In 2022, the Minister of Finance (“Minister”) introduced Regulation No. 112/PMK.03/2022 on Taxpayer Identification Numbers (Nomor Pokok Wajib Pajak – “NPWP”) for Individual Taxpayers, Company Taxpayers and Governmental Agency Taxpayers, as amended by Regulation No. 136 of 2023 (collectively referred to as “Regulation 112/2022”). In essence, this new framework sets out various prerequisites that specifically relate to the utilization of the following types of identification numbers by specific types of taxpayers:[1]

However, in order to ensure adequate legal certainty and facilitate services to taxpayers, as well as ensure sufficient time for stakeholders to prepare administrative systems for the use of the abovementioned identification numbers, the Director-General of Taxes (“Director-General”) has now issued Regulation No. PER-6/PJ/2024 (“Regulation 6/2024”) on the Utilization of NIK as NPWP, 16-Digit Format NPWP and NITKU for Tax Administration Services (collectively referred to as “New Identification Numbers”), which has been in force since 1 July 2024.[5]

Generally speaking, Regulation 6/2024 sets out various provisions that specifically address the utilization of New Identification Numbers, including relevant administrative services, as well as the documents and registrations that are required for the issuance of NPWP. As such, this edition of Indonesian Legal Brief (“ILB”) offers a concise analysis of the various matters that are addressed under the framework of Regulation 6/2024, specifically as they relate to the following areas:

1. Utilization of New Identification Numbers; and
2. The Core Tax Administration System (“CTAS”): Benefits and Challenges.

Utilization of New Identification Numbers

Commencing 1  July 2024, the Directorate-General of Taxes at the Ministry of Finance (Direktorat Jenderal Pajak – “DJP”) and other governmental agencies that provide administrative services (“Other Parties”)[6] are mandated to utilize the New Identification Numbers during the provision of any services that involve taxpayers’ NPWP. These administrative services include registrations and other digital services, which encompass:[7]

The various types and descriptions that apply in relation to the above-listed administrative services, along with further services that can be utilized by taxpayers, will be introduced to the general public on a gradual basis. However, it should be noted that any services that are not included on the above list of administrative services will continue to utilize the traditional 15-digit NPWP format.[8]

In terms of decisions, stipulations, forms and tax documents (collectively referred to as “Taxation Documents”), gradual adjustments will be introduced that incorporate both the 15-digit NPWP format and the New Identification Numbers. The adjusted format is further outlined under the Appendix to Regulation 6/2024.[9]  However, it is important to note that any Taxation Documents that are issued using the 15-digit NPWP format after 1 July 2024 will retain the same legal validity as those that incorporate both the old and New Identification Numbers.[10]

In addition, in terms of NPWP registrations that are completed after the enactment of this Regulation, the 15-digit NPWP format and NITKU will continue to be issued along with the activation or assignment of the corresponding New Identification Numbers, based on relevant taxpayer type.[11]

CTAS: Benefits and Challenges

As initially mandated under Regulation 112/2022, the use of the New Identification Numbers was targeted for completion by 31 December 2023. However, this transition period was subsequently extended until 30 June 2024.[12] According to the Director of Tax Dissemination, Services and Public Relations at the DJP, this extension not only allowed stakeholders additional time in which to prepare affected systems but was also in line with the implementation of the CTAS, which is also set to commence operations in mid-2024.[13]

At its core, CTAS is a sophisticated information technology system that supports DJP operations, including the automation of business processes.[14] CTAS offers substantial benefits to taxpayers, including comprehensive tax accounts that detail all of their tax obligations and related information. The integration and digitalization of tax data, as mandated under Regulation of the President No. 40 of 2018 on the Renewal of the Tax Administration System (“Regulation 40/2018”), is ultimately aiming to simplify tax administration processes and enhance overall tax compliance.[15]

According to the DJP, the CTAS is set to provide various benefits to a wide range of parties across the taxation sector. Said parties, along with several of the offered benefits, are summarized in the following table:[16]

Despite the implementation of these advances within the taxation sector, various challenges relating to the implementation of the New Identification Numbers remain. For example, as of 30 June 2024, approximately 670,000 NIK - NPWP pairs still required matching.[17] Furthermore, not all tax administration services are currently able to accommodate the New Identification Numbers.[18]

Given these prevailing issues regarding the utilization of New Identification Numbers, Regulation 6/2024 offers leniency to Other Parties with systems that are not yet ready to implement the related administrative services. In this regard, the older 15-digit NPWP format will still be permitted to be utilized until a deadline of 31 December 2024.[19]

Key Takeaways

The initial implementation of New Identification Numbers is seen as a crucial step toward full CTAS implementation, a system that is expected to provide significant benefits for taxpayers in terms of efficiency, compliance and transparency. However, existing concerns will necessitate careful management and rapid adaptation to the new system in order to prevent the occurrence of errors and ensure compliance. In an effort to facilitate a seamless transition before the full implementation of the new system, the mandated adjustment period provides relevant stakeholders with the necessary time to bring their systems into line with the new framework.

Source: hukumonline.com