On December 27, 2024, the Minister of Finance issued Regulation Number 119 of 2024 (PMK-119), updating the previous Regulation Number 39/PMK.03/2018 (PMK-39). PMK-119 aims to modernize the tax system and improve taxpayer protections by revising procedures for preliminary tax refunds due to overpayments. This update aligns with the government's commitment to advancing technology-based tax administration. This regulation makes adjustments to accommodate the tax administration system updates.
Electronic Procedure Adjustments
PMK-119 introduces significant changes, particularly in integrating electronic tax administration processes. Taxpayers must submit preliminary tax refund applications electronically through the taxpayer portal by January 10 to be designated as a Taxpayer with Specific Criteria. If electronic submission is not possible, applications can be submitted in the following alternative ways:
- directly; or
- via post, expedition service company or courier service, Tax Office (Kantor Pelayanan Pajak / KPP), Tax Information, Service, and Consultation Office (KP2KP), or other locations designated by the Director General of Taxes.
Taxpayers with Specific Criteria must submit a separate letter to address any discrepancies between the tax overpayment amount in the Preliminary Tax Overpayment Refund Decision Letter (Surat Keputusan Pengembalian Pendahuluan Kelebihan Pajak / SKPPKP) and the application. PMK-119 addresses the preliminary tax refund issue not covered in PMK-39 by specifying that a separate letter must be submitted electronically through the taxpayer portal. If electronic submission is not feasible, the same alternative methods applied to Taxpayers with Specific Criteria designation can be used.
Other changes involve follow-up procedures for preliminary tax refund applications. The processing of separate letters follows the same procedures as preliminary tax refund applications. The same rules apply to applications from Taxpayers with Specific Criteria and those submitted via separate letters. This ensures a more straightforward and standardized process.
Validation Standards Adjustments with Coretax System
PMK-119 provides detailed tax slip validation and issuance guidelines in the tax administration system. Previously, income tax withholding or collection audits were only conducted on the tax returns of taxpayers and withholding agents or tax collectors. As for now, withholding income tax slips or income tax collection slips must be issued through the Directorate General of Taxes (DGT) administration system. Other documents considered equivalent to these slips but not issued through the DGT system must also be validated within the DGT administration system. For self-paid income tax vouchers, validation with the Treasury Receipt Number (Nomor Transaksi Penerimaan Negara / NTPN) is required if payment is made using a tax payment slip. If payment is made using other administrative means that are considered equivalent to a tax payment slip, validation in the DGT administration system is required.
PMK-119 provides a more detailed explanation of the input tax audit process, which is conducted to ensure the following:
- Input tax credit by a Taxpayer with Specific Criteria must be recorded in a tax invoice uploaded to the DGT administration system and approved by the DGT. Alternatively, it must be documented in other forms considered equivalent to a tax invoice, which has been created and validated in the DGT system or filed by another party according to provisions of law and regulation.
- Self-paid input tax must be validated with an NTPN if the payment is made using a tax payment slip. If the payment is made using other administrative means considered equivalent to a tax payment slip, it must be validated in the DGT administration system.
To be recognized as a tax overpayment, input tax must be credited appropriately and meet all audit requirements. If the taxpayer has credited input tax without fulfilling the requirements or if it fulfills the requirements but has not been credited, it will not be recognized as a tax overpayment. Therefore, taxpayers are advised to credit all tax invoices appearing in Coretax and validate all documents considered equivalent to tax invoices or payment slips.
Additionally, PMK-119 outlines the DGT’s review process for qualified Taxpayers with Specific Criteria for preliminary tax refunds. For preliminary income tax refunds, the review focuses on the accuracy of tax reporting and calculations and the validity of income tax withholding slips, income tax collection slips, or income tax vouchers credited by the taxpayer. Meanwhile, for preliminary Value-Added Tax (VAT) refunds, the review includes verifying the accuracy of tax reporting and calculations, assessing self-paid or credited input tax, and ensuring that the taxpayer’s activities align with Article 9 Section 4(b) of the VAT Law.
Low-Risk Taxable Entrepreneurs
Another update has been made to include several subjects on Low-Risk Taxable Entrepreneurs. PMK-119 expands the Low-Risk Taxable Entrepreneur category to include pharmaceutical wholesalers and medical device distributors. These entities must hold licenses and certificates to qualify. Specifically, pharmaceutical wholesalers need a Pharmaceutical Distribution Certificate or Pharmaceutical Wholesaler License and a Good Distribution Practice for Pharmaceutical Products Certificate. Medical device distributors require a Medical Device Distribution Certificate or Medical Device Distributor License and a Good Distribution Practice for Medical Devices Certificate. Furthermore, companies directly owned by State-Owned Enterprises (SOEs) with share ownership of over 50% and consolidated financial statements with the parent SOE are also categorized as Low-Risk Taxable Entrepreneurs.
Similar to Taxpayers with Specific Criteria, Low-Risk Taxable Entrepreneurs must submit a designation application electronically to the DGT via the taxpayer portal. Input tax credited by Low-Risk Taxable Entrepreneurs in preliminary tax refund applications must be stated in a tax invoice or other documents considered equivalent to a tax invoice and validated in the DGT administration system or with the NTPN.
Other Key Changes
In addition to Taxpayers with Specific Criteria and Low-Risk Taxable Entrepreneurs, PMK-119 also updates some provisions for Taxpayers with Specific Requirements. Suppose those three tax subjects submit a tax return showing tax overpayment without a preliminary tax refund application or a tax refund application for the overpayment. In that case, follow-ups will be conducted according to Article 17 Section 1 of the General Tax Provisions and Procedures Law.
Tax refund applications submitted by Taxpayers with Specific Requirements for overpayments up to IDR 100,000,000.00 (one hundred million rupiah) will be processed under PMK-119 Articles 9 to 12. If an audit is carried out on the tax return and results in a Tax Underpayment Assessment Letter (Surat Ketetapan Pajak Kurang Bayar / SKPKB) issuance, administrative sanctions in the form of interest will be reduced.
