In Indonesia, taxpayers have the right to correct their tax returns (SPT) under certain conditions. However, for returns declaring losses or overpayments, there’s a key restriction: Article 8(1a) of the General Tax Provisions Law (UU KUP) mandates that such corrections must be submitted no later than 2 years before the expiration of the assessment period (5 years after the end of tax period or the tax year). But why is this 2-year limit important?

The 2-Year Rule: Protecting the Tax System
The 2-year limitation exists to prevent taxpayers from submitting last-minute corrections right before the assessment period expires. If a taxpayer makes a correction that declares a loss or overpayment too close to the deadline, the Directorate General of Taxes (DGT) would not have enough time to audit the correction properly. This creates potential risks:

• Loss Carry Forward: If a taxpayer corrects their return to declare a loss in the final moments before the assessment period expires, that loss could be carried forward to reduce tax liabilities in future years. Without the time to verify the legitimacy of the loss, the DGT would be forced to accept it, possibly leading to lower taxable profits in subsequent years without adequate review.
• Overpayment Refunds: Similarly, if a correction is made right before the expiration date, claiming an overpayment, the DGT would be obligated to issue a refund (SKPLB) without the opportunity to challenge the claim by issuing a tax underpayment notice (SKPKB). This leaves the DGT vulnerable to unjustified refunds.

If this rule didn’t exist, taxpayers could wait until the very last moment to make these corrections, leaving the DGT no time to investigate potential discrepancies. The result? Potential abuse of the system, with unverified losses being carried into future tax years or resulting in tax refunds that haven’t been properly vetted.

Encouraging Proactive Tax Management
For taxpayers, this rule encourages proactive tax management. It signals the importance of accuracy in the initial filing and ensures that any necessary corrections are made well in advance. If corrections are submitted within the first 3 years of the 5-year period, the process is much smoother, and there’s ample time for the DGT to verify the corrections.

Understanding and complying with this rule is essential for businesses, especially when dealing with loss declarations or overpayment claims. Acting within the allowed time frame will help ensure smooth tax administration and avoid potential complications.

Disclaimer:
This communication contains general information only. Before making any decision or taking any action that may affect your tax and finances or your business, you should consult a qualified professional adviser. GNV shall not be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication.

Author : Ahdianto