Last Minutes Reminder of Individual Annual Income Tax Return
It has been several days before dateline to submit annual income tax return for individual taxpayers at March 31, 2016 and the time is running fast. If you think the tax obligation is so hard and complex to be complied, this article provides you some insights about individual tax compliance.
According to General Taxation Stipulation Law No. 16 Year 2009 article 3 (3b), March period is a dateline to submit Income tax Return (Surat Pemberitahuan Pajak / SPT) for Individual Taxpayer (Wajib Pajak Orang Pribadi). There are three kinds of Income Tax Return forms for Individual Taxpayer, those are 1770SS form, 1770S form, and 1770 form (Tax Director General Regulation No. 36/PJ/2015). Each form is classified according to kind of work and annual gross income amount. Individual taxpayer should select a kind of form to be filled according to their work and income profile.
1770SS form is designed for an individual taxpayer who work for an employer with maximum annual gross income is IDR 60 million, without other incomes (excluded bank and cooperation interest income).
1770S form is designed for an individual taxpayer who works for one or more employers and has other income from non-business and/or non-freelance work. For example, private employees, state employees, armies, police, and state officers that have other incomes from property rental, public speaking honor, and stock investment in stock exchange.
1770 form is designed for an individual taxpayer whose income resources in form of business and/or freelance work, for example a doctor, lawyer, trader, businessperson, consultant, and other independent professions, include state employees / armies / police whose other businesses.
Taxable income is aggregated income of a family and the tax compliance is liability of an individual taxpayer who acts as family head. Husband and wife income will be taxed separately if: husband and wife has been divorced legally (HB); proposed in written by husband and wife itself according to asset and income separation agreement (PH); or proposed by wife who decide to comply her tax rights and obligations by herself (MT).
Amount of non-taxable income (PTKP) that is allowed as Taxable Income deduction for fiscal year 2015 is:
- IDR 36 million for the individual taxpayer itself,
- additional IDR 3 million for married taxpayer,
- additional IDR 36 million for a wife whose income is aggregated with husband income,
- and additional IDR 3 million for each family member in straight descendant or fully adopted children, maximum three (3) child for each family (Ministry of Finance Regulation / PMK No. 122 / PMK.010 / 2015).
Tax rates for individual income tax calculation according to Income Tax Law No. 36 Year 2008 article 17 (1a) as follow:
Taxable Income Level Tax Rate
Up to IDR 50,000,000 5%
From IDR 50,000,001 up to IDR 250,000,000 15%
From IDR 250,000,001 up to IDR 500,000,000 25%
IDR 500,000,001 and above 30%
What is the sanction if we do not submit Annual Income Tax Return for Individual Taxpayer (SPT WPOP)? If you pass the deadline to submit annual income tax return, you will be fined administratively as amount IDR 100,000. Additionally, any income tax payable according to income tax return (SPT) must be paid fully before SPT is submitted. If any income tax payable still outstanding, taxpayer will be fined administratively in form of monthly interest 2% of income tax payable, calculated from payment dateline until payment date, and each date will be rounded as one full month.
Some tips to prepare annual income tax return
The following is some tips to prepare annual income tax return easily for you as individual taxpayers:
- Prepare Income tax article 21 deduction form from your employer (simply known as 1721-A1 or 1721-A2 form (if you are an employee);
- Prepare other tax deduction forms that are released by other parties as related to your incomes, for example Income Tax article 21 deduction form (final or non-final income tax), Income Tax article 23 deduction form, Income Tax article 4(2) deduction form for deposit interest, gain on sale of stock in stock exchange, lottery prizes, gain on sale of land or building, rental fee of land or building, dividend, etc (if any);
- Prepare tax payment form (SSP) if you paid your income tax directly without deduction from employers;
- Prepare alms payment evidence from legal alms institution that is acknowledged by government (if any);
- Prepare annual income tax summary, either the income tax is already deducted by employer or not, then classify the amount according to the kind of work, those are:
- Kind of work as not final income tax object (acquired from business or freelance work).
- Kind of work as final income tax object (for example: saving/deposit interest income, gain on sale of stock in stock exchange, lottery prizes, lump sum severance or pension allowance, honor as Government Budget expenses, gain on sale of land or building, rental fee of land or building, dividend, etc).
- Kind of work as non-taxable income object (for example: donation, legacy, profit portion as a partner in non-distributable share firm, insurance claim, scholarship, and other works as non-taxable income object).
- Prepare commercial and fiscal financial statement (if you already prepared book-keeping);
- Prepare assets summary (fill asset code, asset type, acquisition date, acquisition cost, and notes if any) and liabilities summary (fill liability code, creditor name, year, and liability amount at the end of year, and prepare it according to real condition to avoid any problems in the future);
- Prepare annual living cost summary;
- Specifically if you use 1770 form, determine rate percentage norm to calculate net income for your kind of business;
- Then you can start to prepare your annual income tax return after all data is filled.
For more clear information, we strongly suggest you to read the guidance of annual income tax return fulfillment carefully. The last but not least, please make sure the following simple steps are done on your annual income tax return:
- Personal identity (tax identity / NPWP, name, and full address clearly).
- Signature on main income tax return (or attorney by attaching the power of attorney).
- Prepare the annual income tax correctly, completely, and clearly (in main form, general attachment, and special attachment).