Questioning Voluntary Disclosure in Tax Returns, When No Tax Is Due

Submitting an Annual Tax Return (SPT) is one of the obligations that every taxpayer must fulfill, as part of the self-assessment system adopted by Indonesia. However, it is important to remember that the Annual Tax Return must be submitted correctly, completely, and clearly.

There are two options that taxpayers can take if they realize that the annual tax return submitted is erroneous or incomplete, incorrect or unclear. The first option is to file a correction.

However, if the correction option cannot be used due to several reasons, the taxpayer can submit a voluntary disclosure.

Deadline for Amended Tax Return

There are several things that cause taxpayers to be unable to make corrections. First, because it exceeds the specified time limit. Second, because the audit has already been carried out.

Then, what if the DGT has already conducted an audit before the correction is made? Thus, the opportunity to make corrections to the Annual Tax Return for taxpayers is closed. This is as stated in the Law (UU) on General Provisions and Tax Procedures (KUP).

Actually, according to regulation, the Tax Return correction can be done as long as the Taxpayer has not been audited. However, for the correction of an Annual Tax Return stating loss or overpayment, there is a maximum time limit of two years before the tax expiration or three years after the tax becomes payable or the end of the tax period, part of the tax year or tax year.

The problem is, for a Tax Return showing the overpayment or restitution, DGT must issue an assessment within 12 months after the Tax Return is filed, so the Audit Instruction Letter (SP2) will be submitted to the Taxpayer sooner.

Voluntary Disclosure Option 

When the DGT has already conducted the audit, the Taxpayer actually has another option to 'fix' the submitted Tax Return, other than the Tax Return correction procedure. The final mechanism available is to disclose untruths. 

Voluntary Disclosure is a process of voluntarily correcting tax returns that are considered incorrect, during the audit process.

It should be noted that voluntary disclosure does not necessarily stop the audit process. This is because the audit process will still be continued, even though the Taxpayer does the voluntary disclosure.

For information, taxpayers can do voluntary disclosure as long as an Audit Finding Notification Letter (SPHP) has not been issued.

This is to provide more legal certainty and avoid the possibility of not considering the report on the voluntary disclosure of filing of the Tax Return by the tax auditor. So the SPHP should have reflected all the findings produced during the implementation of the audit.

Although it does not stop the audit process, by submitting the disclosure of untruth, the taxpayer has the opportunity to explain the contents of the annual tax return which they believe. Hopefully, the results of the audit conducted will be in accordance with the contents of the voluntary disclosure. 

Regulatory Issues 

The problem is, that the DGT often assumes that every voluntary disclosure must cause changes in the amount of tax payable or accrued tax, changes in fiscal profit or loss, or changes in the amount of assets and capital

This is in accordance with the provisions in Article 8 of the previous KUP Law, which are as follows:

Although the Director General of Taxes has conducted an audit, provided that the Director General of Taxes has not issued a tax assessment letter, the taxpayer with his own awareness can disclose in a separate report the untruthfulness of the filling of the Tax Return that has been submitted according to the actual circumstances, which may result in:

1. accrued taxes become larger or smaller;
2. losses based on tax provisions become smaller or larger;
3. the amount of assets becomes larger or smaller; or
4. the amount of capital becomes larger or smaller and the audit process continues.

The following are examples of voluntary disclosures that do not change the amount of tax payable. First, there is an error in mapping the numbers in the Tax Return, but it does not change the total value.

Second, there are tax return attachments that are not submitted by taxpayers, such as foreign debt reports or nominative lists of promotional and entertainment expenses. Third, changes in affiliate transaction details.

 In fact, even though it does not change the amount of tax payable, according to regulations, these things can be used as a basis for submitting a voluntary disclosure. This is because the provision of Article 8 of the KUP Law only states "may result in" not "must result in".

Thus, it is still debatable whether voluntary disclosure should result in tax effects or not. Moreover, in Article 8 paragraph (4) of the latest KUP Law, this provision was deleted so that the the article reads as follows:

Although the Director General of Taxes has conducted an audit, provided that the Director General of Taxes has not submitted a notification letter of audit results, the Taxpayer with their own awareness may disclose in a separate report about the incorrectness of filling of the Tax Return that has been submitted in accordance with the actual circumstances, and the audit process shall continue.

Referring to this provision, it is very clear that taxpayers can voluntarily submit a voluntary disclosure as long as the information submitted is in accordance with the actual circumstances, without the condition that there be a change in the value.

Likewise, the implementing provision, namely Government Regulation (PP) Number 74 of 2011 which has been amended by (PP) Number 50 of 2022, states that any voluntary disclosure that causes underpayment will be sanctioned.

Then, if the voluntary disclosure does not result in an underpayment of tax, then there is no need to attach a Tax Payment Letter (SSP) for payment of the underpayment of tax principal and sanctions.

So, neither the new KUP Law nor its derivative regulations state specifically that the voluntary disclosure must/should not result in a change in the amount of tax payable.

On that basis, the author thinks it would be best to immediately improve the provision regarding this matter. The tax authority should issue more specific regulations regarding the scope within which voluntary disclosure can be submitted.

Greater Administrative Sanctions

However, there are risks that must be taken into account by taxpayers who disclose incorrect Annual Tax Returns compared to simply correcting the Annual Tax Return.

This is because there is a risk of being subject to administrative sanctions that are greater than those of correcting the annual Tax Return, if the results of voluntary disclosure result in underpayment, as stated in Article 8 paragraph 2 of the KUP Law.

For example, the administrative sanction in the form of interest for corrections to the Annual Tax Return in August 2023 is set at 0.93% per month. Meanwhile, administrative sanctions in the form of interest for voluntary disclosure are set at 1.35% (according to the Decree of the Minister of Finance Number 38/KM.10/2023). 

Procedure for Voluntary Disclosure

For information, voluntary disclosure can be done by submitting a written report to the DGT.

The report is submitted with certain attachments such as the calculation of tax underpaid or overpaid, according to the actual situation. Second, submit a tax payment letter (SSP) for the repayment of the underpaid tax.

Third, SSP for the repayment of administrative sanctions in the form of interest per month determined by the Minister of Finance, based on the underpaid tax.

Regardless of the various risks that will be faced, both tax return correction and voluntary disclosure are wise options for taxpayers to take, in order to ensure that the tax return submitted is appropriate.

The author suggests taking both options rather than letting the Annual Tax Return that is known to be erroneous become a finding of the DGT that leads to the issuance of a Tax Assessment Letter. This is because it proves that the taxpayer has good intentions to carry out their tax obligations properly. (ASP/KEN)

Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.