns as meant in paragraph (1) hasalready ended, as long as the Director General of Taxation has not yet issued taxassessments, taxpayers on the basis of their own awareness can reveal the untrue

completion of tax returns already conveyed in separate reports, which cause:a. amounts of tax not yet paid to be bigger; or

b. losses on the basis of taxation provisions to become smaller; or

c. amounts of assets to become bigger; or

d. amounts of capital to become bigger.

(5) Underpaid tax resulting from the revelation of the untrue completion of tax returns asmeant in paragraph (4) along with an administrative sanction in the form of the increaseas high as 50% (fifty percent) of amounts of underpaid tax, shall be settled by taxpayersbefore the conveyance of the separate reports.

(6) Even though the deadline of rectification of tax returns as meant in paragraph (1) hasalready expired, as long as the Director General of Taxation has not yet examined,taxpayers can rectify annual income tax returns, if the relevant taxpayers receive on

objections or appeal for tax assessments for the previous tax year, certifying differentfiscal losses from tax assessments for which objections are raised or decisions onobjections for which appeal is filed, in 3 (three) months after the date of receipt of thedecisions on objections or appeal."

9. The provision in Article 9 is amended and a new provision is slipped between paragraphs (2) and(3) to become paragraph (2a), so that Article 9 entirely reads as follows:

"Article 9

(1) The Minister of Finance shall determine the date of expiration of payment and remittanceof tax for one tax moment or period for the respective kinds of tax, not later than 15(fifteen) days after the effective moment of tax due or expiration of tax period.

(2) Underpaid tax owed on the basis of annual tax returns shall be fully settled not later than25Tahun of the third month after the expiration of tax year or part of tax year, before the

tax returns are conveyed.

(2a) In the case of the tax as meant in paragraph (1) or paragraph (2) being paid orremitted after the date of expiration of payment or remittance of tax, the taxpayersshall be subjected to interest of 2% (two percent) per month, calculating from thedate of expiration of payment up to the date of payment, and part of month is fullyrounded up to one month.

(3) Tax collection letters, underpaid-tax assessments, additional underpaid-tax assessmentsand decisions on objections, appeals which result in an increase in amounts of taxliabilities shall be settled in the period of one month as from the date of issuance.

(4) Based on applications from taxpayers, the Director General of Taxation can approve topay in installment or postpone the payment of tax including the shortages of payment asmeant in paragraph (2) not later than 12 (twelve) months, whose implementation isstipulated by a decision of the Director General of Taxation.#

10. The provision in Article 10 is amended so as to entirely read as follows:

"Article 10

(1) Taxpayers shall pay and remit tax due to the state cash through post offices and/or stateor regional administration-owned banks or other payment point stipulated by the Ministerof Finance.

(2) Procedures for payment, remittance and reporting as well as installment andpostponement of payment of tax shall be stipulated by a Decree of Minister of Finance."

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"Article 11

(1) Based on applications from taxpayers, the overpaid tax as meant in Article 17, Article 17Bor Article 17C shall be restituted, but in the case of taxpayers turning out to have tax due,it is directly calculated to settle the tax due at first.

(2) The restitution of overpaid tax as meant in paragraph (1) shall be done not later than onemonth after the date of receipt of applications for the restitution of overpaid tax as meantin Article 17 or as from the date of issue of overpaid tax assessments as meant in Article17B or as from the date of issue of decisions on preliminary restitution of overpaid tax asmeant in Article 17C.

(3) In the case of the restitution of overpaid tax being executed after one month, thegovernment shall pay interest of 2% (two percent) per month for lateness in payment ofoverpaid tax, calculated from the deadline as meant in paragraph (2) up to the moment ofpayment of the overpaid tax.

(4) Procedures for calculation and restitution of overpaid tax shall be stipulated by a decreeof the Minister of Finance.#

12. The provision in Article 12 is amended and made to become paragraph (1) and two newprovisions are supplemented to become paragraphs (2) and (3), so that Article 12 entirely reads

as follows:"Article 12

(1) Every taxpayer shall pay tax owed on the basis of provisions of taxation laws, withoutdepending on the presence of tax assessments.

(2) Amounts of tax due according to tax returns conveyed by taxpayers shall be amounts oftax due according to provisions of taxation laws.

(3) In the case of the Director General of Taxation finding out that amounts of tax dueaccording to tax returns as meant in paragraph (2) are not true, the Director General ofTaxation shall stipulate amounts of tax which should be owed.#


"Article 14

(1) The Director General of Taxation can issue tax collection letters in the case of:a. income tax in the current year being not paid or underpaid;

b. examination of tax returns finding out underpaid tax as a result of misprints ormiscalculations;

c. taxpayers being subjected to an administrative sanction in the form of fine orinterest;

d. companies being subjected to collection of tax on the basis of the Value AddedTax Law of 1984 and amendments, but they are not reporting their businessactivities to be validated as taxable companies;

e. Entrepreneur being not confirmed as Taxable entrepreneur but they make outTax Invoices;

f. Entrepreneur which have already been confirmed as Taxable entrepreneur, notmaking out or making out tax invoices but they are not completing tax invoicespunctually and completely.

(2) The tax collection letters as meant in paragraph (1) shall have the same legal power astax assessments.

(3) Amounts of underpaid tax in the tax claims as meant in paragraph (1) letters a and b shallbe added by an administrative sanction in the form of interest of 2% (two percent) permonth for 24 (twenty four) months at the maximum, calculated as from the effectivemoment of tax due or part of tax year and tax year up to the issue of tax collection letters.

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(4) The companies or taxable companies as meant in paragraph (1) letters d, e and f shall berespectively subjected to administrative sanctions in the form of fine as high as 2% (twopercent) of the basis for imposition of tax.#

14. The provisions in Article 15 paragraphs (1), (3) and (4) are amended so that Article 15 entirelyreads as follows:

"Article 15

(1) The Director General of Taxation can issue underpaid-tax assessments in the period of10 (ten) years after the effective moment of tax due, expiration of tax period, part of taxyear or tax year, in the case of new data or data previously not yet revealed which causethe addition to amounts of tax due being found out.

(2) Amounts of underpaid tax in additional underpaid-tax assessments shall be added by anadministrative sanction in the form of the increase as high as 100% (one hundredpercent) of the amount of shortages of payment of the tax.

(3) The increase as meant in paragraph (2) shall not be imposed in the case of additionalunderpaid-tax assessments being issued on the basis of written information fromtaxpayers on their own intention as long as the Director General of Taxation has not yetexamined.

