DGT Circular Letter No. SE-24/PJ/2015 dated March 30, 2015
GUIDANCE FOR PREPARING EXAMINATION WORK REPORT
1. Examination Work Report (LHP) for testing compliance of taxation obligation
LHP consist of 3 parts, they are preface, content and ending.
a. Preface
1) Title Page
Title page at least must consist of name of examination operation unit (UP2), title of LHP, No of LHP, Date of LHP, taxpayer, taxpayer registration number, taxpayer’s address, type of examination, examination code, examination criteria, tax period and fiscal year.
2) Table of Content
Table of content is to simplify when preparing LHP
b. Content
Content of LHP consist of 4 parts as follow:
I. General
1) Examiner statement
Examiner statement should be written as follow:
“in accordance with article 29 general provisions and procedures law, DGT has authority to conduct examination to test compliance of taxpayer’s taxation obligation and for other purposes in connection with implementation of tax law and regulation. LHP is prepared to settle examination work. LHP is solely for taxation purposes.
Examination to taxpayer already conducted in objective and professional way based on examination standards by using data, information and/or evidence collected/obtained and processed in accordance with audit plan.
Taxpayer book, records and documents used in this examination, limited to borrowing up to ….*). Testing of taxpayer’s taxation obligation and tax return items, limited to type of tax and items/its derivatives which consist in audit plan and its amendment.
In the future, Should there is an error in this report, new data obtained including unrevealed data in this examination, and/or tax crime, it will be followed up in accordance with tax law and regulations”
*) this paragraph will be included when borrowing taxpayer books, records and documents based on latest receipt.
2) Examination assignment consist of:
1) Date and number of examination assignment letter (SP2), amendment of SP2 and assignment letter to assist examination;
2) Structure of tax examination team and experts;
3) Tax period and fiscal year;
4) Examination code;
5) Criteria of examination;
6) Starting date of examination;
3) Taxpayer identity consist of:
1) Name of taxpayer;
2) Taxpayer registration number;
3) Date of taxable entrepreneur confirmed
4) Address and phone number;
5) Year of bookkeeping
6) Taxpayer bookkeeping
7) Currency used;
8) Accounting method;
9) Audited financial statements;
10)Business field classification (KLU) in tax return;
11)Business description which consist of:
· Company Establishment
· Structure of shareholders
· Business cycle;
· Sales procedures;
· Purchasing procedures;
· Production process and capacity;
· Final product
· Explanation on related parties transaction/connection;
· Information on Major suppliers and customers;
· Special technics used by taxpayer in doing business;
· Other information whenever necessary.
4) Taxation obligation compliance, consist of:
1) Taxation obligation implementation;
2) Compliance on payment/deposit;
3) Compliance on tax return filing.
5) Available data/information, consist of:
1) Tax return data;
2) KP data;
3) Information, data, report and complaint analysis and development work (IDLP);
4) Previous LHP;
5) Site examination work report;
6) Experts assistance work;
7) Other data/information.
6) List of borrowed books, records and documents which consist of type or name of books, records and documents borrowed from taxpayer based on borrowing documents.
7) List of attachment consist of:
1) Audit plan and its amendment;
2) Examination assignment letter;
3) Notification of field examination letter or notification letter for office examination;
4) Notification on examination result letter (SPHP) and list of findings;
5) Proxy letter from taxpayer/its proxy;
6) Final discussion on examination result documents;
7) Calculation of tax under (over) payment for each tax period and type of tax (depends on examination coverage);
8) FAR analysis (will be attached when there is related party transaction);
9) Information utilization report or obtained evidence written permit to reveal bank secrecy;
10)Other necessary documents.
II. Implementation of examination
A. Chronology of examination consist of certain dates as follow:
1) Notification f examination send to taxpayer;
2) Field examination in taxpayer’s sites/meeting with taxpayer;
3) Documents completeness;
4) Sending SPHP;
5) Invitation for final discussion;
6) Minutes of discussion;
7) Request for Quality assurance;
8) Minutes of quality assurance team;
9) Minutes of final discussion of examination result.
B. Examination material
Consist of information regarding type of tax and examined items/its derivatives. Definition of type of tax and examined items/its derivatives based on audit plan and its amendment.
C. Description of examination work
Consist of available data/information utilized and description of examination work on examined items as stated in audit plan and its amendment.
1) Description of examination work of each items must contain as follow:
1) Sampling sources contain books, records, documents and/or other relevant data which is collected, processed and tested also include in examination working paper (KKP).
2) Methodology of testing, consist of examination technic and examination procedures applied in testing.
3) Summary, consist of:
a) Conclusion of tax auditor after final discussion of examination result.
b) Conclusion and decision of quality assurance team when there is such discussion.
Conclusion is presented in comparative table which compare items/its derivatives amount according to taxpayer and tax auditor/quality assurance team, except for:
1) Examination is conducted as re-examination, so comparatives amount are previous amount of items/its derivatives and current amount according to tax auditor/quality assurance team; or
2) Examination is conducted as taxpayer does not file its tax return, so items/its derivatives amount according to taxpayer will be blanked
2) When UP2 Domicile also conducted examination on taxpayer sites, then description of examination work must present examination of taxpayer sites.
