Thursday, May 1, 2008

All Construction Services Currently Subject to Final Income Tax

Finally, the rules on the imposition of PPh on the Construction Services has been established by Government Regulation No. 51 Year 2008.  This regulation was issued on 20 July 2008. Regulations issued by this, then reinstate the imposition of PPh on the Construction Services into the final without a more discriminating types of contractors who perform services such as Construction is set in the previous Government Regulation (namely Government Regulation No. 140, 2000). 
The problem is that Government Regulation No. 51 Year 2008 is retroactive since January 1, 2008, hence the need of extra attention from the business services, construction of the change PPh provisions of the construction of this service. 

Summary of government regulation are:

A. Definition of the terms used in this Government Regulation (Article 1):

  1. Construction Services, advisory services is planning construction work; construction services the implementation of the work; advisory services and supervision of construction work.
  2. Construction work is the whole or part of a series of planning activities and / or supervision of the implementation of its work include architectural, civil, mechanical, electrical, environmental and governance each with the utility to realize a building or other physical form.
  3. Planning is the provision of construction services by private persons or entities who stated that professional experts in the field of construction planning services are able to create jobs in the form of physical planning another building.
  4. Implementation is the provision of construction services by private persons or entities who stated that experts in the field of professional services, construction that can organize activities to realize a result of planning a building or other physical forms, including the construction work of consolidating the functions of integrated services in merges planning model , Procurement and construction (enggineering, procurement and construction) and the model of merger planning and development (design and build)
  5. Construction supervision is by giving people a personal service or body of experts which stated that professional services in the areas of construction that is able to implement since the beginning of the work to complete and rendered.
  6. Service users are individuals or agencies, including the form of permanent business, which requires construction services.
  7. Service provider is a person or enterprise including forms of business activities that still provide construction services as well construction planners, construction and implementation, construction supervisors and the subcontractors.
  8. Contract value is the value of construction services listed in a contract construction services overall.

B. On the income from the business tax levied Construction Services Revenue of the final (Article 2).

C. The Rates of the final Income Tax for the Construction Services business consists of (Article 3):

  1. 2% (two percent) for the Implementation of Construction conducted by the provider of services that have qualified small business;
  2. 4% (four percent) for the implementation of Construction conducted by the provider of services that do not have a business qualifying;
  3. 3% (three percent) for the implementation of the construction undertaken by the service providers, other than the provider referred to in point 1 and 2 above [or by service providers who have qualified secondary qualifications or big business];
  4. 4% (four percent) for the planning or construction supervision of the construction undertaken by the service providers that have qualified business; and
  5. 6% (six percent) for the planning or construction supervision of the construction undertaken by the service providers that do not have a qualifying business.

D. In case the service provider business is a Permanent Establishment (PE), the rates of the above does not include tax revenue over the remaining PE's net income (Branch Profit Tax) after Income tax, which is the final (Article 3, paragraph (2)).

E. The remaining profit from Permanent Establishment after the final income tax, subject to tax in accordance with the provisions of Article 26 paragraph (4) of Law PPh or appropriate Tax Treaty (Article 4).

F. Income Tax payment procedure that is the final (Article 5 paragraph (1)):

  1. Services were cut by the user at the time of payment, the service user is a tax witholder
  2. paid by service providers, in terms of user services is not a tax witholder.

G. Income Tax of the cut or are paid (Article 5 paragraph (2)):

1. the number of payments, not including VAT rates multiplied Income tax referred to in Article 3, paragraph (1) PP 51 Tax Year 2008; or

2. the amount of revenue payments, not including VAT, tariffs multiplied Income tax referred to in Article 3, paragraph (1) PP number 51 in 2008 PPh paid by the Service provider

H. Conditions on the difference between the lack of cutting or deposits PPh and treatment if the result of receivables (Article 6):

1. In case there is a difference between the lack of tax revenue that based on the value of Construction Services Contract with the Income Tax based on the payment that was deducted or paid their own referred to in Article 5 paragraph (1), the difference is the lack of paid by the service provider.

2. In the case of Construction Services Contract Value is not fully paid by the User Services, Value of the Contract Services Construction is not paid is not subject to Income Tax which is final, with the terms of Contract Value of Construction Services, which is not paid was recorded as receivables, which can not be charged.

3. Debts that can not be billed as referred to in paragraph (2) is the receivables which clearly can not be billed as referred to in Article 6, paragraph (1) the letter h Income Tax Law.

4. In the case of receivables, clearly can not be billed as referred to in paragraph (3) can be charged again, remain subject to tax revenue that is final.

I. The provisions PPh tariffs and general pengkreditan tax paid abroad (Article 7):

1. The tax paid or terutang abroad on earnings from overseas received or obtained Service provider can be credited against the tax terutang based on the provisions of the Income Tax Law Law.

2. Other income received or obtained from outside the service provider business services Construction rates based on the general provisions of the Income Tax Law.

3. Gains or losses from the exchange of business services including in the calculation of Construction Services Contract value of construction imposed tax revenue that is final.

J. Liabilities Bookkeeping / Recording (Article 8)

Service providers obliged to make a separate recording of the costs arising from the income received or obtained from business activities other than the Construction Services business.

K. Change Period (Article 10)

To the contract signed before January 1, 2008 is set:

  1. for the payment of the contract or part of the contract until 31 December 2008, the imposition of PPh regulated by the PP 140 Year 2000 on top of the income from Income Tax Business Services Construction;
  2. for the payment of the contract or part of the contract after 31 December 2008, based on the regulation of PP 51 Tax Year 2008

L. Government Regulation No. 51 Year 2008 is effective since January 1, 2008 (Article 12).

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