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New Production-Sharing Contractor Regulation for Annual Income Tax Return
All domestic taxpayers and permanent establishments (PEs) in Indonesia must report their taxable income in their annual income tax return. The computation of taxable income of a Production-Sharing Contractor (PSCs) taxpayer is different from the other domestic taxpayers since it is overseen by a Government Regulation.
To accommodate the particular calculation of taxable income of the PSC taxpayer, the Director General of Taxes (DGT) recently issued a regulation providing list of the specific information and documentation which is required to be attached with the annual income tax returns of the PSCs. Taxand Indonesia takes a look at the new regulation and what it means for companies operating in the Upstream Oil and Gas industry.
The Annual Income Tax Return of Production-Sharing Contractors
The annual income tax return form for the PSCs and other corporate taxpayers is same. Additionally, the financial report and other information which are considered important by the taxpayer must be attached with the annual income tax return.
Based on the recently issued DGT regulation, PSCs are now required to attach the following documents with their annual income tax returns to be filed for tax year commencing 2011 onwards:
a. The PSC's taxable income calculation as set out in Government Regulation No. 79/2010
b. Detailed calculation of costs incurred in the PSC's activities
c. The list of the PSCs assets depreciation and amortisation
d. The latest financial quarterly report for the current tax year
e. Proof of payment of income tax
Oil and Gas Proof of Income Tax Payment
The oil and gas proof of income tax payment is a document that proves that the contractor operating in the exploitation and exploration of oil and gas in Indonesia has paid its income tax obligation. The tax payment document must be validated by the Director General of the Treasury before attaching it to the annual income tax return.
This recently issued regulation provides clear information and the certainty of law for PSC contractors operating in upstream oil and gas industry in fulfilling their tax obligation. This regulation will come into effect starting from tax year 2011.
If the taxpayer failed to follow the new regulation while filing its annual income tax return, the said return will be considered as null and void and it shall be considered as though the taxpayer did not submit its tax return. This will be subject to audit and administrative sanctions by the DGT. To avoid such a situation, PSC's taxpayers should consult with their local tax advisors before submitting their annual income tax return.
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