(4) In the case of the period of 10 (ten) years as meant in paragraph (1) already elapsing,

additional underpaid-tax assessment still can be issued but being added by anadministrative sanction in the form of interest as high as 48% (forty eight percent) of theamounts of tax which are not paid or underpaid, if the relevant taxpayers after the tenyear period are sentenced for committing taxation crimes on the basis of court decisionshaving permanent legal power.#

15. The provision in Article 16 is amended and made to become paragraph (1) and two provisions aresupplemented to become paragraphs (2) and (3), so that the article 16 entirely reads as follows:

"Article 16

(1) The Director General of Taxation in his functional capacity or on the basis of applicationsfrom taxpayers can rectify tax assessments, tax collections letters, decisions onobjections, decision on reduction or abolition of administrative sanctions, decision onreduction or revocation of incorrect tax assessment, or decisions on preliminary restitutionof overpaid tax, which contain misprints, miscalculations and/or misapplication of certain

provisions of taxation laws in their issuance.

(2) The Director General of Taxation shall make decisions on applications for rectificationsubmitted in 12 (twelve) months as from the date of receipts of application.

(3) In the case of the period as meant in paragraph (2) elapsing, but the Director General ofTaxation makes no decisions, the applications for rectification submitted shall beconsidered acceptable."

16. The provision in Article 17B is amended so as to Article 17B entirely read as follows:

"Article 17B

(1) The Director General of Taxation after examining applications for restitution of overpaidtax, other than applications for restitution of overpaid tax from taxpayers with certaincriteria as meant in Article 17C, shall issue tax assessments not later than 12 (twelve)months as from the date of receipt of the applications, unless for certain activitiesotherwise stipulated by a decision of the Director General of Taxation.

(2) In the case of the period as meant in paragraph (1) elapsing, but the Director General ofTaxation makes no decisions, applications for restitution of overpaid tax shall beconsidered acceptable and overpaid tax assessment shall be issued not later than onemonth after the period ends.

(3) In the case of overpaid tax assessment being late to be issued in the period as meant inparagraph (2), taxpayers shall be given an interest compensation of 2% (two percent) permonth, calculated from the expiration of the period as meant in paragraph (2) up to the

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date of issuance of overpaid tax assessments."

17. A new Article is inserted between Articles 17B and 18 to become Article 17C which reads asfollows:

"Article 17C

(1) The Director General of Taxation after auditing applications for restitution of overpaid taxfrom taxpayers with certain criteria, shall issue decisions on preliminary restitution ofoverpaid tax not later than 3 (three months as from the date of receipt of applications foroverpaid income tax and one months as from the date of receipt of applications foroverpaid Value Added Tax.

(2) Certain criteria as meant in paragraph (1) shall be stipulated by a Decree of the MinisterFinance.

(3) Taxpayers with certain criteria as meant in paragraph (2) shall be stipulated by a decisionof the Director General of Taxation.

(4) The Director General of Taxation can examine the taxpayers as meant in paragraph (1)and issue tax assessments, after executing preliminary restitution of overpaid tax.

(5) In the case of on the basis of result of the examination as meant in paragraph (4), heDirector General of Taxation issuing underpaid tax assessments, the negative differencesof tax shall be added by an administrative sanction in the form of the increase as high as

100% (one hundred percent) of the total amounts of shortages of tax payment."

18. Paragraph (2) of Article 18 is abolished so that Article 18 entirely reads as follows:

"Article 18

(1) Tax collection letters, underpaid-tax assessments, additional underpaid-tax assessmentand decisions on rectification, decision on objections and decisions on appeals resultingan increase in the amounts of tax which must be paid, shall be the basis for collection oftax.

(2) abolished."

19. The provision in Article 19 is amended so as to Article 19 entirely read as follows:

"Article 19

(1) If tax due according to underpaid-tax assessments for additional underpaid-taxassessment and addition to amounts of tax which must be paid on the basis of decisionson rectification, decisions on objections or decisions on appeals are not paid or underpaidupon the maturity of tax payment, the amounts of tax which is not paid or underpaid shallbe subjected to an administrative sanction in the form of interest as high as 2 (twopercent) per month for the whole period, calculated from the date of maturity up to thedate of payment or the date of issuance of tax collection letters and part of a month isrounded up to one month.

(2) In the case of taxpayers being allowed to pay in installments or postpone the payment oftax, the taxpayers shall also be subjected to an administrative sanction in the form ofinterest as high as 2% (two percent) per month, and part of a month is rounded up to onemonth.

(3) In the case of taxpayers being allowed to postpone the conveyance of tax returns andamounts of tax due which is provisionally calculated as meant in Article 3 paragraph (5)

turning out to less than the amounts of tax actually due, the shortages of payment shall besubjected to an administrative sanction in the form of interest as high as 2% (two percent)per month, calculated from the date of expiration of obligation to convey tax returns asmeant in Article 3 paragraph (3) letter b up to date of payment of the shortages, and partof a month is rounded up to month.

20. The provision in Article 10 is amended and made to become paragraph (2) and added 2 (two)paragraphs to become paragraphs (1) and (3), so that the Article 20 reads as follows:

"Article 20

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(1) Amounts of tax due according to tax collection letters, underpaid-tax assessment,additional underpaid-tax assessment, decision on rectification, decision on objections,decisions on appeals resulting an increase to the amounts of tax, which is not paid by taxguarantors in accordance with the period as meant in Article 9 paragraph (3) shall becollected by Distress Warrants.

(2) In the case of the exemption from the provision as meant in paragraph (1), immediate and

total collection shall be executed if:a. Tax Guarantors plan to leave Indonesia forever or intend to do that;

b. Tax Guarantors hand over goods owned or controlled in the framework oftermination or downsizing of corporate activities or jobs executed in Indonesia;

c. there are indications that tax guarantors will dissolve their business entities ormerge or expand businesses or hand over companies owned or controlled, orexecute other kinds of changes;

d. business entities will be dissolved by the state; or

e. third parties confiscate goods belonging to tax guarantors there are indications ofbankruptcy.

(3) The collection of tax by distress warrants shall be executed in accordance with theprovisions of laws in force."

21. The provision in Article 21 paragraphs (2), (3), (4) and (5) are amended, so that the Article 21entirely reads as follows:

"Article 21

(1) The state shall have preemptive rights to collect tax on goods belonging to tax guarantors.

(2) The provision on the preemptive rights as meant in paragraph (1) shall cover principal tax,administrative sanctions in the form of interest, fines, increase and costs of tax collection.

(3) The prior rights to collect tax shall be above all other kinds of such rights, expect for:

a. legal proceeding costs decidedly caused by a kind of punishment to auctionmovable/immovable goods;

b. costs spent to rescue the said goods;

c. legal proceeding costs decidedly caused by auctions and settlement ofinheritance.

(4) The preemptive rights shall be lost after 2 (two) years have elapsed as from the dateissuance of tax collection letters, underpaid-tax assessment, additional underpaid-taxassessment, decision on rectification, decision on objection, decision on appeals resultingin an amounts of tax which must paid, unless in the two year period, distress warrants forthe payment are notified formally or postponement of payment is granted."

