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Qualifying for a Certificate of Exemption
If a business is not making a profit from a fiscal viewpoint, and taxes are withheld by a third party (withholding tax agent), then at the end of the year the enterprise will have overpaid its tax obligations. In order to reduce the amount of overpaid tax, the taxpayer may apply to the Directorate General of Taxes for a Certificate of Exemption from Third-Party Deduction of Taxes (SKB Potput). A Certificate of Exemption represents a declaration from the tax office stating that the taxpayer is not required to withhold income tax, meaning that such tax will not be withheld automatically from income. Taxand Indonesia identifies the taxpayers that can benefit from a Certificate of Exemption.
A Certificate of Exemption may be granted to:
- Taxpayers who suffer from fiscal losses if the enterprise is newly established or still in investment stage rather than production stage or has experienced force majeure
- Has suffered a fiscal loss due to the need to compensate for a loss suffered the previous year
- The monthly instalments paid were greater than the estimated income tax payable
Multinationals should consider if they qualify for a Certificate of Exemption and take note that these certificates are issued sparingly and may only be given once. If an enterprise has many customers, each one will need to be issued with a Certificate of Exemption to ensure the business benefits from the income tax being withheld. Therefore it is permitted for Certificate of Exemptions to be photocopied and duplicated. Any photocopies must be legalised by the issuing tax office, otherwise it will not be accepted and the tax withholding agent would be required to withhold the tax as normal. On a more positive note the tax office is required to provide legalisation of the certificate within a day.
Your Taxand contact for further queries is:
T. +62 21 835 6379
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