Navigating the complexities of Indonesia’s tax landscape is crucial for businesses, especially during mergers, acquisitions, or corporate restructuring. Our Tax Due Diligence service is designed to ensure that your financial and tax obligations are fully transparent, compliant, and optimized under Indonesian tax regulations.
What is a Tax Due Diligence?
Tax Due Diligence is a comprehensive review of a company’s tax affairs to identify potential tax risks, liabilities, and compliance issues. This process is essential for investors, buyers, and businesses to make informed decisions, minimizing the risk of future tax disputes or unexpected financial burdens.
Our Approach to Tax Due Diligence
There are two types of employment contracts: Fixed-term contracts (Perjanjian Kerja Waktu Tertentu or PKWT) and Indefinite-term contracts (Perjanjian Kerja Waktu Tidak Tertentu or PKWTT). Fixed-term contracts are used for specific time periods or projects, while indefinite-term contracts are open-ended.
No, you cannot hold both at the same time. You must choose between the Work Permit KITAS and the Investor KITAS depending on your role in Indonesia, whether it is as an employee or an investor.
Minimum wages are set by the government and vary by region. Employers must ensure that wages paid to employees are at least equal to the regionally established minimum wage. Failure to comply can result in sanctions and penalties.
What is a tax dispute, and how does it arise in Indonesia?
A tax dispute occurs when there is a disagreement between the taxpayer and the Indonesian Tax Authorities (Direktorat Jenderal Pajak, DJP) regarding tax assessments, tax payments, or the interpretation of tax regulations. Disputes commonly arise after a tax audit when the taxpayer disagrees with the findings of the DJP.
How does a tax audit work?
During a tax audit, the tax authority reviews your financial records and tax filings to ensure compliance. If discrepancies are found, they will issue a notice of their findings.
What can I do if I disagree with a tax audit’s findings?
You can file a Tax Objection within three months of receiving the audit results. This is your formal request for the tax authority to re-examine their decision.
What happens if my Tax Objection is rejected?
If your objection is rejected, you can escalate the matter by filing a Tax Appeal with the Tax Court within three months of receiving the rejection.
What is a Tax Lawsuit?
A Tax Lawsuit challenges administrative actions by the tax authority that are unrelated to assessments, such as disputes over tax refunds or collections.
When can I file a Tax Judicial Review?
A Tax Judicial Review is the final legal step, brought before the Supreme Court to correct substantial legal errors made by the Tax Court. This is done only after exhausting all other avenues.
Can I resolve a tax dispute without going to court?
While negotiation is possible, formal out-of-court settlements are rare in Indonesian tax disputes. Our professional advice is crucial to exploring your options.
What are the typical outcomes of a tax objection?
The outcomes of a tax objection can be varied. The tax authority may fully accept, partially accept, or reject your objection, depending on the strength of your argument and evidence provided.
How long does it take to receive a decision on a Tax Objection?
The tax authority typically takes 12 months from the date of filing to issue a decision on a Tax Objection. If no decision is made within this time, the objection is considered rejected by law.
Can I settle my tax liabilities during the dispute process?
Yes, settling your tax liabilities during the dispute process is possible. However, this may impact the progression of the dispute. Consulting with a tax professional like our firm is advised before making any settlement decisions.
What are the common reasons for a Tax Judicial Review?
Common reasons for a Tax Judicial Review include substantial legal mistakes in the lower courts’ rulings, misinterpretation of tax laws, or procedural violations that affected the fairness of the judgment.
What penalties can I face in a tax dispute?
Penalties can include fines, interest charges, and administrative sanctions depending on the nature of the dispute. If a tax deficiency is found, additional penalties may apply for late payments or underreporting.
What is the time limit to file a Tax Lawsuit?
A Tax Lawsuit must be filed within 90 days of the administrative action you are challenging (such as a refusal of a refund). Missing this deadline can result in the dismissal of your lawsuit.
What types of administrative decisions can be challenged through a Tax Lawsuit?
You can challenge decisions such as denial of tax refunds, incorrect tax collections, or penalties imposed outside of a tax assessment.
What happens if I win a Tax Appeal or Tax Lawsuit?
