Technical Tax Issues of Foreclosed Collateral
Ideatax -- Jakarta In mid-April 2023, the Government issued Ministry of Finance Regulation No. 41 Year 2023 on Value Added Tax on the Delivery of Foreclosed Collateral by Creditor to Buyer.
For information, this regulation is a technical instruction from Article 10 of Government Regulation Number 44 Year 2022 on the Application of Value Added Tax on Goods and Services and Sales Tax on Luxury Goods. In the Article, the government regulates that the transfer of rights to taxable goods due to an agreement is included in the definition of delivery of taxable goods subject to VAT.
Furthermore, this provision also regulates that included in the definition of delivery of rights to taxable goods due to an agreement is the delivery of collateral by the creditor to the Buyer.
The collateral itself as referred to in Government Regulation Number 41 Year 2022 includes: mortgages on land and objects related to land, fiduciary guarantees, mortgages, pledges, and other similar encumbrances.
As a derivative regulation of higher provisions, Ministry of Finance Regulation Number 41 of 2023 regulates technical provisions regarding the transfer of Foreclosed collateral, including: definitions, general provisions, tariffs, tax imposition bases, creditor obligations, debtor obligations and so on.
Definition and General Provisions
Technically, PMK No. 41 Year 2023 defines Foreclosed collateral as collateral Foreclosed by creditors in the context of repayment of Loans, Financing Based on Sharia Principles, or Loans Based on Pawn Law.
Furthermore, the provision also regulates that the delivery of collateral by the creditor to the collateral buyer is included in the definition of delivery of rights subject to VAT.
Tax Rate and Basis of Imposition
In general, the VAT rate on the delivery of Foreclosed collateral is no different from the VAT rate in general, which is 10%. However, Article 3 of Ministry of Finance Regulation number 41 of 2023 regulates that VAT on the delivery of Foreclosed collateral is collected and deposited using a certain amount of 10%. Thus, the VAT rate on the delivery of Foreclosed collateral is 1.1% of the sale value of the collateral to the buyer.
Obligation to Issue Tax Invoice
There are four obligations of the creditor for the delivery of Foreclosed collateral: making tax invoices or equivalent documents, collecting VAT, depositing VAT, and reporting VAT on the delivery of Foreclosed collateral in the VAT Periodic Tax Return.
Documents equated with tax invoices are documents that are equal to tax invoices and at least contain information regarding: document number and date, name and tax ID number of the Creditor, name and tax ID number or population identification number of the Debtor, name and tax ID number or population identification number of the Collateral Buyer, description of Taxable Goods, tax imposition basis, and the amount of VAT collected.
Deposit and Reporting Obligations
As mentioned earlier, creditors have the obligation to make VAT payments and reporting on the delivery of Foreclosed collateral. In order to deposit VAT on Foreclosed collateral, Article 6 and Article 7 of Ministry of Finance Regulation No. 41 regulate the following technical matters:
1. The creditor is obliged to deposit the VAT collected by using a tax payment slip or other equated documents.
2. The tax deposit letter is filled in with the following provisions:
The name column and taxpayer identification number column are filled in with the name and taxpayer identification number of the creditor;
The tax account code and deposit type code are filled in with 411211/100;
The taxpayer or depositor column is filled in with the name and taxpayer identification number of the Creditor.
3. VAT deposits on the delivery of Foreclosed collateral must be made no later than the end of the following month after the tax period ends.
4. In addition to having the obligation to make deposits, Creditors are also required to report the delivery of Foreclosed collateral in the VAT Periodic Tax Return.
5. Input tax on the acquisition of Foreclosed collateral cannot be credited by the creditor.
Ministry of Finance Regulation Number 41 Year 2023 was promulgated on April 11, 2023 and came into effect on May 1, 2023.
Law Number 8 of 1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods as amended several times lastly by Law Number 7 of 2021 concerning Harmonization of Tax Regulations.
Government Regulation Number 44 of 2022 on the Application of Value Added Tax on Goods and Services and Sales Tax on Luxury Goods.
Ministry of Finance Regulation Number 41 Year 2023 on Value Added Tax on the Delivery of Collateral Acquired by Creditor to Buyer.
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