Things You Should Know Before Establishing a Company

Owning a company certainly makes you get many benefits because you have official permission from the government to run a business legally; however, you must not forget and ignore all kinds of obligations as a company already having a taxpayer number (NPWP). Ignorance of obligations will result in administrative sanctions in fines and criminal sanctions in prison sentences. The following are some of the obligations of a company having become a legal entity as a consequence of ownership of a NPWP.

The following are the obligations of a company that must be carried out by its owner:

1. Reporting SPT/company income tax every year to the tax office
2. Paying for taxes if the company makes a profit
3. Paying for taxes on employee income
4. Paying for employment insurance / BPJS every month for company employees

1. PT Company – Limited Liability Company with domestic investment
2. PMA Company – Limited Liability Company with Foreign Investment

• PT Company

Limited Liability Company with domestic investment (PMDN) is a company whose shares are wholly owned by Indonesians and cannot be owned by foreigners in some or all.

• PMA Company

Limited Liability Company with Foreign Investment (PMA) is a company where some of shares can be owned by Indonesians and foreigners, or all of the shares can also be owned by foreigners for certain business fields and for some business fields, they are required to partner with local people/companies.

Once you have a company and have a business license from the Indonesian government, you will get many benefits and convenience in running a business, including:

• Having an account in the name of the company
• Ease of Access to Banking
• Ease of Access to Capital from investors
• Ease of purchasing assets
• Ease of conducting business transactions between companies internationally
• Gaining trust of customers, investors and banks
• Ease of obtaining long-term stay visas at low costs for shareholders with a certain amount for foreigners

To establish a company, you are required to deposit a certain amount of money into the bank as proof of the company’s capital contribution, but this requirement only applies to certain types of business, such as: construction services, transportation services, telecommunications services, mining, financial services, medical services, etc. However, for certain business fields, capital is not required to be deposited at the time of company registration, such as the sector of management consulting services business, general trading included in the low and medium risk category of business sector.

Consequences: You must report your Annual Tax Return (SPT) every year. Although you no longer have an income, please remember that the obligation is REPORTING, not PAYMENT.

When you already have a Taxpayer Number (NPWP), it shows the beginning of your commitment is to fulfill your tax obligations. All efforts to fulfill tax obligations for every taxpayer require awareness of high tax and compliance. Some taxpayers deliberately do not fulfill their tax obligations to report SPT because they are reluctant, forgetful or on purpose, and do not even understand the risks and sanctions that will be imposed. These risk provisions and the impositions of sanctions are actually regulated in Article 39 of the Law concerning General Provisions and Tax Procedures (UU KUP) Number 16 of 2009.

The obligation of every taxpayer, in addition to having a Taxpayer Number, is to calculate, pay for and report tax. Try to report your Annual Income Tax (PPh) SPT by e-filing before it is due. For individual taxpayers, the annual Income Tax (PPh) reporting deadline is 31 March, while the tax reporting deadline for corporate taxpayers is 30 April. Don’t delay until the tax reporting deadline. Therefore, what are the risks of not paying and reporting SPT? Here’s the discussion for you.

If you are late or do not report your Tax Return (SPT) on time, you will be subject to a fine of IDR 100,000 for individual taxpayers and IDR 1,000,000 for corporate taxpayers. However, this administrative sanction is excluded or not imposed if the taxpayer has died, no longer works or has income, is a foreign citizen (WNA), and no longer lives permanently in Indonesia.

Therefore, if you are one of the excluded taxpayers, then immediately go directly to the Tax Service Office (KPP) to arrange your deactivation as a taxpayer. NPWP is valid for life so that it has no expiration date. That’s why, complying with the Minister of Finance Regulation (PMK) number 186/PMK.03/2007 concerning Certain Taxpayers, you have the rights to apply as a non-effective (NE) taxpayer. Having status as a non-effective taxpayer, you no longer need to pay for and report tax returns.

