The Mutual Agreement Decision Serves as the Basis for Annual Tax Return's Correction

Taxpayers can now use a mutual agreement (Mutual Agreement) for solving tax problems as a guideline for correcting Annual Tax Returns (SPT).

Mutual Agreement is a procedure to address tax disputes that occur in the implementation of double tax avoidance agreement (P3B) or tax treaty. 

This is stated in Government Regulation (PP) Number 50 of 2022 on Procedures for the Implementation of Rights and Fulfillment of Tax Obligations, which is effective as of 12 December 2022. This regulation is a derivative of the Law on Harmonization of Tax Regulations (HPP), whose issuance simultaneously revokes Government Regulation Number 74 of 2011 concerning Procedures for the Implementation of Rights and Fulfillment of Tax Obligations.

Read: The Mutual Agreement Procedure Breaks the Deadlock of Double Taxation Disputes

Previously, voluntary corrections to annual tax returns could only be made on the basis of:

• Tax assessment letter 
• Objection decision letter 
• Decision Letter on Tax Assessment Reduction
• Decision Letter on Tax Assessment Cancellation
• Notice of Correction on Appeal Verdict, or
• Judicial Review Decision

For the record, mutual agreement decision and other letters that can be used as the basis for correcting annual tax returns are only valid if a number of conditions are met.

First, issued on a case one or several years earlier. Second, the letters state a fiscal loss that is different from the fiscL loss that has been compensated for in the annual tax return. 

Correction is carried out by placing a mark in the space provided on the Annual Tax Return stating that the taxpayer has made the correction.

Taxpayers may only make corrections no later than three months from the date of the abovementioned decrees and decision letters received. 

If after the period has elapsed, the taxpayer does not make corrections, the DGT will functionally recalculate the compensation for losses in the annual tax return. (ASP/SYF/KEN)