(5) In case of Distress Warrant for payment is notified formally, in 2 (two) years as meant inparagraph (4), calculated from date of the Distress Warrant notification, or grantedpostponement of payment in 2 (two) years, added by the postponement of paymentperiod."

22. The provision in Article 22 is amended so that the Article 22 entirely reads as follows:

"Article 22(1) Rights to collect tax, including interest, fine, increase and cost of tax collection shall expire

after 10 (ten) years have elapsed as from the effective moment of tax due or expiration ofthe tax period, part of the tax year or the relevant tax year.

(2) The expiration of tax collection as meant in paragraph (1) shall be cancelled in the caseof:

a. the issuance of warning letters and distress warrants;

b. the presence of acknowledgement of tax due from taxpayers directly and

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indirectly;

c. the issuance of underpaid-tax assessment as meat in Article 13 paragraph (5) oradditional underpaid tax assessment as meant in Article 15 paragraph (4)."

23. The provision in Article 23 paragraph (2) is amended and paragraphs (1) and (3) are abolished,so that the Article 23 entirely read as follows:

"Article 23

(1) abolished

(2) Lawsuits of taxpayers or tax guarantors against:

a. the execution of distress warrants, instructions to execute confiscation, orannouncement of auctions;

b. decisions connected with the execution of taxation decisions, other than thosestipulated in Article 25 paragraph (1) and Article 26;

c. decisions on rectification as meant in Article 16 connected with tax collectionletters;

d. decisions as meant in Article 36 connected with tax collection letters;can only befiled to the tax court."

(3) abolished"

24. The provision in Article 24 is amended, so that the Article 24 entirely reads as follows:

"Article 24

Procedures for the writing-off of tax claims and stipulation of the amounts written off shall beregulated by a decree of the Minister of Finance."

25. The provision in Article 25 paragraphs (3), (4) and (5) are amended so as to entirely read asfollows:

"Article 25

(1) Taxpayers can only raise objections for the following matters to the Director General ofTaxation:

a. underpaid-tax assessments;

b. additional underpaid-tax assessments;c. overpaid-tax assessments;

d. nil-tax assessments;

e. withholding or collection by the third parties on the basis of provisions of taxationlaws.

(2) The objections shall be raised in writing in the Indonesian language by mentioningamounts of tax due or amounts of tax withheld or collected or amounts of losses tocalculation of taxpayers along with clear reasons.

(3) The objections shall be submitted in the period of 3 (three) months as from the date ofletters, date of withholding or collection as meant paragraph (1), unless if taxpayers canshow that the period can not be fulfilled because of conditions beyond their control.

(4) Objections failing to meet the requirements are meant in paragraph (1), (2) and (3) shallnot be considered letters of objections, thus being not taken into account.

(5) Evidence of receipt of letters of objections given by officials of the Directorate General ofTaxation appointed or evidence of dispatch of letters of objections through registeredletter shall become evidence of receipt of letters of objections.

(6) In the case of requests from taxpayers for purpose of submission of objections, theDirector General of Taxation shall give writing information on matters becoming the basisfor imposition of tax, calculation of losses, withholding or collection of tax.

(7) The submission of objections shall not postpone obligations to pay tax and collect tax."

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26. The provisions in Article 27 paragraph (2), (3) and (6) are amended, and paragraph (4) abolishedas to entirely Article 27 read as follows:

"Article 27

(1) Taxpayers can only raise applications for appeals to the tax arbitration agency againstdecisions on objections stipulated by the Director General of Taxation.

(2) Decisions of the tax arbitration court shall not constitute decisions on publicadministration.

(3) The applications as meant in paragraph (1) shall be submitted in writing in the Indonesianlanguage along with clear reasons in the period of 3 (three) months as from the date ofreceipt of decisions, accompanied by copies of the decisions.

(4) Abolished.

(5) The submission of applications for appeals shall not postpone obligations to pay andcollect tax.

(6) The tax arbitration agency as meant Article 23 paragraphs (1) and (2) shall be regulatedby a law."

27. The provision in Article 27A is amended and made to become paragraph (1) and two new

provisions are supplemented to become paragraphs (2) and (3), so that the Article 27A entirely

reads as follows:

"Article 27A

(1) In the case of the submitted objections or applications for being acceptable partly ofwholly, as long as the tax due as meant in underpaid-tax assessments and/or additionalunderpaid-tax assessments has already been paid which results in overpaid tax, theexcesses of payment shall be restituted plus an interest compensation of 2% (twopercent) per month for 24 (twelve four) months at the maximum, calculated from the dateof the payment resulting in overpaid tax up to the date of issuance of decisions onobjections or appeals.

(2) The interest compensation as meant in paragraph (1) shall also be granted tooverpayment of administrative sanctions in the form of a fine as meant in Article 14paragraph (4) and/or interest as meant in Article 19 paragraph (1) on the basis of

decisions on reduction or abolition of administrative sanctions, as a result of the issuanceof decisions on objections or appeals partly or wholly accepting applications fromtaxpayers.

(3) Procedure for calculation of amounts of restitution of overpaid tax and/or the granting ofthe interest compensation shall be regulated by a decree of the Minister of Finance."

28. The provision in Article 28 is amended, so that the Article 28 entirely reads as follows:

"Article 28

(1) Individual taxpayers undertaking business activities or independent jobs and taxablecompanies in Indonesia shall perform book keeping/accounting.

(2) Taxpayers exempted from performing the book keeping as meant in paragraph (1) butthey are obliged to record shall be individual taxpayers undertaking business activities orindependent work/jobs who according to provisions of taxation laws are permitted to

calculated net income by using norms of calculation of net income and individualtaxpayers who undertaken no business activities or independent work/jobs.

(3) The book keeping or recording shall be managed by observing good intention andreflecting the real conditions or business activities.

(4) The book keeping or recording shall be managed in Indonesia by using Latin letters,Arabic letters, rupiah denomination and compiled in the Indonesian language or otherforeign languages permitted by the Minister of Finance.

(5) The book keeping shall be managed by the principle of consistency and the accrual or

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cash system.

(6) Any change in models of book keeping and/or accounting year shall secure approval fromthe Director General of Taxation.

(7) The book keeping shall at least consist of records of assets, liabilities, capital, income andcosts, as well as sales and purchase, so that amounts of tax due can be calculated.

(8) The book keeping in foreign languages and currencies other than the Rupiah can bemanaged by taxpayers after securing licenses from the Minister of Finance.

(9) The recording as meant in paragraph (2) shall consist of data collected regularly on goodsturnover or revenue and/or gross income as the basis for calculation of amounts of taxdue, including income which is not a tax object and/or not subjected to final tax.

(10) Individual taxpayers not obliged to convey annual income tax return shall be exemptedfrom the obligation to perform bookkeeping and recording.

