Requests for Non-Effective Status as Individual Taxpayer – Indonesia collects taxes using a self-assessment system. This system necessitates tax calculation, payment, and reporting by taxpayers themselves. To ensure that not every taxpayer must pay taxes, the government offers exemptions. Taxpayers whose income is below the non-taxable income are eligible for this exemption.
Every taxpayer who has a Taxpayer Identification Number (NPWP) is still required to file an Annual Tax Return even if they have no obligation to pay taxes.
For some taxpayers, the requirement to file the annual tax return may be onerous. In order to waive this filing requirement, the Directorate General of Taxes has issued regulations that enable taxpayers to easily submit a request for a Non-Effective NPWP.
1. Definition of Non-Effective Taxpayer
The definition of Non-Effective Taxpayer (NE taxpayer) is regulated in PER-04/PJ/2020, which refers to taxpayers who do not meet the subjective and/or objective requirements but have not yet had their NPWP revoked.
From this definition, it can be clarified that NE taxpayers who already have an NPWP are not obligated to pay and report their taxes, both for Periodic Tax Returns and Annual Tax Returns. For the time being, NE taxpayers will be exempt from routine administration.
2. Stipulation of Non-Effective Taxpayers
The Head of the Tax Office or an authorized official may designate NE taxpayers based on the taxpayer’s request or ex-officio. This is regulated in Article 24, paragraph (1) of PER-04/PJ/2020. Meanwhile, the criteria for taxpayers who can be stipulated as NE taxpayers are regulated in Article 24 paragraph (2) of PER-04/PJ/2020, as follows:
- No longer engaged in business activities or self-employment;
- Taxpayer’s income is below the non-taxable income;
- Taxpayer has a NPWP for administrative purposes, such as obtaining employment or opening a financial account;
- Residing or staying abroad for more than 183 days within a period of 1 year;
- Applied for NPWP revocation, and a decision has not been issued yet;
- Failing to submit the Annual Tax Return for two consecutive years and/or no tax payment transactions have been made;
- Taxpayer who does not comply with the requirements regarding NPWP registration documents;
- Taxpayer’s address is unknown after field checking;
- Branch NPWP by ex-officio of issuing a VAT Construction Self-Building Notice of Tax Underpayment Assessment (SKPKB) for the taxpayer itself;
- Government institutions that do not meet the requirements as tax deductors and/or collectors but have not had their NPWP revoked; or
- Taxpayers other than those mentioned in numbers 1 to 10 who no longer meet the subjective and/or objective requirements, but their NPWP has not been revoked yet.
3. Request for a Stipulation of Non-Effective Taxpayer
Regarding the request for NE taxpayer stipulation, taxpayers may submit their Non-Effective status request either electronically or in writing. Taxpayers who wish to apply for Non-Effective status are required to attach a Non-Effective Taxpayer Declaration Letter and supporting documents demonstrating that the taxpayer meets the criteria as mentioned above.
The request for a stipulation of NE taxpayer can be made electronically through specific channels determined by the Tax Office, including registration applications, the tax office contact center, and/or other designated channels.
Once a taxpayer has been stipulated as an NE taxpayer, the following conditions apply:
- Filing and reporting of the Annual Tax Return are not mandatory.
- No Warning Letters will be issued even if the Annual Tax Return is not filed or reported.
- Tax Assessment Letters for administrative penalties will not be issued due to the non-filing of the Annual Tax Return.
4. Re-activation of Non-Effective Taxpayer
Non-Effective Taxpayers can reactivate their NPWP status by submitting a request for re-activation of their NE taxpayer status, either electronically or in writing. This is conducted when the conditions and criteria for NE taxpayers are no longer met or for other reasons that require the reactivation of the NPWP.
Based on the explanations above, it can be concluded that individual taxpayers with income below the non-taxable income and without any other business activities may apply for NE status, thereby being exempted from filing the Annual Income Tax Return. Notwithstanding, they can apply for reactivation their NPWP if the conditions and criteria for being an NE taxpayer are no longer met. Once the taxpayer’s status becomes effective again, they are obligated to fulfill their tax obligations.