3) When examination team propose on stopping the examination by preparing short LHP, then description of examination work explain the reason or basis for stopping such examination based on regulation.
III. Summary of examination work and calculation of tax payable.
A. Consist of summary of correction made on each items after final discussion on examination work or discussion with quality assurance team including calculation of tax payable, tax credit, tax under (over) payment, administrative charges, tax under (over) payment and/or tax collection letter.
B. Summary of each type of tax according to examination coverage.
C. Summary format follow calculation notes format.
IV. Conclusion and proposal of auditor
1) Conclusion consist of:
a) List of examination work summary, which consist of information of the biggest correction. Such correction will be classified as follow:
i. Gross revenue
ii. Cost of goods sold
iii. Other operating expenses
iv. Non operating Gross income
v. Non operating expenses
vi. Fiscal adjustment
vii. Loss compensation
viii. Tax credit
ix. Income tax withholding/collection object
x. Local VAT object
xi. VAT object of Import/intangible taxable goods utilization/taxable services utilization from outside custom area in custom area
xii. Sales tax on luxury goods object
xiii. Stamp duty object
xiv. Other tax object
Correction classification code consists of following code:
· Correction based on evidence
· Correction based on differences on tax regulation implementation
· Correction on transfer pricing
b) Data/information produced by examiner after examination consist of:
i. List of summary of examination work
ii. List of assets and properties of taxpayer
iii. KLU on examination work
iv. Changing in taxpayer profile
v. Other data
2) Proposal consist of:
a) Proposal on tax assessment letter, tax collection letter and/or other proposal based on examination work according to regulation; or
b) Proposal on stopping examination when examination team propose it based on regulation; or
c) Other necessary proposal.
c. Ending
1) Consist of documents as described in attachment of this circular letter.
2) Such documents are copies of the original documents.
2. LHP for other purposes
LHP consist of 3 parts, they are preface, content and ending.
a. Preface
A. Title Page
Title page at least must consist of name of examination operation unit (UP2), title of LHP, No of LHP, Date of LHP, taxpayer, taxpayer registration number, taxpayer’s address, type of examination, examination code, examination criteria, tax period and fiscal year.
B. Table of Content
Table of content is to simplify when preparing LHP
b. Content
Content of LHP consist of following:
1) Examiner statement
Examiner statement should be written as follow:
“in accordance with article 29 general provisions and procedures law, DGT has authority to conduct examination to test compliance of taxpayer’s taxation obligation and for other purposes in connection with implementation of tax law and regulation. LHP is prepared to settle examination work. LHP is solely for taxation purposes.
Examination to taxpayer already conducted in objective and professional way based on examination standards by using data, information and/or evidence collected/obtained at the time of examination.
In the future, Should there is an error in this report, new data obtained including unrevealed data in this examination, and/or tax crime, it will be followed up in accordance with tax law and regulations”
1) Taxpayer identity consist of:
i. Name of taxpayer;
ii. Taxpayer registration number (NPWP) consist of:
· NPWP of head office/business location
· NPWP branches
iii. Address consist of:
· Address of head office/business location
· Address of branches
· VAT payable place
· Place of transfer
iv. Accounting method;
v. Accounting system;
vi. Year of financial statement:
vii. Authorized person;
viii. Type of business;
ix. Business field classification (KLU);
x. Tax obligation
2) Examination assignment consist of:
· Date and number of examination assignment letter (SP2), amendment of SP2 and assignment letter to assist examination;
· Structure of tax examination team and experts;
3) Examination basis, consist of:
xi. Fiscal year;
xii. Type and criteria of examination;
xiii. Examination basis;
4) Examination implementation consist of:
xiv. Borrowed books, documents and/or records;
xv. Examination material;
xvi. Taxpayer business profile;
xvii. Chronology of examination
5) Description of examination work, consist of available data/information utilized and description of examination.
6) Conclusion and recommendation consist of conclusion and recommendation related to examination.
7) List of attachments consist of attached documents in LHP.
c. Ending
1) Consist of documents as described in attachment of this circular letter.
2) Such documents are copies of the original documents.
3. Preparing LHP
a. Examination team preparing LHP based on KKP.
b. LHP consist of:
i. Prepared in good and correct Indonesian language
ii. Paper size must be white A4
iii. Using font Arial
iv. Content of LHP must be given page number
c. Team member must sign LHP as their responsibility
d. When not available, it should be put notes in signature part.
e. LHP must be signed by head of UP2 in order to know:
i. Examined items already in line with audit plan and its amendments.
ii. Legal basis for correction in accordance with tax law and regulation.
f. LHP will be attached with examination supervisory paper prepared by using standard format set by DGT.
g. Draft of LHP is prepared when it must be reviewed by head of regional tax office or director of examination and collection before SPHP sent to taxpayer.
4. Transition condition
a. This circular letter will be valid at the stipulation date.
b. At the effective date of this circular letter, DGT circular letter No. SE-09/PJ/2012 concerning guidance for preparing examination work report to test compliance of taxation obligation will still valid until 30 June 2015.