Tax Accounting Sytem in Indonesia Lecturer: Lect. Univ. Dr. Luminita Rus Prepared by: Rizka Azhari Indonesia Oradea 2017 Contents 1. Introduction… [620457]

i
UNIVERSITY OF ORADEA
FACULTY OF ECONOMIC SCIENCES

Financial Accounting II :
Tax Accounting Sytem in Indonesia

Lecturer:
Lect. Univ. Dr. Luminita Rus

Prepared by:
Rizka Azhari
Indonesia

Oradea
2017

Contents
1. Introduction ………………………….. ………………………….. ………………………….. ………… – 1 –
1.1. Legal Basis ………………………….. ………………………….. ………………………….. ……. – 1 –
1.2. Definition of Tax Accounting ………………………….. ………………………….. ……….. – 2 –
1.3. Bookkeeping Vs Recording ………………………….. ………………………….. …………. – 2 –
1.4. Tax Accounting Process ………………………….. ………………………….. ……………… – 3 –
2. Value Added Tax (VAT) and Value Added Tax on Luxuries Goods …………………….. – 4 –
2.1. Definition of VAT Accounting and Value Added Tax on Luxury Goods ……….. – 4 –
2.2. Delivery of Taxable Goods / Services ………………………….. ………………………… – 5 –
2.3. Value Added Tax Rates ………………………….. ………………………….. ………………. – 7 –
2.4. Tax Imposition Bases ………………………….. ………………………….. …………………. – 7 –
3. Accounting for Income Tax ………………………….. ………………………….. ………………… – 8 –
3.1. Definition of Income Tax Accounting ………………………….. ………………………… – 8 –
3.2. General Income Tax Calculation ………………………….. ………………………….. ….. – 9 –
3.2.1. Cost of Position / Retirement Cost ………………………….. ……………………. – 9 –
3.2.2. Non -Taxable Income ………………………….. ………………………….. …………. – 10 –
3.3. Tax Tariff ………………………….. ………………………….. ………………………….. ……. – 10 –
4. Concl usion ………………………….. ………………………….. ………………………….. …………. – 10 –
5. References ………………………….. ………………………….. ………………………….. ………… – 11 –

– 1 –
1. Introduction
The practice of taxation in Indonesia today has grown so rapidly following
the times. This is shown by the increasing amount of tax revenue targeted by the
Director General of Taxes and the number of taxpayers in Indonesia. This situation
raises the demand for taxpayers themselves to calculate, deposit and repor t the
amount of taxes, because the system of taxation in Indonesia gradually and globally
has led to self -assessment system. Most of the people are still unaware of taxation.
For this reason, the author tries to write a little bit about the taxation proced ure in
Indonesia as one of the themes proposed to complete the project in Accounting II
course.
Most Indonesians also consider accounting as the difficult thing , especially
when it is associated with a tax that has ever -changing regulations. Sometimes, they
faced many problems with the government s due to lack of education about reporting
their property and the tax payable does not fit with the actual. For these reason s, the
author wish this project can be the enough referrences for those who read it to know
more about tax accounting in Indonesia. So, the author can show that basically
accounting for tax does not have big differences with accounting for entity. The
distinguishes are only on the side of legislation in force in Indonesia relating to
account ing. For that it is concluded there are two differences that are fixed and time
difference.
1.1. Legal Basis
There are some legal basis in Indonesia related to tax accounting, which are:
• Law Number 7 of 1983 on Income Tax as already amended several times, First:
Law Number 7 Year 1991, Second: Law Number 10 Year 1994, Third: Law
Number 17 Year 2000 and amended the latest by Law Number Income Tax Act
Number 36 of 2008
• Law Number 6 Year 1983 regarding General Provisions and Tax Procedures as
already amended several times and the latest by Law Number 28 Year 2007,
Law Number 5 Year 2008 and Law Number 16 Year 2009.
• Statement of Financial Accounting Standard (PSAK) No 46 About Deferred
Tax Accounting

