Understanding the 4 Types of Tax Sanctions
Monday, 15 April 2024
One of the reasons why we must fulfill our tax obligations correctly is to avoid sanctions. Any mistake, even if administrative in nature, carries the risk of a penalty. Moreover, if the error is substantive, the penalty risk can be more severe.
Specifically, there are four types of sanctions that may be imposed on taxpayers for errors made. First, administrative sanctions in the form of interest. Second, administrative sanctions in the form of fines. Third, administrative sanctions in the form of an increase.
Lastly, the fourth type of sanction is a criminal penalty. Unlike the previous three types, criminal sanctions are not considered administrative sanctions.
In general, the provisions regarding tax sanctions are regulated in Law No. 6 of 1983 concerning the Law on General Provisions and Tax Procedures (KUP), which has been amended several times. This includes Law No. 11 of 2020 on Job Creation, Law No. 7 of 2021 on the Harmonization of Tax Regulations (HPP), and Law No. 6 of 2023 concerning the Establishment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation as Law.
Therefore, it is important for taxpayers to understand the differences between each type of sanction. By doing so, taxpayers can be more compliant in fulfilling their tax obligations, avoiding the risk of heavy penalties.
1. Interest Sanctions
Interest sanctions are imposed for violations committed by taxpayers related to delays in paying taxes payable. The amount of interest sanctions depends on the type of violation committed and how long the delay is made.
The longer the tax payment is made, the greater the interest sanction that must be paid. Interest sanctions are calculated per month starting from the due date of payment until the date of tax payment but are limited to a maximum of 24 months. The amount of interest rate is determined differently every month, depending on the Decree of the Minister of Finance.
The following is a breakdown of the violations subject to interest sanctions, as regulated in the KUP Law:
|
No |
Article |
Violation |
|
1 |
8 paragraph (2) and (2a) |
Correction of Periodic and Annual Tax Returns that result in higher tax payable |
|
2 |
9 paragraph (2a) and (2b) |
Late payment of periodic and annual taxes |
|
3 |
13 paragraph (2) |
Underpayment of tax in Underpaid Tax Assessment Letter (SKPKB) because based on the results of the audit there is the tax that is not or underpaid and a Tax ID number is issued or confirmed as a VAT-Registered Person in an official capacity. |
|
4 |
13 paragraph (2a) |
SKPKB is issued because based on the audit result, it is found that the VAT-Registered Person does not deliver BKP (Taxable Goods)/JKP (Taxable Services) or export BKP/JKP and has been granted a refund of Input Tax or has credited Input Tax as referred to in Article 9 paragraph (6e) of the VAT Law. |
|
4 |
14 paragraph (3) |
STP (Tax Collection Letter) is issued because the current year's income tax is not/underpaid or from the research results there is a tax underpayment as a result of a writing error and/or miscalculation. |
|
5 |
19 paragraph (2) |
Installment or postponement of tax payment |
|
6 |
19 paragraph (3) |
Reduction of tax payment because it is allowed to postpone the submission of tax return and it turns out that the provisional calculation of tax payable is less than the amount of tax payable. |
2. Fine Sanction
Fines are imposed due to violations related to reporting obligations by taxpayers. Unlike the interest sanction which is determined monthly, the fine sanction does not depend on the length of the delay.
In addition, the determination varies depending on the type of violations. For certain violations, a fine of a certain nominal value is imposed. However, other violations, it is determined based on a certain percentage of the Tax Base (DPP) or the amount of underpaid tax.
The following are the details of the violations and the fines that will be imposed, according to the KUP Law:
|
No |
Article |
Violation |
Sanction |
|
1 |
7 paragraph (1) |
Late submission of periodic tax return |
|
|
2 |
7 paragraph (1) |
Late submission of Annual Tax Return |
|
|
3 |
8 paragraph (3) |
Disclosure of Untruth |
100 % of tax underpayment |
|
4 |
14 paragraph (4) |
|
1% of the Tax Base |
|
5 |
25 paragraph (9) |
Objection is rejected or partially accepted |
30% of the tax amount based on the objection decision, minus the tax paid before filing the objection |
|
6 |
27 paragraph (5d) |
The appeal is rejected or partially accepted |
60% of the tax amount based on the Appeal Decision, minus the tax paid before filing the objection |
3. Increase Sanction
An increase sanction is imposed when a taxpayer provides incorrect information as the basis for calculating their tax payment. Compared to the other two types of administrative sanctions, namely fines and interest, the increase sanctions is relatively larger.
The KUP Law includes several provisions regarding the imposition of this sanction. The first is Article 13 paragraph (3), which stipulates an additional administrative sanction of 75%.
This additional sanction applies to the amount of unpaid or underpaid Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLG), as well as to withholding or collection of Income Tax that is less or not paid.
Second, sanctions related to Article 15 paragraph (2), in the form of an additional increase in sanctions of 100% of the underpaid tax, due to a tax deficiency based on the Additional Underpayment Tax Assessment Letter (SKPKBT).
Third, Article 17 paragraph (5) and Article 17D paragraph (5) in the form of an increase sanction of 100% of the amount of tax underpayment. This applies if a taxpayer with certain criteria or who fulfills certain requirements has obtained a preliminary refund of overpaid tax. However, it is known that there is tax underpaid so SKPKB is issued.
4. Criminal Sanctions
Criminal tax sanctions are imposed when a taxpayer is deemed to have committed a violation that causes harm to the state's revenue.
However, the implementation of criminal sanctions in Indonesia emphasizes the principle of ultimum remedium, meaning that criminal law enforcement is the last resort taken by the government to improve taxpayer compliance.
Thus, by prioritizing this principle, the government prioritizes the recovery of state financial losses until the case has permanent legal force (incracht).
In essence, taxpayers are allowed to restore state revenue losses by paying tax principal and sanctions, as a consideration for prosecution without imprisonment.
This ultimum remedium concept is then strengthened in the HPP Law. Among them, in addition to eliminating imprisonment, the HPP Law also changes the amount of sanctions that must be paid by tax criminals.
This means that the tax investigation process, which could lead to imprisonment, can be stopped if the taxpayer pays off the tax payable plus the administrative sanctions incurred.
The following is the amount of sanction provisions related to criminal tax regulated in the HPP Law:
|
No |
Article |
Violation |
Sanction |
|
1 |
39 |
Anyone who deliberately:
|
Imprisonment for a minimum of 6 months and a maximum of 6 years |
|
2 |
39A |
Anyone who deliberately:
|
Imprisonment for a minimum of 2 years and a maximum of 6 years. |
Thus, these are the four types of tax-related sanctions that taxpayers need to understand to avoid greater tax risks in the future. (ASP/CHY/KEN)