(11) Books, records, documents which become the basis for book keeping or recording andother documents shall be maintained for 10 (ten) years in Indonesia, namely in businessplaces or domiciles by individual taxpayers or domiciles by taxable companies.

(12) Models of and procedures for the recording as meant in paragraph (2) shall be regulatedby a decision of the Director General of Taxation."

29. The provision in Article 29 paragraphs (2) and (4) are amended, so that the Article 29 entirelyreads as follows:

"Article 29

(1) The Director General of Taxation shall be authorized to examine for testing thecompliance with taxation obligations and for other purpose in the framework of theimplementations of taxation laws.

(2) For the purpose of examination, examining officers shall have identities of examiners andbe accompanied by letters of instructions to examine as well as showing them totaxpayers being examined.

(3) Taxpayers subjected to examination shall be obliged:

a. to show and/or lend books or records, documents which become the basis forthem and other documents connected with income earned, business activities,

independent work of taxpayers or taxable objects.b. to give opportunity to enter places or rooms deemed necessary and provide

assistance to facilities the examination.

c. to give information needed.

(4) In the case of in the disclosure of book keeping, recording or documents as well asinformation asked, taxpayers being committed to certain obligations to keep them insecrecy, the obligation to keep them in secrecy shall be ignored by requests for thepurpose of the examination as meant in paragraph (1)."


"Article 31

Procedures for examination shall be regulated by a decree of the Minister of Finance."

31. The provision in Article 32 paragraph (2) and (4) are amended and among paragraph (3) and (4)are inserted 1 (one) paragraph that is paragraph (3a), so that the Article 32 entirely reads asfollows:

"Article 32

(1) In exercising rights and fulfilling obligations according to provision of taxation laws,taxpayers shall be represented by:

a. executives in the case of companies;

b. persons or bodies in charge of settlement, in the case of companies in dissolution

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or bankrupt condition;

c. one of the heirs, executors of testaments to those managing estate in the case ofindividual estate;

d. custodians or guardians in the case of children underage or persons in custody.

(2) The proxies as meant in paragraph 91) shall be responsible jointly and/or severally for

the payment of tax due, unless they can prove or convince of the Director General ofTaxation that they in their capacity are impossible to bear responsibility for the said tax

due.

(3) Individuals or companies can appoint proxies by letters of special authorization toexercise rights and fulfill obligations according the provisions of taxation laws.

(3a) The executives as meant in paragraph (3) shall meet the requirements stipulated by adecree of the Minister of Finance.

(4) The executives as meant in paragraph (1) letter a shall include persons decidedly havingauthority to determine policies and/or make decisions in operation of companies."

32. The provision in Article 33 is amended, so that Article 33 entirely read as follows:

Article 33

The buyers of taxable goods or recipients of taxable services as meant in the Value Added TaxLaw of 1984 and amendments shall be responsible in share for the payment of tax as long as theycan show evidence that tax has already been paid."

33. The provision in Article 34 is amended and a new provision is inserted between paragraphs (2)and (3) to become paragraph (2a), so that the Article 34 entirely reads as follows:

"Article 34

(1) Every official shall be prohibited from notifying other people of all matters are known orinformed to them by taxpayers in the framework of their positions or jobs to execute theprovisions of taxation laws.

(2) The prohibition as meant in paragraph (1) shall also be effective for experts appointed bythe Director General of Taxation to assist in the execution of provisions of taxation laws.

(2a) The provision as meant in paragraphs (1) and (2) shall be excepted in the caseof:

a. officials and experts acting as witnesses or expert witnesses in legalproceedings

b. officials and experts giving information to other parties stipulated by theMinister of Finance

(3) In the interest of the state, the Minister of Finance shall be authorized to grant writtenlicenses to the officials as meant in paragraph (1) and the experts as meant in paragraph(2) for providing information, showing written evidence from and/or about taxpayers toparties appointed.

(4) For the purpose of examination in criminal or civil cases in the court upon requests of judges according Criminal and Civil Codes, the Minister of Finance can grant writtenlicenses to ask for written evidence and information on taxpayers which are owned bythem from the officials as meant in paragraph (1) and the experts as meant in paragraph(2), written evidence and written information he has concerning the Taxpayer.

(5) The requests of judges as meat in paragraph (4) shall mention names of suspects ordefendants, information asked as well as connection between the said criminal or civilcases and the information asked."

34. The provision in Article 36 paragraph (2) is amended so as to entirely read follows:

"Article 36

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(1) The Director General of Taxation can take the following measures:

a. to reduce or abolish administrative sanctions in the form of interest, fine andincrease which are owed according to the provisions of taxation laws in the caseof the sanctions being imposed due to mistakes of taxpayers or not due towrongdoings.

b. to reduce or cancel incorrect tax assessment.

(2) Procedures for reduction, abolition or annulment of tax due as meant in paragraph (1)shall be regulated by a decree of the Minister of Finance."

35. A new provision is supplemented between Article 36 and 37 become Article 36A which reads asfollows:

"Article 36A

In the case of officers in the calculations and stipulation of tax according of taxation laws in forcethus inflicting losses on the state, the relevant tax officers shall be subjected to sanctions inaccordance with the provisions of laws in force."

36. The provision in Article 37 is amended so to Article 37 entirely read as follows:

"Article 37

Any change in amounts of interets compensation and administrative sanctions in the form of

interest, fines and increase, shall be regulated by a government regulation."

37. The provision in Article 38 is amended, so that Article 38 entirely read as follows:

"Article 38

Everybody because of negligence:

a. failing to convey tax returns; or

b. conveying tax returns, but the contents are not correct or complete, or accompanyinginformation whose contents are incorrect,thus being able to inflict losses on the staterevenue, shall be subjected to imprisonment of one year and/or a fine as high as twice theamount of tax due which is not paid or underpaid, at the maximum."


"Article 39

(1) Everybody intentionally

a. not registering or abusing or using taxpayer code number without rights orvalidation of taxable companies as meant in Article 2;or

b. not conveying tax returns; or

c. conveying tax returns and/or information whose contents are not correct orcomplete; or

d. refusing the examination as meant in Article 29; or

e. showing books, records and other documents which are false or falsified so as toseem true; or

f. not managing the book keeping or recording, not showing or not lending books,records or other document; or

g. not remitting tax already withheld or collected,thus being able to inflict losses onthe state revenue, shall be subjected to imprisonment of 6 (six) years and a fineof 4 (four) times the amount of tax due which nor paid or underpaid, at themaximum.

(2) The sentence as meant paragraph (1) shall be doubled in the case of anybody againcommitting taxation crime before one year elapses, starting from the date of serving theimprisonment imposed.