1.2. Definition of Tax Accounting
Tax Accounting comes from two wo rds namely accounting and taxes.
Accounting is a process of recording, classifying, summarizing a financial
transaction and ending with a financial reporting. While Tax is a compulsory levy
collected by the government from the public (taxpayers) to cover r outine state
expenditures and development costs without repayment services that can be
appointed directly. So Tax Accounting is a process of recording, classifying and
summarizing a financial transaction in connection with tax obligations and ending
with t he preparation of fiscal financial statements in accordance with the relevant
taxation provisions and regulations as the basis for the preparation of the Annual
Tax Return.
The preparation of these financial statements is necessary to facilitate the
compan y in reporting property / wealth and also income and expenses obtained in
certain period. The Company requires a type of profit / loss statement to calculate
the amount of tax payable in a given tax year.
1.3. Bookkeeping Vs Recording
Based on Law No. 16 of 200 9 Article 28 paragraph (1) it is mentioned that
an individual taxpayer conducting business activities or free employment and
corporate taxpayers in Indonesia are required to conduct bookkeeping. Then in
Article 28 paragraph (2) it is mentioned that the Tax payer who is exempted from
the obligation to maintain the bookkeeping as referred to in paragraph (1), but is
obliged to register, is an Individual Taxpayer conducting business or free work in
accordance with the provisions of the Law Taxation allowed to c alculate net income
by using the Net Income Tax Norms (NITN) and individual Taxpayers who do not
engage in business activities or free employment. While the provisions concerning
taxpayers of Persons who use NITN regulated in Article 14 paragraph (2) of La w
No. 36 of 2008 stated that: Individual taxpayers who conduct business activities or
free work with gross circulation in 1 (one) year less than Rp 4.800 .000.000 (Four
billion eight hundred million rupiah), may calculate the net income by using the
Net Inc ome Statement as referred to in paragraph (1), provided that the Director
General of Taxes in the first 3 (three) months of tax year concerned.

Based on the above provisions it is clear that in fact both Individual
Taxpayer and Corporate Taxpayer are requi red to perform bookkeeping.
Bookkeeping is the process of recording all company transactions accompanied by
accurate evidence and is accomplished with the preparation of financial statements.
From the definition we can equate between bookkeeping with accou nting itself.
However, for Individual Taxpayer whose gross sales for one year is less
than Rp 4,800,000,000 can use the recording system . Recording is a process of
calculating net income by using the Net Income Statement. The calculation of
income is usually based on estimat ion. This is allowed because of the lack of
knowledge about accounting itself. So in the recording is not supported by clear
and accurate evidence. But for Individual Taxpayer who choose by their own to use
bookkeeping in reporting their wealth and income , it is also allowed. For example
Mr. Andi has a Grocery Store business in area A, if for year 2009, estimated net
income is amounted to Rp 100,000,000. If it is assumed that the percentage of N ITN
in area A is 30% then the tax rate owed to Mr. Andi is as follows:
Tax Basis = 30% X Rp 100,000,000
= 30,000,000
Income Tax = 5% X Rp 30,000,000
= 1,500,000
1.4. Tax Accounting Process
Taxation accounting process is not much different from the usual
accounting process. Accounting always starts with the transaction to be recorded.
This transaction is related to financial information that can be assessed with money,
not non -financial information. Then this transaction will be recorded in a Journal,
then posted, then entered into the work sheet and ended with the preparation of
financial statements. This financial report can be made monthly or yearly. Detailed
accounting process and also illustration about accounting cycle can be seen below.

The process is as follows:

2. Value Added Tax (VAT) and Value Added Tax on Luxuries Goods
2.1. Definition of VAT Accounting and Value Added Tax on Luxury Goods
Value Added Tax is a tax levied by a Taxable Entrepreneur with respect to
a delivery transaction (sale or purchase or other transaction) of taxable goods /
services within the customs territory by an individual or company taxpayer . So any
transactions relating to the delivery (sale or purchase or other transaction) of the
taxable goods / services shall be subject to VAT on such goods / services. The
imposition of VAT on such transactions is usually followed by the creation of a Tax
Invoice.
VAT accounting is the recording of a sale and purchase transaction of goods
and or services subject to VAT tax. In trading companies and service companies,
these goods or se rvices are considered to be commodities traded, so companies
must recognize the acquisition cost is based on generally accepted accounting
methods.
A transaction related to the delivery of taxable goods other than levied by
value added tax, but also levied Value Added Tax on Luxury Goods. The following
is the type of delivery of Taxable Goods subject to Value Added Tax on Luxury
Goods as follows:

