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New Tax Audit Policy
Tax audit is an important tool for the Indonesian Tax Authority (ITA) whose objectives are to control the taxpayers' compliance, assure the correctness of the amount of tax to be paid, as well as to increase the state revenue from taxes, which is being targeted to increase to Rp 9 trillion (approximately US$ 1.047 billion) in 2011. Taxand Indonesia looks at the importance the policy has on multinational companies who are being targeted to undertake tax audit.
Based on the ITA's audit strategy for 2011, the tax audits will be intensified and will be focused on certain business sectors that significantly contribute to the state revenue such as the mining, oil and gas industries, chemical industries, cement industries, construction & real estate, telecommunications industries, and also big trading companies, as well as enterprises that conduct business with related parties (engage in transfer pricing transactions).
To obtain a higher tax audit quality and reliable result, the Minister of Finance has issued guidelines for audit procedures and documentation. For this purpose, a Quality Assurance Team was established by the ITA.
Quality Assurance Team
Before the audit is finalised, the tax auditors have to inform the taxpayer of the audit findings explaining the corrections and adjustments on the tax calculation made by the taxpayer on its tax return. The auditors will also invite the taxpayer in a closing conference to discuss the discrepancies. If an agreement could not be reached during the closing conference, then upon the taxpayer's request the discrepancies will be reviewed, discussed and decided upon by the Quality Assurance Team (QAT).
The task of the Quality Assurance Team (QAT) is to resolve differences in opinion between the tax auditor and the taxpayer concerning the audit results and to provide decision if the auditor and the taxpayer could not meet an agreement during the closing conference.
All the documentation and notes made by the Quality Insurance Team will be signed by the Team members, the auditors and the taxpayer. The tax calculation decided by the QAT will be used by the ITA as the basis in issuing the tax assessment notice.
The taxpayers, particularly the multinational companies in those industries being targeted for tax audit should take note of the ITA's new tax audit policy. To avoid any problems that may arise during the audit, the taxpayers must prepare their tax returns along with the complete financial reports, the accounting records and documentations as well as the Transfer Pricing documentations (for those taxpayers that have related party transactions).
Your Taxand contact for further queries is:
T. +62 21 835 6379