Income Taxpayers below Non-Taxable Income can Propose Non-Effective Taxpayer

As we know that the payment and reporting of taxes is a concern for all Taxpayers. However, the government provides relief in terms of payment and reporting of taxes for employee Taxpayer who receive income below the non-taxable income limit and do not have other businesses, namely Taxpayers can apply for Non-Effective Taxpayers. Through this article, we will discuss more about Non-Effective Taxpayers.

A. Definition of Non-Effective Taxpayer

The definition of Non-Effective Taxpayer is regulated in the Regulation of PER-04/PJ/2020. The regulation explains that Non-Effective Taxpayer is a Taxpayer who does not meet the subjective and/or objective requirements but has not had the Taxpayer Identification Number removed. This definition based on Article 1 PER-04/PJ/2020 concerning Technical Instructions for the Administration of Taxpayer Identification Numbers, Electronic Certificates, and the Confirmation of Taxable Entrepreneur states that Non-Effective Taxpayer is Taxpayer who does not meet subjective requirements and/or objective but the deletion of the Taxpayer Identification Number has not been carried out.

From the definition above, it can be explained that Non-Effective Taxpayer who already have Taxpayer Identification Number are not obliged to pay and report their taxes, both Periodic Tax Return and Annual Tax Return, even though the Taxpayer Identification Number of the Non-Effective Taxpayer remains in the Information System of Directorate General of Taxation. For the time being, Non-Effective Taxpayers will be excluded from routine administration.

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B. Determination of Non-Effective Taxpayers

The Head of the Tax Service Office or an official appointed by the Director General of Taxes (DGT) can designate Non-Effective Taxpayer based on the request of the Taxpayer or by position. Referring to Article 24 paragraph (1) PER-04/PJ/2020 which states that the Head of the Tax Service Office or an official appointed by the Director General of Taxes can determine Non-Effective Taxpayer, based on the request of the Taxpayer or by position.

Meanwhile, the criteria for Taxpayer who can be determined as Non-Effective Taxpayer are regulated in Article 24 paragraph (2) PER-04/PJ/2020, including the following:

1. Individual Taxpayer who carries out business activities or freelancers who in fact no longer carry out business activities or freelancers;
2. Individual Taxpayer who does not carry out business activities or independent work and whose income is below Non-Taxable Income;
3. Individual Taxpayer who does not carry out business activities or independent work whose income is below non-taxable income who have a Taxpayer Identification Number to be used as an administrative requirement, among others, to obtain a job or open a financial account;
4. Taxpayer who resides or abroad for more than 183 days within a 12 month period that have been proven to be foreign tax subjects in accordance with the provisions of the laws and regulations in the field of taxation and have no intention of leaving Indonesia forever;
5. Taxpayer who applies for deletion of Taxpayer Identification Numbers and have not issued a decision;
6. Taxpayer who does not submit Tax Returns and/or do not have tax payment transactions either through self-payment or through other party deductions or collections, for 2 consecutive years;
7. Taxpayer who does not comply with the provisions regarding the completeness of the Taxpayer Identification Number registration documents as referred to in Article 10 paragraph (7);
8. Taxpayer whose addresses are unknown based on field research;
9. Taxpayer issued Branch Agency Taxpayer Identification Numbers by position in the framework of issuing Notice of Tax Underpayment Assessment of Value Added Tax for self-development activities;
10. Government agencies that do not meet the requirements as tax collectors and/or collectors but have not had their Taxpayer Identification Number removed; or
11. Taxpayer other than those referred to in letters a through j who no longer meet the subjective and/or objective requirements but have not had their Taxpayer Identification Number removed.

C. Application for determination of Non-Effective Taxpayer

In the case of an application for determination of a Non-Effective Taxpayer, the Taxpayer may submit a non-Effective status either electronically or in writing. This has been stated in Article 24 paragraph (3), namely the Application for Determination of Non-Effective Taxpayer is submitted electronically or in writing, and is accompanied by a Statement of Non-Effective Taxpayer and supporting documents showing that the Taxpayer meets the criteria.

Taxpayers who will apply for non-Effective status are required to attach a Statement of Non-Effective Taxpayer and documents showing that the Taxpayer meets the criteria as mentioned above. This is regulated in Article 24 paragraph (4) and paragraph (5) PER-04/PJ/2020 which states that Electronic Documents and affirmations or statements are serious about the application for determination of a Non-Effective Taxpayer submitted through a service that determined by the Directorate General of Taxes. Applications for electronic determination of Non-Effective Taxpayer can be made through certain channels determined by the Directorate General of Taxes through Registration Applications, Contact Centers, and/or certain other channels.

If the Taxpayer still has a Branch Taxpayer Identification Number with active status, then a Taxpayer with a Central Taxpayer Identification Number cannot be determined as a Non-Effective Taxpayer. This has been stated in Article 24 paragraph (6) PER-04/PJ/2020.

If the Taxpayer has been determined as a Non-Effective Taxpayer, then the Taxpayer:

• Has no obligation to submit and report Annual Tax Returns.
• Not issued a warning letter even if they do not submit or report an Annual Tax Return which is calculated as a Non-Effective Taxpayer.
• Tax Collection Letters are not issued for administrative sanctions for not submitting Annual Tax Returns which are effective from the time they are determined as Non-Effective Taxpayer.

D. Reactivation of Non-Effective Taxpayers

It should be noted that Taxpayer can reactivate their tax status by submitting an application for reactivation of Non-Effective Taxpayer. Matters that need to be known by Taxpayer regarding the reactivation of Non-Effective Taxpayer have been regulated in Article 29 paragraph (2), paragraph (3), paragraph (4), and paragraph (5) PER-04/PJ/2020 including:

• Applications for reactivation of Non-Effective Taxpayer can be made electronically or in writing, and accompanied by supporting documents showing that the Taxpayer does not meet the criteria for Non-Effective Taxpayers.
• Including supporting documents, namely Electronic Documents which show that the Taxpayer does not meet the Non-Effective Taxpayer criteria as referred to in Article 24.
• Applications for reactivation of Non-Effective Taxpayer electronically as referred to in paragraph (2) can be made through certain channels determined by the Directorate General of Taxes, in the form of Registration Applications, contact centers and/or other certain channels.
• The reactivation date of the Non-Effective Taxpayer is calculated from the date the Taxpayer no longer meets the criteria.

From the explanation above, it can be seen that the application for activation of Non-Effective Taxpayer can be done electronically or in writing. In addition, Taxpayer need to attach supporting documents showing that the Taxpayer does not meet the Non-Effective Taxpayer criteria as referred to in Article 24 paragraph (2) PER-04/PJ/2020.

Written by Lutfia Anggraeni, Tax Compliance & Audit, TaxPrime.