(3) Everybody trying to commit crimes by abusing or using taxpayer code numbers without

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rights or validation of taxable companies as meant in paragraph (1) letter a or failing toconvey tax returns and/or conveying tax returns whose contents are not correct or notcomplete as meant in paragraph (1) letter c in the framework of submitting applicationsfor restitution or making tax compensation shall be sentenced by a maximumimprisonment period of 2 (two) years and a fine of four times the amounts of restitutionapplied for and/or compensation made by Taxpayers.

39. The provision in Article 41 is amended so as to Article 41 entirely read as follows:"Article 41

(1) Officials because of their negligence failing to meet the obligation to keep in secrecy thematters as meant in Article 34 shall be sentenced by a maximum imprisonment period ofone year and maximum fine of Rp 4,000,000.00 (four million rupiah).

(2) Officials intentionally not fulfilling their obligations or anybody causing officials fail to meetthe obligation as meant in Article 34 shall be sentenced by a maximum imprisonmentperiod 2 (two) years and a maximum fine of Rp 10,000,000.00 (ten million rupiah).

(3) Indictments against the crimes as meant in paragraph (1) and (2) shall only be done basisof complaints from people whose secrecy are violated."

40. The provisions in Article 41A is amended so as to Article 41A entirely read as follows:

"Article 41A

Everybody who according to Article 35 of this law is obliged to give information or evidence asked,but the relevant person intentionally provides no information or evidence, or provide untrueinformation or evidence shall be sentenced to a maximum imprisonment period of one year and amaximum fine of Rp 10,000,000.00 (ten million rupiahs)."

41. The provision in Article 41B is amended so as to Article entirely read as follows:

"Article 41B

Everybody intentionally or causing difficulty to investigations into taxation crimes shall besentenced to a maximum imprisonment period of 3 (three) years and a maximum fine of Rp10,000,000.00 (ten million rupiahs)."


"Article 44

1) Certain Civil Servants within the Directorate General of Taxation shall be granted specialauthority as investigators to probe taxation crimes, as meant in the Criminal Code inforce.

2) The Authority of the Investigators as meant in paragraph (1) shall be as follows:

a. to receive, seek, collect and examine information or reports with taxation crimesso that the information or reports become more complete and clearer;

b. to examine, seek and collect information on individuals or companies with regardto the truth of actions committed in taxation crimes;

c. to ask information and material of evidence from individuals or companiesconnected with taxation crimes;

d. to examine books, records and other documents connected with taxation crimes;

e. to conduct a search for obtaining evidence from individuals or companiesconnected with taxation crimes;

f. to ask help from experts in the framework of the execution of investigation intotaxation crimes;

g. to stop and/or prevent anybody from leaving rooms or upon the execution ofinvestigation and to examine identities of persons and/or documents carried outmeant in letter e;

h. to take pictures of anybody connected with taxation crimes;

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i. to summon people for testimony and examination as suspects or witnesses;

j. to stop investigation.

k. to take other necessary actions to ensure the smooth investigations into taxationcrimes according to applicable laws.

(3) The investigators as meant in paragraph (2) shall notify the commencement ofinvestigation and convey results of the investigation to public prosecutors throughinvestigating officials of the Indonesian Police Force, according to provisions stipulated inthe Criminal Code in force.#

43. A new provision is supplemented between Article 47 and CHAPTER XI to become Article 47Awhich read as follows:

"Article 47A

The provisions in Law Number 6 Year 1983 on Taxation General Provisions and Procedures asalready amended by Law Number 9 Year 1994 shall be effective for all taxation rights andobligations not yet settled."

Article II

This law shall be referred to as "Law on the Second Amendment to Law concerning Taxation General

Provisions and Procedures."

Article III

This law shall come into force as from January 1, 2001.

For public cognizance, this law shall be promulgated by placing it in Statute Book of the Republic ofIndonesia.

Ratified in : Jakarta

On : August 2, 2000

THE PRESIDENT OF THE REPUBLIC OF INDONESIAsgd

ABDURRAHMAN WAHID

Promulgated in Jakarta

On August 2, 2000

THE STATE SECRETARY

sgd

DJOHAN EFFENDI

STATUTE BOOK OF THE REPUBLIC OF INDONESIA YEAR 2000 NUMBER126

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ELUCIDATION

ON

LAW NUMBER 16 YEAR 2000

CONCERNING

THE SECOND AMENDMENT TO LAW NUMBER 6 YEAR 1983 ON TAXATION GENERAL

PROVISIONS AND PROCEDURES

I. GENERAL

1. The taxation regulation stipulating taxation general provisions and procedures whichcomes into force as from January 1984 is Law Number 6 Year 1983 on general provisionsand taxation procedures. The law is based on the state philosophy Pancasila and theConstitution of 1945 which highly uphold rights of citizens and place taxation obligationsas a state obligations and a means of participation of the public in financing the state andnational development.

The law contains taxation general provisions procedures which are principally effective formaterial tax laws, other wise the relevant tax laws have already regulated them selvestaxation general provisions general provisions and procedures.

2. In the implementation of Law Number 6 Year 1983 on General Provisions and TaxationProcedures as already amended by Law Number 9 Year 1994, realized that there arematters not yet accommodated, it is necessary to make improvement according to socialand economic developments as well as Government Policies. Besides, publicexpectations to create a more capable and clean taxation apparatus are still taken intoaccount by various provisions of a supervisory nature in this law.

3. The philosophy and foundation which become the background of and the basis for thislaw area reflected in provisions stipulating systems and mechanisms become specialcharacteristics and features in the Indonesian taxation system because the law willfunction as #general provisions# for other taxation laws.

The special characteristics and features of the tax collection system are as follows:

a. tax collection is manifestation of direct and collective dedication and participationof tax payers in fulfilling taxation obligations needed for financing the state andnational development;

b. responsibility for the obligation to collect tax as reflection of obligations in thetaxation sector lies with members of taxpayer society themselves. Thegovernment, in this case the taxation apparatus, is functionally obliged to foster,serve and supervise the fulfillment of taxation obligations on the basis ofprovisions stipulated in taxation laws.

c. members of taxpayers society are entrusted to exercise community mutualassistance through a self-assessment method of calculation, payment andreporting, so that through the system, administration of taxation can be executedin orderly, controllable and simple manners and easy to understand by membersof Taxpayer society.

The tax collection system means that the stipulation of amounts of tax due is entrusted totaxpayers themselves and they are obliged to report the amounts of tax due already paidregularly in accordance with provisions of taxation laws. Under the system, theadministration is expected not to heavily burden taxpayers and bureaucratic red tape willbe avoidable. In line with expectations in efforts to enhance the public service, thetechnical administrative authority of the Director General of Taxation can be delegated tothe subordinate apparatus.

