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Jakarta, Ideatax -- General public may be unfamiliar with the term 'Agunan Yang Diambil Alih' or commonly known as AYDA. However, for the Banking and Financial Institutions, it's a familiar concept. In general, AYDA refers to assets acquired by Banks or Financial Institutions, either through auction or voluntary surrender by the collateral owner when the borrower/debtor fails to meet obligations to the Bank or Financial Institution.
In short, AYDA is the asset acquired by the bank due to the borrower's default. This definition can be found in the Regulation of Bank Indonesia Number 9/9/PBI/2007 regarding the Amendment to Bank Indonesia Regulation No. 8/21/PBI/2006 concerning the Assessment of Commercial Banks' Quality of Assets Based on Sharia Principles.
Furthermore, for the execution of the collateral rights contained in AYDA, there are two mechanisms that banks can employ: auction mechanism and private sale mechanism with the consent of the collateral owner. This provision can be found in Article 20 of the Law Number 4 of 1996 concerning Mortgage Rights over Land and Related Objects.
However, the execution of the taken-over collateral has led to a tax regulation dispute. The Banks argue that the execution through auction or private sale does not incur Value Added Tax (VAT). Their argument is based on the fact that the primary business of the banks is banking, not property trading, so it is not appropriate to apply VAT to the sale of collateral. Moreover, the Banks contend that the taken-over collateral is a debt guarantee, which is not included in the definition of taxable goods.
On the other hand, the Tax Authorities believe that the transfer of collateral from the Bank to a third party is subject to Value Added Tax. The rationale is clear: the tangible goods taken over are considered Taxable Goods (BKP). Second, the transfer is made within the customs area. Third, the taken-over collateral is an asset that has become the right of the banking party.
The lack of clear regulations on AYDA in previous tax regulations has resulted in prolonged disputes between the tax authorities and taxpayers. To address this, the Government shed some light on the AYDA dispute through Government Regulation Number 44 of 2022 regarding the Application of Value Added Tax on Goods and Services and Sales Tax on Luxury Goods.
Based on Article 10 of the derived rules of the Value Added Tax Law, it is stipulated that the transfer of rights over BKP through an agreement is considered a transfer of Taxable Goods, including the transfer of collateral by creditors to buyers.
Furthermore, the provision also states that the takeover of collateral by creditors occurs due to mortgage rights over land and related objects, fiduciary guarantees, mortgages, pledges, or other similar encumbrances.
With the above information, it is now clear that the takeover of collateral constitutes a taxable supply of goods and services subject to VAT. Further provisions regarding the scope of the takeover of collateral, the time of tax liability, collection and remittance procedures, and reporting will be regulated by the Ministry of Finance.
Related provisions:
- Law Number 4 of 1996 concerning Mortgage Rights over Land and Related Objects;
- Law Number 7 of 2022 concerning Harmonization of Tax Regulations;
- Government Regulation Number 44 of 2022 regarding the Application of Value Added Tax on Goods and Services and Sales Tax on Luxury Goods;
- Bank Indonesia Regulation Number 9/9/PBI/2007 concerning the Amendment to Bank Indonesia Regulation No. 8/21/PBI/2006 concerning the Assessment of Commercial Banks' Quality of Assets Based on Sharia Principles.
