Tax Obligations For Individuals and Corpor
Tax Obligations For Individuals and Corpor
Tax Obligations For Individuals and Corpor
Tax is a substantial matter for most country in the world. In Indonesia, tax
has an important role as it is the largest source to fund state budget. Even though
it is one of the key to keep a nation running, society do not consider tax as a
beneficial thing. Due to lack of tax education, many people do not understand tax
obligations well.
One of the tax responsibility in Indonesia is income tax. The Income Tax
Law states that income is any additional economic capability that is received or
obtained by taxpayers, both from Indonesia and outside Indonesia, that can be
used for consumption or to increase the taxpayer's wealth, by name and in what
form even. In the context of individuals, income can originate from business
activities, free employment or other income. At present, the state has given trust to
companies and the public for initiatives to count, report and deposit taxes or self-
assessment. Income tax is one of the example of the self-assessment system which
enforced to simplify tax report.
If the tax subject that receives income is a child, the tax obligation is
carried out by the tax payer. The Tax Insurer is an individual or entity responsible
for paying taxes, including representatives who exercise rights and fulfill the
obligations of taxpayers according to the provisions of tax laws and regulations.
Even though a child has fulfilled subjective requirements but has not fulfilled the
requirements to obtain a Taxpayer Identification Number (TIN or NPWP in
Indonesia) as a Taxpayer, the tax obligations are carried out by the taxpayer or
supervisor.
Once a person reaches adulthood he can carry out his own obligations by
registering to get a TIN. The requirement to get a TIN is a Self-Identity Card,
which is a National Identity Card (KTP) or other identity card that refers to
ownership of a KTP, for example a driving license or passport.
Taxpayers who carry out business activities or free work but the
circulation of their business or gross circulation is less than 4,8 billion rupiah a
year, Taxpayers can use Net Income Calculation Norms. In addition, taxpayers
who have free jobs such as doctors, lawyers, notaries, accountants, consultants,
appraisers, actuaries and architects are also required to report their gross income
and income tax.
Tax not only stand as a source of state income or budgetary function, but
also has an income distribution function. Personal income tax is one of the
instruments to overcome the inequality of income distribution between high-
income people and low-income people. But, how? The general personal income
tax rate in Indonesia imposes a progressive tax rate. The principle of progressive
tax rate is that those who are wealthy must bear a greater tax burden than from
those who are poor. So low income individuals not only pay less tax, but they pay
a smaller percentage of their income in this form of tax rate. Of the various types
of taxes, this progressive income tax is most in line with the goal of increasing
income equality. The imposition of the progressive tax rate is at the same time a
manifestation of the theory of endowment where taxes are charged to the society
based on their economic capabilities.
Aside from individual taxpayer, all business entities in Indonesia, whether
in the form of Limited Company, Firms, Limited Partnership, Permanent
Establishmnet and others that have a Tax Identification Number, are obliged to
pay taxes. Business entity has an obligation to pay taxes from the time it is
established or domiciled in Indonesia. This obligation will end when the entity is
dissolved or no longer domiciled in Indonesia.
To get the nominal taxable income of the entity, reduce fiscal net income
by compensating for fiscal losses. Fiscal net income is the net income received by
domestic taxpayers, whether from business activities or not, after passing fiscal
adjustments based on tax provisions. Meanwhile, fiscal net compensation is a loss
experienced by the agency. When using bookkeeping, the loss can be
compensated for five consecutive years.
There were some tax rates imposed for business entity. They differ based
on how much the company gain. If the company gain less than 4,8 billion rupiah,
it could use whether the general rates of 25 percent or 0,5 percent tariff based on
Government Regulations number 46. If the company gain more than 4,8 billion
rupiah but less than fifty billion rupiah, it will receive a tariff reduction by fifty
percent of the general tariff. There were some other tariffs that will not be
explained in this writing.