This law outlines that administration of taxation has an active in the execution of takes offostering, service, supervision and imposition of sanction according to taxation laws. The

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fostering of taxpayers can be executed by various efforts, like the provision of counselingof taxation knowledge through mass media and direct illumination to the public

4. With the principles of legal certainty, justice and simplicity being held firmly, the directionand objectives of improvement of this taxation law refer to the following principal policies:

a. to realize independence in the state and national development financing whosemain source comes from tax revenue;

b. to support development efforts equitably, to boost investments equitablythroughout the territory of the Republic of Indonesia, especially to boost thedevelopment of remote areas which have so far been considered backward andlate in their progress, in the framework of both equal distribution of developmentand enhancement of efficiency in the use of natural resources as well as theincrease in tax revenue over a long term.

c. to support efforts aimed at driving up exports, particularly exports of non-oil/gascommodities, manufactures and services in the framework of the increase inforeign exchange earnings.

d. to support efforts aimed at boosting the development of small-scale businessesto increase their potential optimally, and in the framework of alleviation of part ofsociety from poverty;

e. to support efforts for the development of human resources, science andtechnology;

f. to support efforts to preserve ecosystems, natural resources and theenvironment;

g. to support efforts for ensuring better justice and participation of society in thefinancing of development according to their capacity; and

h. to support efforts aimed at creating a more capable and clean taxation apparatus,enhancing service for taxpayers, including simplified and facilitated procedures inthe fulfillment of taxation obligations, intensified supervision over the fulfillment ofthe taxation obligations as well as better enforcement of the existing provisions oflaws.

II. ARTICLE BY ARTICLE

Article I

Letter 1

Article 1

Sufficiently clear

Letter 2

Sufficiently clear

Letter 3

Article 2

Paragraph (1)

Based on the self-assessment system, all taxpayers are obliged to

register themselves at office of the Directorate General of Taxation forregistrations as taxpayers and at the same time obtaining taxpayer codenumbers.

The obligation is also effective for married women subjected to taxcollection individually because they live separately on the basis ofdecisions of judges or this is intended in writing on the basis ofagreements on separation of income and property.

Since taxpayers code numbers are a means in taxation administrationused as personal identities or identities of taxpayers, every taxpayer is

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only given one taxpayer code number. Apart from that, taxpayer codenumbers are also used for ensuring the orderly tax payment andsupervision over taxation administration. In the case of taxationdocuments, taxpayer code numbers are subjected to sanction inaccordance with laws in force.

Paragraph (2)

Taxpayers being companies/entrepreneurs/employers subjected tocollection of value added tax on the basis of the Value Added Tax Law of1984 and amendments, must report their businesses to be validated astaxable entrepreneurs.

Individual entrepreneurs are obliged to report their businesses to officesof the Directorate General of Taxation whose working areas comprisingdomiciles of entrepreneurs and places where the businesses areexecuted. Corporate employers must report their businesses to offices ofthe Directorate General of Taxation whose working areas overseedomicile of employers or places where the businesses are executed.

Therefore, Taxable Entrepreneur or entity who have place of workingbusiness in several offices of the Directorate General of Taxation shalltheir businesses to offices of the Directorate General of Taxation whose

working areas oversee domicile of employers or places where thebusinesses are executed.

Validation of taxable companies/employers functions to not only ascertain the real identities of taxable companies, but also exercise rightsand obligations in the field of Value Tax and Sales Tax on Luxury Goodsas well as to supervise taxation administration.

Taxpayers already fulfilling the requirement for taxable companies,employers but they do not report their businesses to be validated astaxable companies, employers are subjected to sanctions to taxationlaws.

Paragraph (3)

In addition to the places as meant in the offices (1) and (2), the Director

General of Taxation can determine other offices of the DirectorateGeneral of Taxation as registration places for certain taxpayers andtaxable companies/employers for obtaining taxpayer code numbersand/or validation of taxable companies/employers.

Apart from that, individual taxpayers being certain entrepreneurs, namelyindividual taxpayers having business place in several places, likeelectronic goods traders having shops in shopping centers, are alsoobliged to register at offices of the Directorate General of Taxation whoseworking areas cover business places of the taxpayers are conducted.

Paragraph (4)

Taxpayer code numbers and/or functional validation of taxablecompanies/entrepreneurs/employers can be issued to taxpayers ortaxable companies/entrepreneurs/employers failing to meet the obligation

to register themselves and/or report their businesses. The Issuance canbe done if based on date obtained or owned by the Directorate Generalof Taxation, the individual entrepreneurs or companies/employers havealready fulfilled the requirements for obtaining taxpayer code numbersand/or validating as taxable companies.

Paragraph (5)

The obligation to register themselves for obtaining taxpayer codenumbers and the obligation to report businesses for securing validation oftaxable employers have the period limited, because it connects with the

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moment of tax due and obligation bearing tax due. Applications forabolition of taxpayer code numbers and/or revocation of validation oftaxable employers must be settled in 12 (twelve) months as from the dateof receipt of complete documents.Provisions on the period of registrationand reporting, procedure for granting and revocation of taxpayer codenumbers as well as validation and revocation of validation of taxableemployers are stipulated by a decision of the Director General of

Taxation.

Letter 4

Article 3

Paragraph (1)

For taxpayers, tax returns function as a means of reporting andaccounting for the calculation of the real amounts of tax due for taxpayersand reporting the following matters:

- payment or settlement of tax already executed themselvesand/or through withholding or collection by other parties for onetax year or part of the tax year;

- income which constitutes tax objects or non-tax objects;

- assets and liabilities;

- payment of amounts withheld or collected with regard to thewithholding or collection of tax on other individuals or statutorybodies for one tax period, stipulated by taxation laws in force.

For Taxable entrepreneurs, tax returns function as a means of reportingand accounting for the calculation of the real amounts of Value AddedTax and Sales Tax on Luxury Goods and reporting of the followingmatters:

- crediting of input tax to output tax;

- payment or settlement of tax already executed themselves bytaxable employers and/or through other parties in one tax period,stipulated by taxation laws in force;

- for tax withholders or collectors, tax returns function as a meansof reporting or accounting for amounts of tax withheld orcollected and remitted.

Completing tax return means the completion of forms of tax returnscorrectly, clearly and completely according to directives provided on thebasis of taxation laws in force.

The incorrect completion of tax return resulting in underpaid tax, issubjected to fanctions according taxation laws.

Paragraph (1a)

Sufficiently clear

Paragraph (2)

In the framework of providing service and facilities for taxpayers, forms oftax returns are made available in offices within the Directorate

General of Taxation and other places stipulated by the Director Generalof Taxation which are easily accessible by Taxpayers.

Paragraph (3)

This paragraph stipulates the deadline of conveyance of tax returnsconsidered quite adequate for taxpayers to prepare all matters connectedwith the payment of tax and settlement of book keeping.

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Certain taxpayers stipulated by a decree of the Minister of Finance areallowed to report several tax periods in on tax return.