1. Delivery of Taxable Goods Categorized as Luxury by an Entrepreneur who
produces Taxable Goods which are categori zed as Luxury in the Customs
Area in the course of business or work
2. Import of Taxable Goods Classified as Luxury. In contrast to Value Added
Tax, Sales Tax on Luxury Goods shall be imposed only once upon delivery
of Taxable Goods categorized as Luxury by E ntrepreneurs who produce or
at the time of import.

2.2.Delivery of Taxable Goods / Services
Based on Law No. 18 year 2000 article 1A mentioned that some types of
transactions are included in the type of delivery of taxable goods. The types of
delivery are as follows:
1. Submission of the right to Taxable Goods due to an agreement
2. Transfer of Taxable Goods due to a lease agreement;
3. Delivery of Taxable Goods to intermediary traders or through an auctioneer;
4. Self-use and / or free delivery of Taxable Goods;
5. Inventory of Taxable Goods and assets which are not originally intended for
sale, remaining at the time of the dissolution of the enterprise, so long as the
Value Added Tax on the acquisition of the asset may be credited
accordingly;
6. Delivery of Taxable Go ods from Central to Branch and vice versa and
delivery of Taxable Goods between Branches;
7. Delivery of Taxable Goods on a consignment basis.
All above types of transactions are included in the type of delivery of taxable
goods. So every transaction mentione d above is done by a taxable entrepreneur then
it must be collected VAT.
In accounting, especially for trading and manufacturing companies, there
are two methods of inventory recording, namely the method of perpectual and
physical methods.

a. Perpe ctual Meth od
This Perpe ctual Method records inventory / taxable goods based on
inventory accounts, so that each time inventory mutation is known. When a
company buys goods / supplies, the company will record:
Supplies xxx
Cash / Accounts Payable xxx
When the Goods / Supplies are sold then the company will record:
Cash / Accounts Receivable xxx
Supplies xxx
b. Physical Method
This Physical Method records inventories / taxable goods not on inventory
accounts, so that inventory mutations at any time can not be known. To know the
amount of inventory each period, it is necessary to calculate the physical inventory.
Therefore the company needs to record the adjustment of the inventory. When a
company buys goods / supplies, the company will record:
Purchase xxx
Cash / Accounts Payable xxx
Supplies xxx
Cost of Supplies xxx
When the Goods / Supplies are sold then the company will record:
Cash / Accounts Receivable xxx
Sales xxx
Cost of Supplies xxx
Supplies xxx

In addition there are some transactions that belong to the submission, there
are also some transactions that are not included in the submission. Although these
transactions are not considered taxation as surrender does not mean there is no
record. Accounting of all transactions carried out must be recorded so it can be
accounted for. These transactions include:
1. Delivery of Taxable Goods to a broker as referred to in the Book of
Commercial Law
2. Delivery of Taxable Goods for debt guarantees
3. Delivery of Taxable Goods in the case of a Taxable Entrepreneur obtains a
license for centralization of the tax payable
2.3.Value Added Tax Rates
In general, there are two kinds of rate for Value Added Tax :
1. 10% for all types of delivery of goods / services subject to tax except
exports. This amount may change as stipulated in the Government
Regulation as low as 5% and as high as 15%.
2. 0% for export. This is because the government's goal to increase the
country's foreign exchange
While Tariffs for Value Added Tax on Luxury Goods are:
1. Tariff of Value Added Tax on Luxury Goods shall be at least 10% (ten
percent) and 200%
2. The export of Taxable Goods categorized as Luxury shall be taxed at a rate
of 0% (zero percent)
2.4.Tax Imposition Bases
To calculate the amount of VAT or VATLG payable or to be paid, it must
be known first about the Tax Imposition Basis. There are 5 Tax Imposition Bases,
including the following:

