The enactment of the Law on Harmonized Taxation (HPP Law), has changed a number of provisions in Law Number 28 of 2007, concerning Taxation General Provision and Procedure (KUP).
There are 10 articles of the KUP Law that have been amended, including article 8, article 13, article 25, article 27, article 32, article 34, article 40, article 43A, article 44, article 44A, article 44B, and article 44E.
In addition, there are eight new articles added to the HPP Law, including article 2 paragraph (1a), article 14, article 20A, article 27C, article 32A, article 44C, and article 44D.
In substance, the changes and additions to these articles are related to several things, such as the use of the Single Identity Number (NIK) which replaces the Taxpayer Identification Number (NPWP) to changes in the amount of administrative sanctions for legal efforts. Here are the details of the changes:
NIK replaces NPWP function
The function of the NPWP as the identity of the taxpayer will be replaced with the NIK, which has been listed on the Identity Card (KTP). This is confirmed in Article 2 paragraph (1a) of the HPP Law.
It is designed so that the tax administration system can be integrated with the demographic system that can reach more people. Thus, it is expected to expand the tax base in Indonesia.
However, the use of NIK that replaces NPWP does not necessarily require everyone who has an ID card to be a taxpayer.
Because, the obligation to pay taxes only applies to people whose income is above non-taxable income (PTKP), which is currently set at IDR 4.5 million per month or IDR 54 million per year.
While for entrepreneurs must at least have revenue of IDR 500 million per year, with a final income tax rate of 0.5%
The Opportunity to Uncover Untruthfulness in Tax Return Is Getting Narrower
Taxpayers can still disclose the untruthfulness of the annual tax return that is made, even though it is being audited. This is the substance of Article 8 paragraph (4) of the KUP Law.
However, in the HPP Law, the time limit for voluntary disclosure is shorter. The reason is, in the amendment to Article 8 paragraph (4), taxpayers can only disclose untruthfulness in making tax returns, before the DGT issues a temporary Notification of Tax Audit Result (SPHP).
Previously, voluntary disclosure could be made as long as the tax assessment notice (SKP) had not been issued which was a document resulting from the final audit.
Tax Assessment Administration Sanctions Trimmed
In addition to having to be audited, taxpayers who receive an underpaid tax assessment letter (SKPKB) because they are late in submitting their annual tax return, do not make bookkeeping, and have an excess VAT that cannot be compensated for, also have to pay administrative sanctions.
Administrative sanctions given include if the tax assessment notice declares taxpayers do not or have an underpayment of income tax and do not or have an underpayment of VAT.
The amount of interest is set by the Minister of Finance every month based on the benchmark interest rate plus an uplift factor of 20%.
In the former regulation, the administrative sanction for underpaid or unpaid income tax was set at 50% and for less or not collected income tax at 100%.
In addition, taxpayers who withhold income tax but do not deposit it and taxpayers who underpay VAT will be subject to an administrative sanction of 75%. The amount of the sanction is lower than the previous rule which was 100%.
| Penalty Base | KUP Law Penalties | HPP Law Penalties |
| underpaid income tax | 50% | interest per month (Interest Rate+20%) |
| not-deducted income tax | 100% | interest per month (Interest Rate + 20%) |
| unpaid income tax | 100% | 75% |
| underpaid VAT and STLG | 100% | 75% |
Installment Collection or Tax Withholding Mechanism is Established
Through the HPP Law, the government asserts that taxpayers who do not pay their installments or delay their underpayments on time will receive a tax collection letter from the DGT.
The tax collection letter is as strong as the tax assessment letter. Thus, in addition to having to pay the remaining installments, the taxpayer must pay administrative sanctions in the form of interest whose value is determined by the Minister of Finance every month.
This provision is contained in Article 14 paragraph (1) letter i, which is an additional clause in the HPP Law on changes to the KUP Law.
Lower Administrative Sanctions for Legal Effort
The HPP Law still opens room for taxpayers to make legal efforts such as filing objections, appeals to tax review
However, if the application for objection and appeal is rejected in part or in whole, in addition to having to pay off the tax payable, they must also pay administrative sanctions.
However, in the HPP Law, the amount of administrative sanctions that must be paid is lower than what was previously regulated. This is stated in the amendments to article 25 paragraph (9) and paragraph (10) as well as article 27 paragraph (2a), paragraph (5f) and paragraph (5g).
The amount of administrative sanctions if the application for objection is partially or completely rejected is set at 30%, previously 50%. Meanwhile, the amount of administrative sanctions if the appeal is rejected is 60%, previously it was 100%.
In addition, the HPP Law also stipulates the amount of administrative sanctions if the request for tax review is rejected is 60% of the previously unregulated.
| Legal Efforts | KUP Law Penalties | HPP Law Penalties |
| Objection rejected in part/in whole | 50% | 30% |
| Appeal rejected in part/ in whole | 100% | 60% |
| Tax review rejected in part/in whole | unregulated | 60% |
Requirements for Taxpayer Authorization Strengthened
The HPP Law also emphasizes the requirements for the tax authorization, through amendments to Article 32 paragraph (3a). Previously, the determination of the terms and criteria for the tax authorization for taxpayers was delegated to the minister of finance.
However, in the amended rule, the requirement for a taxpayer authorization is stipulated that it may only be given to people who have competence in the field of taxation, unless the appointed tax authorization of is husband, wife, or blood family to the second degree.
Disclosure of Taxpayer Information
The HPP Law also amends the provisions regarding the confidentiality of taxpayer information. With the amendment to Article 34 paragraph (3) of the KUP Law, tax officials, including experts, may provide taxpayer information other than the court and the Audit Board of Indonesia (BPK).
As long as it is approved by the minister of finance, tax officials and experts may now disclose taxpayer data to investigators or state institutions, government agencies and legal entities established by law that is bound by a cooperation agreement.
While the previous rules did not specify the parties or agencies that are entitled to receive taxpayer data from these officials or experts.
Appointing Tax Withholder
The Minister of Finance can appoint other parties to collect, withhold, deposit, and report taxes. This is stipulated in Article 32A which is an additional clause in the KUP Law.
In addition to parties directly involved in transactions, parties who can be appointed can also act as intermediaries, such as electronic system operators.
If the designated electronic operator does not carry out its obligations, it will be reprimanded and if it is not followed up, it will be subject to sanctions in the form of termination of access.
Terms of Termination of Investigation Tightened
The HPP Law tightens the conditions for termination of the tax crime investigation process that is being carried out by the Prosecutor's Office.
If previously the investigation could be terminated at the request of the minister of finance after the taxpayer had paid the tax payable plus sanctions, now the taxpayer is also required to pay state losses resulting from their mistake plus administrative sanctions.
The provision is contained in the amendment of article 44B paragraph (2). In the regulation, the amount of administrative sanctions that must be paid differs depending on the type of violation committed.
If the violation is related to negligence in submitting the Annual SPT which has a detrimental effect on the state, the fine that must be paid is as much as the value of the state loss. Meanwhile, if it is related to an intentional violation, the administrative sanction must be paid three times the value of the state loss.
