In the previous article, we explored the types of Joint Operations (JOs) that are exempt from the requirement to register for a Taxpayer Identification Number (Nomor Pokok Wajib Pajak / NPWP) and to be appointed as a Taxable Entrepreneur (Pengusaha Kena Pajak / PKP). In this article, we will examine the different forms of JOs that must register their business with the tax office to obtain NPWP and/or be appointed as PKP according to the latest regulations.
Also Read: Overview of the Latest Tax Provisions on Joint Operations
Minister of Finance Regulation (Peraturan Menteri Keuangan / PMK) Number 79 of 2024 outlines three criteria that JOs must meet to require registration for NPWP and/or to be appointed PKP. First, the JO delivers goods and/or services. Second, the JO receives or generates income. Third, the JO incurs costs or makes payments to other parties. These criteria are alternatives, meaning that if a JO meets any one of them, it is obligated to register its business with the tax office in the area where the JO is based.
Furthermore, PMK 79 specifies that the domicile of the JO is determined by the residence or place of domicile of one of the JO members, as indicated in the JO agreement or the letter of appointment.
The JO must register for an NPWP within one month of its establishment or when operation begins, whichever comes first. If the JO starts operating before it is officially established (as evidenced by a deed), the registration deadline is calculated from when it begins its business activities.
Additionally, PMK 79 of 2024 states that JOs delivering Taxable Goods (Barang Kena Pajak / BKP) or Taxable Services (Jasa Kena Pajak / JKP) are required to report their business and be appointed as PKP if their business turnover exceeds the small business threshold of IDR 4.8 billion per year, or if any member of the JO has been appointed as a PKP. For example, suppose taxpayers A, B, and C decide to form a JO called JO ABC. Taxpayer A and taxpayer B have not been appointed as PKP because their annual business turnover is below IDR 4.8 billion. However, taxpayer C has been appointed as a PKP since they import goods from outside the customs area. As a result, JO ABC is required to register its business to be appointed as PKP.
VAT Treatment
In terms of Value-Added Tax (VAT) treatment, PMK 79 of 2024 states that the delivery of BKP or JKP from members to the JO or from the JO to customers is subject to VAT, following VAT laws. However, there is a small loophole. The regulation does not address the delivery of BKP or JKP from the JO to its members. This means that a JO could potentially sell BKP or JKP to members who do not have PKP status without needing to issue a tax invoice. We will discuss tax planning strategies related to these regulatory loopholes in a future article.
In addition to addressing these normative issues, PMK 79 of 2024 introduces several new provisions. One key update pertains to the tax base for the delivery of BKP or JKP, whether from the JO to customers or from members to the JO. For deliveries from the JO to customers, the tax base is determined according to the relevant laws and regulations. However, for deliveries from members to the JO, the tax base is based on the agreed contribution value specified in the JO agreement or related documents.
For example, in the JO agreement among taxpayers A, B, and C, it was agreed that taxpayer A would contribute 20%, taxpayer B 30%, and taxpayer C 50%. When the JO began operations, taxpayer C delivered machinery and equipment valued at IDR 140 billion. For this delivery, taxpayer C is required to issue a tax invoice based on 50% of the delivery value.
Consequently, JO ABC can claim this amount as a credit in their Periodic VAT Return under VAT regulations. This overview covers obligations for registering for NPWP and PKP, as well as the VAT responsibilities for JOs. In the next article, we will discuss the income tax aspects of JOs.
Relevant Provisions
Law of the Republic of Indonesia Number 6 of 1983 regarding General Provisions and Procedures for Taxation as amended by Law of the Republic of Indonesia Number 7 of 2021 regarding Harmonization of Tax Regulations;
Law Number 8 of 1983 regarding Value-Added Tax and Sales Tax on Luxury Goods as amended by Law of the Republic of Indonesia Number 7 of 2021 regarding Harmonization of Tax Regulations;
The Minister of Finance Regulation Number 79 of 2024 regarding Tax Treatment of Joint Operations
