English Rules in Tax bookkeeping - Ideatax

English Rules in Tax bookkeeping - Ideatax

PPh - 03 Apr, 2023 14:04 WIB

Ideatax, Jakarta -- These days, it has become quite common for a company or corporation to conduct transactions with other parties in a foreign country. Thanks to the development of digital technology and business transactions that has created new business platforms such as e-commerce, marketplace, affiliate marketing, crowdfunding, influencers, online courses, peer to peer lending, and others.

 

However, Google, Temasek, Bain & Co (2022) predict that by 2025 the value of e-commerce in Indonesia will increase by 17% to 95 billion USD in 2025. This value also places Indonesia as the country with the largest e-commerce activity in Southeast Asia.

 

Regardless of the type of business, transparency of business activities becomes a major issue.  Especially for companies engaged in foreign investment, coal contracts of work, and oil and gas cooperation contracts. Transparency of business activities can be realized with transparent financial reports that can be understood by shareholders. According to Belkaoui (1980), accounting is an alternative to verbal communication between executives and outsiders.

 

Since shareholders of digital and foreign investment companies are generally located outside Indonesia, these companies are often required to submit financial statements in English and foreign currencies.

 

DGT as a public institution is quite adaptive in accommodating the use of English and foreign currency in tax reporting. Article 28 paragraph (1) of Law Number 6 of 1983 concerning General Provisions and Tax Procedures as amended by Law Number 7 of 2021 stipulates that individual taxpayers conducting business activities or free work and corporate taxpayers in Indonesia are required to organize bookkeeping. Furthermore, Paragraph (8) stipulates that bookkeeping using a foreign language and currency other than Rupiah can be organized by taxpayers after obtaining permission from the Ministry of Finance.

 

In the regulation of the Ministry of Finance Number 196/PMK.03/2007 as amended by PMK 123/PMK.03/2019, bookkeeping using foreign languages and or currencies can be organized by taxpayers who are:

  • In Foreign Investments;

  • In the Coal Contract of Work;

  • Contractors of Oil and Gas Cooperation Contract;

  • Having Permanent Establishments;

  • Registering their shares either partially or completely on foreign stock exchanges;

  • Having Collective Investment Contracts (KIK) that issue mutual funds denominated in United States Dollars (USD);

  • In direct affiliation with foreign holding companies;

  • Presenting financial statements in their functional currency using US Dollars.

 

Furthermore, the provision also stipulates that to use bookkeeping in English and US Dollar currency, the above-mentioned company or entity must apply for a permit to the Ministry of Finance. The permit must be submitted to the Regional Tax Office where the taxpayer is registered no later than 3 months before the financial year using English and US Dollar currency begins.

 

Afterwards, The Head of the Regional Tax Office on behalf of the Ministry of Finance will give a decision on the application for the use of English and foreign currency within one month of the application letter received in full. Thus, if the Regional Office does not provide a decision within a period of one month, then the taxpayer's application is considered accepted.

 

Related to tax payment, taxpayers who have obtained permission to use bookkeeping in English and foreign currencies can make payments of Corporate Income Tax, Final Income Tax in Rupiah after being converted using the exchange rate set by the Ministry of Finance at the time of payment.

In regards to Tax Return, Taxpayers who have obtained permission to use bookkeeping in English and foreign currencies are required to submit Tax Return in Indonesian language except for financial statements and calculation units denominated in US Dollars.

 

Furthermore, if the taxpayer who is licensed to use bookkeeping in English and the US Dollars unit plans to quit using it, the taxpayer may submit a written request for cancellation no later than three months after the fiscal year begins.

 

For more information on the procedures for using bookkeeping in English and USD, you can contact Ideatax.

 

References

Belkaoui, A. (1980). The impact of socio-economic accounting statements on the investment decision: An empirical study. Accounting, Organizations and Society, 263-283.

seconds. (2023, March 17). Get to know the digital business, types, and benefits. Retrieved from Detik Finance: https://finance.detik.com/solusiukm/d-6328081/mengenal-bisnis-digital-jenis-hingga-keuntungannya

Google, Temasek, Bain & co. (2022). e-Conomy sea 2022. Singapore: Google.

 

Related regulations

  • Law number 6 of 1983 concerning General Provisions and Tax Procedures as amended by Law number 7 of 2021 concerning harmonization of tax regulations.

  • Regulation of the Ministry of Finance - 196 / PMK.03 / 2007 concerning Procedures for Organizing Bookkeeping Using Foreign Languages and Currency Units Other Than Rupiah as well as the Obligation to Submit Annual Tax Returns for Corporate Taxpayers as amended by PMK-123 / PMK.03 / 2019.

  • Regulation of the director general of taxes number PER-23/PJ/2015 concerning procedures for Application, Notification, Giving, Cancellation and Application and Reissue of Permits for Bookkeeping Using English and United States Dollar Currency Units

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