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Fast Track Refund Process for Well Behaved Taxpayers

9 Jul 2012

The Minister of Finance has recently issued a regulation regarding the implementation of Article 17C of Law No.28/2007, which sets out the criteria for certain taxpayers that have are able to use the priority refund facility.
Based on the existing General Taxation Provisions and Procedures claims for refund of overpaid tax as stated in the taxpayers' tax returns will be thoroughly audited before the claims are paid. The audit and payment process can take up to one year.

However, as stipulated in the legislation, for certain (compliant) taxpayers the refund will be paid within three months of application, as a full tax audit is not required - only an examination of the refund requested. Taxand Indonesia takes a look at the alternative process to see whether taxpayers are likely to benefit from it.

Taxpayers wishing to benefit from the priority refund process may submit an application to the tax office, or they can be automatically designated in a decision letter issued by the Directorate General of Taxes (DGT) at the beginning of each year. Taxpayers will be designated if they have:

  1. not been late in submitting the annual return for three consecutive years
  2. never been late in submitting monthly returns
  3. no tax arrears
  4. financial statements submitted to the tax authority for 3 consecutive years and have been audited by a public accountant or a government audit agency with unqualified opinion
  5. not been sentenced to a tax crime in the last five years

Taxpayers must apply for the refund of the overpaid tax in writing, and an examination of the taxpayer's return will be carried out by the tax authority to determine:

  1. the completeness of the returns (including the attachments)
  2. the correctness of the overpayment calculations
  3. the correctness and validity of the tax credits; and
  4. the validity of the tax payment.

For income tax overpayment, the refund will be paid within three months, and for VAT overpayment the refund will be given, at the latest, within one month after the submission of the refund application.

Taxand's Take

The process of obtaining tax refunds generally takes up to one year because the tax authority has to conduct a tax audit first. This timely process is bound to affect a company's cash flow and therefore an accelerated approach would be beneficial. This accelerated refund procedure will be of benefit to the taxpayers in the following ways:
a. the tax overpayment will be paid more quickly,
b. a company's cash flow is clearer; and
c. a company's overall compliance costs can be reduced.
This accelerated refund facility should be taken into account by both domestic and multinational taxpayers, and they should take advantage of the facility where appropriate.

Your Taxand contacts for further queries are:
Prijohandojo Kristanto
T. +62 21 835 6379

Suryohadi Djulianto
T. +62 021 8356363

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