Director General of Taxes Circular Number: SE-02/PJ.31/2003

 

 

 

 

 

 

In respect of the issuance of the Minister of Finance Decree Number 543/KMK.03/2002 concerning Deemed Profit and Payment Methods of Income Taxes for Taxpayers Conducting an International Children's Toys Contract Manufacturing Business, the Minister of Finance Decree is, hereby, submitted as well as the elucidation/affirmation of the following matters:

1.

Income Tax treatment of Taxpayers conducting an international children’s toys Contract Manufacturing Business is stipulated as follows:

 

a.

Net income in the form of the remuneration for international contract manufacturing services is not calculated pursuant to the general provisions under Article 16 paragraph (1) but pursuant to Article 15 of the Income Tax Law, namely Deemed Profit, which is set at 7% (seven per cent) of the total manufacturing or assembly costs of goods, excluding the costs for the use of direct materials;

 

b.

Net income referred to in letter a is subject to Income Tax by applying the highest tax rate under Article 17 paragraph (1) subparagraph b of the Income Tax Law of 30% (thirty per cent) which is final;

 

c.

Final Income Tax payable referred to in letter b must be settled by the Taxpayer through monthly payments, calculated based on the total realisation of all costs for the manufacturing or assembling of goods every month, excluding the costs for the use of direct materials. The costs for the manufacturing or assembling of goods include all expenses which constitute direct manufacturing (other than the principal’s raw materials) and indirect costs as well as general and administrative costs according to the Taxpayer’s commercial bookkeeping;

 

d.

To procedures for the payment and filing of final Income Tax, the general provisions under the Law concerning General Provisions and Tax Procedures shall apply. Thus, monthly tax payments must be performed no later than the 15th of the following month using the Final Income Tax Payment Slip (SSP) and monthly tax filing must be performed no later than the 20th of the following month using the Final Income Tax Payment Slip sheet 3.

2.

The treatment referred to in point 1 applies insofar as the Taxpayer does not enter into an Advanced Pricing Agreement with the Director General of Taxes.

3.

Income other than the remuneration for international contract manufacturing services received/accrued by the said Taxpayer remains subject to Income Taxes pursuant to the general provisions under the Income Tax Law. Other income includes gains/losses on foreign exchange differences for debts/receivables and cash/bank money in foreign currency.

4.

This decree comes into force:

 

a.

on 1 January 2003 if the Taxpayer’s tax year/accounting year is the same as the calendar year;

 

b.

at the beginning of the 2003 tax year/accounting year which begins after 1 January 2003 if the Taxpayer’s tax year/accounting year is different from the calendar year.

 

 

 

With the enactment of this Minister of Finance Decree, tax losses from the 2002 tax year and earlier years cannot be carried forward starting from the 2003 tax year, except for tax losses relating to income other than the remuneration for international contract manufacturing services.

 

 

 

This is to be known and implemented accordingly.

 

 

 

21 January 2003
DIRECTOR GENERAL,
signed
HADI POERNOMO