After Voluntary Disclosure Program, What’s Next?
By: Sondang Romian Purba, employee of the Directorate General of Taxes
A month after the Voluntary Disclosure Program (Program Pengungkapan Sukarela/PPS in Bahasa Indonesia) ended, the hype is taking its time to diminish. One thing is for sure, the ending of the program is not the end of the taxpayer’s obligation, both for the taxpayers who participated in the program and the ones who didn’t.
The Voluntary Disclosure Program (VDP) is one of many efforts of the Indonesian government to encourage taxpayers' compliance by giving the chance for the taxpayers to self-assess their assets and any obligations related to their tax that have not been fulfilled.
Taxpayers are given a second chance to correct their past tax fulfillment obligations under favorable terms, provided that the Directorate General of Taxes (DGT) gets the data and information regarding the taxpayers’ assets. This program was implemented at the beginning of 2022 and ended by June 2022, and was considered a success, despite some minor imperfections.
The VDS is a follow up to the provisions in Chapter 5, Article 5 of the Harmonisasi Peraturan Perpajakan Law No. 7 of 2021, which is regulated further in Minister of Finance No. 196/PMK.03/2021 concerning Procedures for the Implementation of the VDP. The implementation of the VDP is also in line with the concept described by the OECD, which explains the Voluntary Disclosure Program as an opportunity offered by the government to allow previously non-compliant taxpayers to adjust their tax affairs under specified terms. It affected compliance in a timely and cost-effective manner, which is like a win-win solution both for taxpayers and the government.
Just to refresh our minds, compliance according to the OECD is the degree to which a tax payer complies (or fails to comply) with the tax rules of his country, for example by declaring income, filing a return, and paying the tax due in a timely manner.
At one of the press conferences, Indonesian Finance Minister Sri Mulyani mentioned that this program will be the last, and after the VDP period ends, it is expected to encourage an increase in the ratio of taxation, supervision, and law enforcement in DGT that is carried out based on a much better database, so on the other hand, taxpayers can carry out the fulfillment of their taxation rights and obligations correctly.
Yes, the taxpayer’s compliance is the target. As for DGT, Director General of Taxes Suryo Utomo said that after VDP ends, DGT will carry out its business processes as before, yet the implementation of business processes will be much better and enhanced considering that DGT has obtained data and information from domestic financial institutions and tax authorities of partner countries through Automatic Exchange of Information.
So after the VDP session ends, what’s next for the taxpayer? We will see it from two points of view; from the participant's VDP and the ones who didn’t participate.
Participants in the Voluntary Disclosure Program
The taxpayer that participates either in Policy I or Policy II should pay attention to some commitments after submitting the Notice of Disclosure Asset (Surat Pemberitahuan Pengungkapan Harta/SPPH) and getting the Certificate (Surat Keterangan), especially when it’s related to asset investment. Some issues that should be paid attention to according to Article 21 PMK 196/PMK.03/2021 are:
- Taxpayers that are required to maintain bookkeeping and get the certificate from the VDP must record the value of the net assets submitted in the Notice of Disclosure Asset in addition to the retained earning balance on the balance sheet.
- The additional assets and liabilities disclosed by taxpayers in the Notice of Disclosure Assets are treated as the acquisition of the new assets and new liabilities according to the date of the Certificate and reported on the Annual Income Tax Return for the 2022 tax year.
- Assets disclosed in the Notice of Disclosure Assets in the form of tangible assets can not be depreciated for tax purposes, and the same treatment also applies to intangible assets. They can not be amortized for tax purposes.
For taxpayers participating in VDP that repatriated their assets to Indonesia, there are also additional key points to remember. In general, they are:
- Taxpayers have to make sure to transfer the assets no later than September 30th, 2022, and they cannot be transferred outside Indonesia at least for five years after the certificate is issued.
- Taxpayers who choose to invest in the sovereign bond, downstream sector of natural resources, or renewable energy sector as specified in Minister of Finance Regulation No. 196/2021 must do so by September 30th, 2023.
- Taxpayers must submit a report on the realization of asset repatriation or investment realization report to DGT through the designated electronic channels. The said report should be submitted at the latest at the deadline for submitting the taxpayers' annual tax return. That means if a taxpayer participates in DVP and has a tax calendar year from January to December, the deadline for submitting the Annual Tax Return will be on April 30th, and the report of the realization of asset repatriation or investment realization should be sent by April 30th, too. Technical Regulations will be issued due to the specifics of reporting the realization of assets repatriation or investment report.
Taxpayers who did not take part in the Voluntary Disclosure Program
For the taxpayer who didn’t participate in the DVP but also knows that there’s something that should be reported or amended, of course, knows very well that there is no turning back time to join the DVP.
It’s understandable that we only regret the chances we didn’t take. Not only is the rate in VPS considered favorable, but the basis for calculating the tax is also more attractive because it uses the addition of assets as the basis, not income. For the taxpayers that still have some assets that haven’t been disclosed, they will be considered as income at the time of the discovery of the data and/or information about these assets by DGT.
Don't be discouraged; taxpayers can still amend their obligations that require correction by submitting an Amendment Tax Return. Article 8 of Harmonisasi Peraturan Perpajakan Law No. 7 of 2021 says that the taxpayer can still send in the Amendment Tax Return as long as the Audit Process has not yet begun. If a taxpayer amends their tax return, one of the consequences is the payment of the sanction or interest if the amended tax return results in a higher amount of taxes to be paid.
In the end, for the taxpayers that participated in the DVP, hopefully this will be the second chance (or maybe third chance for the taxpayers that participated in Policy I) and a time to start fresh. Also, for all the taxpayers, both the ones that participated and the ones that didn’t, since DGT is now better equipped and prepared to take on the challenge of getting recalcitrant taxpayers to pay up, this will be a chance to start fresh to become a compliant taxpayer. Being a compliant taxpayer brings peace of mind because it exercises our right to be honest.
*)This article is the author's personal opinion.