On 22 June 2017, the Minister of Trade issued Regulation No. 44 of 2017 on the Implementation of Confirmation of Taxpayer Status before Issuing Certain Licenses in the Ministry of Trade (Regulation 44), which became effective on 1 September 2017. Regulation 44 is the implementing regulation of the President Instruction No. 10 of 2016 on Corruption Prevention and Eradication of 2016 and 2017.
Regulation 44 is a result of a discussion between the Ministry of Trade and the Ministry of Finance. It was issued to synchronize taxation data with export and import data, and to avoid miscalculation of the tax that should be paid by the importer or exporter which may lead to a loss of state income in the form of taxation.
Implications for Business
1. Who will be affected
Regulation 44 will have a significant impact on business players such as franchiser, distributors of alcohol and staple food, future commodity traders and particularly exporters and importers.
2. Impact for exporters and importers
Under the previous regulation, in respect of taxation data, exporters and importers only needed to submit their taxpayer identification number (NPWP) to obtain an export license or import license under Ministry of Trade. Now, the regulation is more strict as there must be a confirmation of taxpayer status before the Ministry of Trade issue the licenses.
With the issuance of Regulation 44, it is implied that the government wants the exporters and the importers to comply with taxation - which is determined by a valid taxpayer status. Further, General Secretary of Ministry of Trade informed that importers and exporters are obliged to show proof of payment of tax on imported goods as a condition to obtain an import license or export license. Failure to do so may cause the licensing application would not be processed.
What the Regulation Says
Below are some of the noteworthy provisions of Regulation 44:
1. The requirement to conduct confirmation of taxpayer status
Under Regulation 44, the Ministry of Trade will process certain licenses after the taxpayer's status has been confirmed. If the taxpayer's status is confirmed to be valid, certain licenses may be issued. Otherwise, the application process for certain licenses will be suspended until the applicant obtains a valid status.
Referring to Directorate General of Taxation ("DGT") Regulation No. 43 of 2015 and Circular Letter of Directorate General of Taxation No. SE-33/PJ/2016, a valid status will be obtained in the following circumstances:
- The name of the taxpayer is in line with the data in the information system of the DGT.
- The taxpayer has submitted Annual Income Tax Return in the last two fiscal years.
Under the above provision, the taxpayer must submit proof of payment of the payable tax before license applications can be processed by the Ministry of Trade. This is to ensure that licenses are not issued to applicants who have tax arrears.
Based on Regulation 44, the appointed officials will conduct confirmation of taxpayer status through:
- Information system of the Ministry of Trade, which is integrated with the information system of the DGT, Ministry of Finance;
- Website/application provided by the DGT, Ministry of Finance.
2. Certain licenses that are required to get confirmation of taxpayer status
The attachment of Regulation 44 provides the types of licenses that require confirmation of taxpayer status. There are 115 licenses, divided into four groups:
- Domestic trade licenses, such as Business License of Survey Services and Business License for Property Trade Intermediaries
- Foreign trade licenses, such as:
- Registered Exporter of certain products (ie, oil and mining products);
- Export Approval of certain products (ie, animal and animal products);
- Producer Importer of certain products (ie, plastics, dangerous goods);
- Registered Importer of certain products (ie, alcohol; oil and gas; mobile phones, handheld and tablet computer);
- Import Approval of certain products (ie, animal and animal products; iron, steel and its derivative products, oil and gas; textile; mobile phones, handheld and tablet computer).
- Consumer protection and commerce, such as Goods Registration Number and Product Registration Number
- Commodities term trade, such as Business License of Term Brokerage and Business License of Term Exchange
Regulation 44 is silent regarding any sanction imposed by Ministry of Trade when exporters or importers do not comply with taxation. However, it is clearly implied that if a valid taxpayer status is not obtained, the export/import license may not be issued. Consequently, the absence of export/import license may affect exporters and importers as follows:
Based on the regulation of general provision of export, if exporters fail to provide the required export documents (such as certain export licenses issued by Ministry of Trade), they may be subject to administrative sanctions in the form of revocation of licenses and/or cancellation of recognition as a Registered Exporter.
Under the current regime, if goods imported without the required import license, importers may not be able to clear the goods from the port to the customs area. Thus, the importers will be required to re-export their goods since the goods are not allowed to enter the customs area. In addition, failure to provide the required import documents may be subject to administrative sanction in the form of suspension of Importer Identification Number (Angka Pengenal Impor/API) as mandated in the general provision of import regulation.
Under Regulation 44, the Ministry of Trade will only grant certain licenses to importers and exporters if they have a valid taxpayer status. If an importer or exporter does not have a valid status, the Ministry of Trade may suspend its licensing application until it obtains the required valid status.
The valid status will be obtained if, among other things, the taxpayer has provided proof of payment of the payable tax as explained above. If an importer or exporter does not have a valid taxpayer status, its import or export license may not be issued. An exporter may have to re-export its imported goods and importers and exporters might be imposed with administrative sanctions.