A taxpayer who neglects or deliberately neglects reporting a tax return (SPT) or even falsifies the contents of the SPT form will be subject to criminal sanctions or imprisonment. The prison term imposed on taxpayers who do not comply with tax regulation is a minimum of 6 months up to 6 years. Negligence or falsification of reporting SPT is found causing losses to the state income, because it does not comply with the actual conditions.

Preparation of the file of company’s Annual SPT report starts from the requirements that must be met and what must be attached.

The following are the general requirements that must be prepared to report the Corporate SPT online:

1. Corporate NPWP
2. Business establishment documents
3. Business permit documents
4. Periodic SPT
5. The audited financial statements
6. EFIN Agency
7. Corporate Income Tax SPT of Form 1771

Before using the Klikpajak Online Agency e-SPT service for your company’s annual tax report, you are required to have an identity number to carry out online transactions.

As an obedient taxpayer, paying for taxes before the specified deadline is an obligation. Especially for Corporate Taxpayers, Annual SPT is reported no later than April 30 in the Tax Year. If you miss reporting after the specified time, you must be prepared to be subject to administrative sanctions in fines. This article contains a description on how to pay fines complying with Article 7 of the KUP.

The Directorate General of Taxes (DGT) has recently tightened the application of tax regulations for taxpayers. After previously promoting the tax amnesty process, now the DGT is also starting to check taxpayers’ tax reporting in previous years.

Complying with Law Number 28 of 2007, Article 7, Paragraph 1 Concerning General Provisions and Tax Procedures, fines are imposed in the case of:

1. Corporate Annual SPT is not submitted on time, the Fine is IDR 1,000,000.00 per SPT.
2. Individual Annual SPT is not submitted on time, fine is IDR 500,000.00 per SPT.
3. Periodic VAT SPT are not submitted on time, the fine is IDR 500,000.00 per SPT.
4. If the SPT is not submitted on time, the fine is IDR 100,000 per SPT.

Paragraph 2 of the same article states further Taxpayers receiving exemptions or waive from fines. Administrative sanctions are not imposed on:

1. Individual Taxpayers who have died.
2. Individual Taxpayers who are no longer carrying out business activities or independent work.
3. Individual Taxpayers who have foreigner status and no longer live in Indonesia.
4. Company with Permanent Establishment (BUT) that no longer carries out activities in Indonesia.
5. Mandatory Entities that are no longer carrying out business activities but have not been dissolved complying with applicable regulations.
6. Treasurer who no longer makes payments,
7. Taxpayers affected by disasters or other taxpayers who are regulated complying with Minister of Finance Regulations.

As we already know, basically the tax rate is the basis for imposing tax on all tax objects that are the responsibility of the taxpayer. Tax rates are generally in percentages determined by the government as a reference for tax imposition. Structurally, there are at least 4 types of tax rates, namely progressive, degressive, proportional rates, fixed or regressive rates.

Where, in progressive rates, when the tax is collected, the percentage will increase in proportion to the basic amount of the tax imposition. In Indonesia itself, this type of tax rate is applied as a method to impose personal income tax. Complete rates can be seen in the table below.

As we already know, basically the tax rate is the basis for imposing tax on all tax objects that are the responsibility of the taxpayer. Tax rates are generally in percentages determined by the government as a reference to tax imposition. Structurally, there are at least 4 types of tax rates, namely progressive, degressive, proportional, fixed or regressive rates.

If you have made decision to close your company, the following are the steps you must take:

1. Make a deed of dissolution at the Notary’s office
2. Apply for the closure of your company’s NPWP at the tax office, but this process is not easy because the tax office must first carry out an audit of your company’s finances to ensure that your company does not have tax debts to the government; in this way, the tax office will carry out an audit of all transactions and your business activities and, as long as your company’s NPWP has not been officially closed by the tax office, your company still has the obligation to report and make payments complying with applicable regulations.

This is a brief description of the rights and obligations of companies that have been granted/have business permits from the government and have Taxpayer Numbers (NPWP) from the tax office, as taxpayers who must carry out their obligations complying with the applicable regulations.