If you win, the court may order the tax authority to revise or cancel their previous decision. This could result in a refund, removal of penalties, or a corrected tax assessment.
Can I request an extension for filing a Tax Objection or Tax Appeal?
No, deadlines for filing Tax Objections and Tax Appeals are strictly enforced under Indonesian tax law.
What is the burden of proof in a tax dispute?
In Indonesian tax disputes, the burden of proof lies with the taxpayer. You must provide evidence and documentation that supports your claim against the tax authority’s assessment or decision.
What happens if I fail to provide sufficient evidence in a Tax Objection or Tax Appeal?
If you fail to provide enough evidence, the tax authority or the Tax Court may rule in favor of the government. Therefore, it is crucial to present a well-prepared and substantiated case.
What is the impact of a Tax Dispute on my business operations?
While a tax dispute is ongoing, it may cause financial uncertainty. However, unless there are severe violations, the tax authority generally does not halt business operations during the dispute. Consulting with tax professionals like our firm can help mitigate risks.
Can I negotiate with the tax authority before filing an objection or appeal?
Informal negotiations or discussions can sometimes lead to clarification or resolution before entering the formal dispute resolution process. However, once a decision has been made, formal procedures are required to challenge it.
No, business activities such as attending meetings or negotiations are not allowed on a Tourist Visa. For such activities, you must apply for a Single-Entry Business Visa or a Multiple-Entry Business Visa, depending on your needs.
What is Contract Drafting?
Contract drafting involves creating legally binding agreements tailored to the needs of the parties involved, ensuring all essential terms and conditions are clearly defined.
Why is contract review important?
Contract review helps identify potential risks, clarify obligations, and ensure that the contract aligns with your legal and business interests, preventing future disputes.
What should be included in a contract?
Key elements include the parties’ identities, terms of the agreement, rights and obligations, payment details, dispute resolution mechanisms, and termination conditions.
Do contracts in Indonesia need to be in Bahasa Indonesia?
Yes, under Indonesian Law No. 24 of 2009, contracts involving Indonesian entities must be drafted in Bahasa Indonesia. However, bilingual contracts are also common for international dealings.
How long does it take to draft or review a contract?
The timeframe depends on the complexity of the contract. Simple agreements can be handled in days, while more complex contracts may take longer due to negotiations or specific legal considerations.
Can I modify a contract after signing it?
Yes, contracts can be modified post-signature, but amendments must be agreed upon by all parties and documented in writing to be enforceable.
What are common mistakes in contract drafting?
Common mistakes include ambiguous terms, missing key clauses, overlooking applicable laws, and failing to address dispute resolution.
Do I need a lawyer for every contract?
While not legally required, consulting a lawyer ensures the contract is legally sound, protects your interests, and avoids potential pitfalls.
What happens if a contract term is violated?
If a contract term is violated, it constitutes a breach. The non-breaching party may seek legal remedies such as damages, contract termination, or specific performance, depending on the contract’s terms.
What are the risks of using template contracts?
Templates may not account for the unique aspects of your transaction or relationship, which can lead to gaps in protection or unforeseen legal risks.
Is electronic signature valid in Indonesia?
Yes, electronic signatures are legally recognized in Indonesia under the Electronic Information and Transactions Law, provided they meet certain requirements.
Can international contracts be governed by foreign law?
Yes, parties can choose foreign law to govern their contract. However, the contract must still comply with Indonesian law when it involves Indonesian parties or is executed in Indonesia.
What should I look for in a contract review?
Look for clarity in obligations, fairness in terms, compliance with Indonesian laws, potential risks, and whether your rights and interests are adequately protected.
Employment contracts must be in writing and should clearly outline both employer’s and employee’s rights and obligations, including job responsibilities, working hours, salary, benefits, and the duration of employment. The contract should comply with Indonesian Manpower Law No. 13 of 2003, as amended by the Job Creation Law.
Employers are required to register their employees with BPJS (Badan Penyelenggara Jaminan Sosial) for health and employment benefits, including health insurance, old-age benefits, work accident protection, and death insurance. The contributions are shared between the employer and the employee.