a. Selling Price
Selling price is all value in the form of money including all expenses
incurred by the buyer of the taxable goods and has been deducted by the sales
discount given. The selling price that becomes the Basic Tax Imposition is usually
the net selling price (meaning after deducting the discount)
b. Replacement Value
The value of all monetary values includes all costs incurred by buyers of
taxable servic es. This value is to replace the services provided by the taxable
entrepreneur.
c. Import Value
The value of imports are all monetary values including all expenses incurred
by buyers of taxable goods and other charges under the provisions of customs
legislation. The value of this import is calculated by summing the Cost / Price of
Goods (C), Insurance / Guarantee (I), Freight / Cost Delivery (F) and other customs
fees in accordance with the provisions of customs legislation.
Import Value = C + I + F + other charges
d. Export Value
The value of exports are all values in the form of money regarding the price
of the exported product or often referred to as the Cost of Export. There are certain
products set by the government such as the palm oil industry.
e. Other value stipulated by the Minister of Finance
This other value is set when there is difficulty in determining the selling
price or the replacement value of the product. In this case the minister of finance
may establish the basis of taxation.
3. Accounting f or Income Tax
3.1. Definition of Income Tax Accounting
Income Tax is a withholding tax on income in respect of employment,
services or activities of any name and in whatever form an individual's taxpayer

receives or obtains in respect of which the employer pays the wage, wage,
honorarium, allowance and payment others in return for work performed by
employees or non -employees; Government treasurers who pay salaries, wages,
honoraria, benefits, and other payments in respect of employment, services or
activities; P ension funds or other entities paying pensions and other payments under
whatever name in the framework of retirement; Bodies that pay honorarium or other
payments in return for services including the services of experts who perform free
employment; and Org anizer of activities that make payments in connection with
the execution of an activity.
Accounting for Income Tax is the process of recording transactions related
to income tax, such as payroll, wages and so forth. When there are transactions
related to t he withholding / collection of income tax, payment of income tax and
also salary / wages of employees then there should be accounting records in
accordance with applicable tax laws.
3.2. General Income Tax Calculation
In simple terms, this taxable income is calculated by:
One Month Salary xxxx
Benefits xxxx +
Total monthly salary xxxx
Reduction:
Cost of Occupation / Pension xxxx
Non-Taxable Income xxxx +
Total Reduction xxxx
Taxable income xxxx
3.2.1 . Cost of Position / Retirement Cost
Based on Regulat ion of the Minister of Finance No. PMK -250 / PMK.
03/2008, the amount of the official expenses deductible from gross income for the

calculation of Income Tax deduction for permanent employees is set at 5% of Gross
Income, not exceeding Rp 6,000,000.00 a ye ar or Rp 500,000.00 a month. While
the cost of pension as a deduction of gross income is Rp 2.400.000, – a year or Rp
200.000, – a month.
3.2.2 . Non-Taxable Income
The amount of non -taxable income is as follows :
• Taxpayer : Rp 15.840.000, –
• Additional marita l status : Rp 1.320.000, –
• Working Wife : Rp 15.84 million, –
• Additional dependents : Rp 1.320.000, – (Maximum 3)
3.3. Tax Tariff
There are some differences of tariff of Income tax, which are:
• Income below Rp 50,000,000 : 5%
• Income Rp 50,000,000 -Rp 250,000,000 : 15%
• Income Rp 250,000,000 -Rp 500,000,000 : 25%
• Income above Rp 500,000,000 : 30%
4. Conclusion
The tax system in Indonesia is growing rapidly. This rapid development
requires all taxpayers in Indonesia to increase knowledge about tax accounting.
Because the amount of tax payable is highly dependent on the accounting records
of the taxpayer whether individual or entity. Financial record errors can lead to
errors in tax payments and there will be sanctions to be borne by the taxpayer.
Therefore, it is highly recommended for every taxpayer to learn more about tax
accounting without worrying if the science is difficult. Because basically, taxation
accounting is not too different from the accounting in general.

5. References
Dirjen Pajak . (n.d.). Retrieved from Pajak: www.pajak.go.id
Kiswara, E. (2004). Aplikasi Akuntansi Perpajakan Indonesia. Semarang: EKC.
Mulyadi. (2004). Perpajakan (Vol. IV). Indonesia: Salemba.