Paragraph (4)

If individual taxpayers or taxable companies fail to convey or prepareannual financial statements or corporate balances along with profit/lossstatements in the period already stipulated in paragraph (3) letter b,

because of the wide range of business activities and technical problemsin compilation of financial statements, difficulties to meet the deadline ofcompletion and the need for relaxation of the period already stipulated,the taxpayers or taxable companies can submit applications for theextension of period of conveyance of annual income-tax return. Theperiod of conveyance of annual income-tax returns is extended for 6 (six)months at the maximum.

Paragraph (5)

In order to prevent anybody from evading and/or extending the period ofpayment of tax due in one tax year which must be paid before the periodof dispatch of annual tax returns, it is necessary to stipulatedrequirements resulting in the imposition of sanctions in the form of fineson taxpayers intended to extend the periods of conveyance of annual

income-tax returns.The requirements are obligations to give up written statements onamounts of tax which must be paid on the basis of provisional calculationin one tax year, as the attachment to applications for postponement ofobligations to convey Annual Income Tax Returns.

Paragraph (5a)

In the framework of fostering of taxpayers failing to convey tax returns upto the period already stipulated warning letters are given the relevanttaxpayers.

Paragraph (6)

Since tax returns function as a means of taxpayers to report and accountfor the calculation of amounts of tax and payment, in the framework of

ensuring uniformity and facilitating the completion and administration,models and contest of tax returns are stipulated by a decree of theMinister of Finance.

Annual income-tax returns at least contain amounts of turnover, income,taxable income, underpaid or overpaid tax, as well as assets andobligations outside business activities or independent jobs by individualTaxpayers.

Taxpayers obliged to undertake book keeping must also accompanyfinancial statements in the form of balances and profit/loss statements aswell as other kinds of information needed for calculating amounts ofTaxable Income.

Value Added Tax Returns at least contain amounts of bases for the

imposition of tax, output tax, and creditable input tax and underpaid oroverpaid tax.

The tax returns must be accompanied by information and documentswhich can be in the form of letters of authorization, certificates ofmarriage with assets and income separated, documents connected withimport and export as well as tax payments.

Paragraph (7)

Tax returns signed along with attachments are a unit which constitutesthe element of validity of tax returns. Therefore, in the case of tax returns

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being conveyed but they are not or not fully meet the required provisions,the tax returns are considered not to be conveyed.

Paragraph (8)

Every taxpayer is principally obliged to convey tax returns. By taking intoefficiency and other considerations, the Minister of Finance can stipulateincome taxpayers exempted from the obligation to convey tax returns,

like individual taxpayers receiving or earning income lower than taxableincome but they are obliged to have Taxpayer Code Number because ofcertain interests.

Letter 5

Article 4

Paragraph (1)

Sufficiently clear

Paragraph (2)

Sufficiently clear

Paragraph (3)

Sufficiently clear

Paragraph (4)

Sufficiently clear

Paragraph (5)

Procedures for the receipt and processing of tax returns contain mattersconnected with examination of completeness, granting of receipts,classification of overpaid, underpaid and nil-tax returns, procedures forrecording and follow up to management, which are stipulated by a decreeof the Minister of Finance.

Letter 6

Article 6

Paragraph (1)Sufficiently clear

Paragraph (2)

In the framework of enhancing service for taxpayers and in line withdevelopments of information technology, taxpayers need other methodsto meet the obligation to convey tax returns other than through postoffices by registered mail. In relation thereto, the methods need to bestipulated by a decision of the Director General of Taxation.

Paragraph (3)

Evidence of receipt and date of dispatch of tax returns conveyed throughpost offices are evidence of receipt as long as the tax returns arecomplete, fulfilling the requirements as meant in Article 3 paragraphs (1),

(1a) and (6).Letter 7

Article 7

Paragraph (1)

In the interest of orderly taxation administration and in order to maintaindiscipline of taxpayers, the taxpayers failing to convey tax returns in theperiod stipulated are subjected to an administrative sanction in the formof a f ine of Rp 50,000.00 (fifty thousand rupiahs) in the case of periodical

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tax returns and Rp 100,000.00 (one hundred thousand rupiahs) in thecase of annual tax returns.

Paragraph (2)

The Minister of Finance is authorized to exempt certain taxpayers fromthe administrative sanction in the form of the fine as meant in paragraph(1), like non-effective taxpayers and individual taxpayers whose net

income is lower than untaxable income.Letter 8

Article 8

Paragraph (1)

Taxpayers making mistakes in the completion of the returns still haverights to rectify on the basis of self intention for 2 (two) years after theexpiration of the tax period, part of the tax year or tax year with thecondition that the Director General of Taxation has not yet started toexamine. Starting to examine means the moment of conveyance ofnotifications on tax examination to taxpayers or representatives orproxies or employees or upon the receipt by family members of taxpayersalready grown up.

The stipulation of the period of rectification is deemed sufficient in termsof time for taxpayers to examine and rectify tax returns on the one sidethe time remains sufficient to the Director General of Taxation to provideservice and supervise the rectification made by taxpayers before thedeadline of expiration elapses.

Paragraph (2)

The rectification of tax returns on the basis of their own intention resultsin consequences to the calculation of amounts of tax due and theamounts of calculation of tax payment change from the previousamounts.

In the case of the rectification resulting in shortages of tax payment,taxpayers are subjected to an administrative sanction in the form of a f ine

of 2% (two percent) per month.The interest owed to underpaid tax is calculated as from the date ofexpiration of period of conveyance of tax returns up to the date ofpayment because of rectification/correction of Tax Returns.

Paragraph (3)

In the case of taxpayers violating the provision as meant in Article 38, aslong as investigation has not yet been executed eventhough examinationhas already been carried out and taxpayers have already disclosed theirmistakes and at the same time settled the actual tax due along with asanction in the form of a fine of 2% (two percent) of the amount ofunderpaid tax, investigation will not be conducted on the relevanttaxpayers.

However, in the case of investigation being already executed and thecommencement of the investigation being notified to public prosecutors,the opportunity to rectify on the basis of their own intention is closed tothe relevant taxpayers.

Paragraph (4)

Eventhough the two year period as meant in paragraph (1) has alreadyended and the Director General of Taxation has not yet issued taxassessments, the opportunity is still given to taxpayers and not yetrectifying tax returns to disclosed the untrue completion of tax returnsalready conveyed, which can be in the form of annual tax returns or

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periodical tax returns for the previous years or periods. The disclosure ofthe untrue completion of the tax returns is limited to the following matters:

a. amounts of tax not yet paid to be bigger; or

b. losses on the basis of taxation provisions to become smaller; or

c. amounts of assets to become bigger; or

d. amounts of capital to become bigger.Paragraph (5)

Sufficiently clear

Paragraph (6)

If taxpayers receive decisions on objections or appeal resulting indifferent fiscal losses from tax assessments for which objection areraised or decisions on objections for which appeal is filed, the relevanttaxpayers still have opportunity to rectify annual income tax returns in thefollowing year, eventhough the year period after the tax year or part of theyear elapse with the provision that the Director General of Taxation hasnot yet examined taxpayers in connection with the said tax returns.

The following examples are provided for clarification:

a. PT A conveys an annual income tax return of 2002 on March 31,2003, certifying a fiscal loss Rp 100,000,000.00 but the tax is notoverpaid.

The tax is later examined and a tax assessment is issued onJanuary 16, 2006, certifying that the fiscal loss is Rp50,000,000.00.

The taxpayers raise an objection for the tax assessment onMarch 16, 2006. A decision on objection stating that the fiscalloss of PT A in 2002 increases to Rp 110,000,000.00 is issuedon November 10, 2006.

PT A conveys an annual income tax return for 2003 on March 26,2004, certifying that:

Net income Rp 200,000,000.00

----------------------

Compensation for the loss on the basis

of annual income tax return of 2002 Rp 100,000,000.00

----------------------

Taxable income Rp 100,000,000.00

============

The annual income tax return of 2003 is rectified in accordancewith the provision in Article 8 paragraph (6) on November 21,2006 so as to become as follows:

Net income Rp 200,000,000.00Loss according to a decision on

objection Rp 110,000,000.00

------------------------


============

b. PT B convey an annual income tax return of 2002 on March 31,2003, certifying a fiscal loss of Rp 15,000,000.00 but the tax is

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not overpaid

That tax is later examined and a tax assessment is issued onJanuary 16, 2006, certifying that the fiscal loss is Rp100,000,000.00 A decision on objection rejection the objectionraised by the taxpayers is issued on November 10, 2006.

The taxpayers file an appeal for the decision on objection on

December 22, 2006.A decision on appeal stipulating that the loss of the taxpayerincreases to Rp 160,000,000.00 is issued on May 18, 2007.

PT B convey an annual income tax return for 2003 on March 26,2004, certifying that:

Net income Rp 250,000,000.00

Compensation for the loss on the basis

of annual income tax return of 2002 Rp 150,000,000.00

---------------------(-)


============

The annual income tax return of 2003 is rectified in accordancewith the provision in Article 8 paragraph (6) on July 21, 2007 soas to become as follows:

Net income Rp 250,000,000.00

Loss according to a decision in

objection Rp 160,000,000.00

-------------------- (-)


============

Letter 9

Article 9

Paragraph (1)

The period payment and remittance of tax due for one tax moment orperiod is stipulated by the Minister of Finance with the period notexceeding 15 (fifteen) days after the effective moment of tax due orexpiration of tax period. The lateness in payment and remittance issubjected to administration sanction according to the provision in force.

Paragraph (2)

In the case of upon the completion of annual income tax returns,underpaid tax turning out to remain existent, the shortages of taxpayment must be settled not later than 25th of the third month after theexpiration of the tax year or part of the tax year before the conveyance of

the said annual income tax returns.

For example, an annual income tax returns is conveyed on March 31, theshortages of payment of tax due and final remittance might have beensettled not later than March 25, before the annual income tax return isconveyed.

Paragraph (2a)

This paragraph regulates the imposition as a result of the lateness in thepayment or remittance of tax. For a clear method of calculation of

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interest, the following example is provided:

- Periodical installment of income tax-article 25 in 2002 is Rp10,000,000.00 per month

- Periodical installment of tax for May 2002 as paid on June 28,2002 and reported on June 19, 2002

- A tax collection letter is issued on July 15, 2002

- Interest in the tax collection letter is rounded up to one month= 1x 2% x Rp 10,000,000.00 = Rp 200,000.00

Paragraph (3)

Sufficiently clear

Paragraph (4)

Based on applications from taxpayers, the Director General of a Taxationcan approve the said taxpayers to pay in installments or postpone thepayment of tax due, including shortages of payment of income tax,eventhough the date of maturity of payment has already been stipulated.

The relaxation is provided carefully for 12 (twelve) months at themaximum and limited to taxpayers really facing difficulties in liquidity.

Letter 10

Article 10

Paragraph (1)

The Directorate General of Taxation is prohibited from receiving taxremittance from taxpayers. All kinds of state tax remittance must betransferred to the state cash through payment points stipulated by theMinister of Finance, like post offices and/or state or regionaladministration-owned banks or other payment points stipulated by theMinister of Finance.

Efforts to expand payment points of tax easily accessible by taxpayersare intended to facilitate taxpayers to fulfill their liabilities and at sametime to avoid the feel of reluctance in paying tax.

Paragraph (2)

Procedures for payment, remittance and reporting of tax stipulated by adecree of the Minister of Finance as well as procedures for installmentand postponement of payment of tax are expected of tax expected tofacilities the payment of tax and the administration.

Letter 11

Article 11

Paragraph (1)

In the case of the amount of actual tax due already being calculated withamounts of tax credits, but the result shows a positive difference (theamount of tax credits being higher than the amount of tax due) or tax

which should not be paid already being paid, taxpayers are entitled to askfor restitution of the overpaid tax with the provision that the relevanttaxpayers have no tax due.

In the case of taxpayers still having tax due which cover all kinds of tax inthe office and branches, the overpaid tax is calculated first with the taxdue and the overpaid tax can only be restituted to taxpayers if there is apositive difference.

Paragraph (2)

In order to provide legal certainly for taxpayers and to ensure orderly

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administration, the Director General of Taxation stipulates that therestitution must be done not later than one month:

a. from the date of receipt of written applications for the restitutionof overpaid tax, in the case of the overpaid-tax assessments asmeant in Article 17;

b. from the date of issuance, in the case of the overpaid-tax

assessment as meant in Article 17B;c. from the date of issuance, in the case of the decisions on

preliminary restitution of overpaid tax as meant in Article 17;

up to the moment of issuance of instructions to pay overpaid tax.

Paragraph (3)

In order to ensure the balance of rights and obligations of taxpayers withquick service by the Directorate General of Taxation, this paragraphstipulates that the government gives interest as high as 2% (two percent)per month to the relevant taxpayers as an incentive to the lateness in therestitution of overpaid tax from the period as meant in paragraph (2),starting from the date of expiration of the one-month period to themoment of payment, upon the issuance of instruction to pay overpaid tax.

Paragraph (4)

Sufficiently clear

Letter 12

Article 12

Paragraph (1)

Tax is principally owed upon the arising of taxable objects, but for interestof taxation administration the effective moment of tax due is:

a. upon certain moment, in the case of income tax which is withheldby third parties;

b. at the end of period, in the case of income tax on employeeswhich is withheld by employers, or on business activities by otherparties, or on value added tax and sales tax on luxury goods bytaxable entrepreneurs/companies.

c. at the end of tax year, in the case of income tax.

Taxpayers must remit amounts of tax due which has already beenwithheld, collated or which must pay themselves by taxpayers uponmoment of perio

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