Tax Collection Letter Can Be Written Off by Indonesia’s DGT, How?

The Tax Collection Letter (Surat Tagihan Pajak “STP”) serves as a mechanism for the Directorate General of Taxes (DGT) to collect tax administration sanctions arising from violations of tax provisions or errors in fulfilling tax obligations. Unlike errors in presenting financial statements for commercial purposes, mistakes in tax reporting incur administrative sanctions. In contrast, errors in commercial financial statements typically only require an adjustment journal, with no administrative penalties applied.

Legal Basis

The provisions concerning tax administration sanctions are outlined in Law (UU) No. 6 of 1983 regarding General Provisions and Tax Procedures (Ketentuan Umum Peraturan Perpajakan “KUP”), which has been amended several times, including through Law No. 11 of 2020 concerning Job Creation, Law No. 7 of 2021 concerning Harmonization of Tax Regulations (Harmonisasi Peraturan Perpajakan “HPP”), and Law No. 6 of 2023 regarding the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law.

What is a Tax Collection Letter (STP)?

The STP is a letter issued by the DGT to impose tax administration sanctions such as interest, fines, and increases on taxes owed. It is important for taxpayers to respond to the STP immediately. If the taxpayer agrees with the STP, the payment should be made before the due date. Conversely, if there are objections to the STP, the taxpayer has the option to request a reduction, write-off, or cancellation from the DGT.

Triggers for STP Issuance

According to Article 14 of the KUP Law, the following circumstances may lead the DGT to issue STPs to taxpayers:

1. Unpaid or underpaid income tax for the current year;
2. Insufficient tax payments due to typos or miscalculations;
3. Administrative sanctions in the form of fines or interest imposed on taxpayers;
4. Delay or absence of tax invoices by confirmed Taxable Entrepreneurs;
5. Incomplete filling of tax invoices by confirmed Taxable Entrepreneurs;
6. Disallowed interest compensation identified through decisions or information obtained;
7. Unpaid or underpaid taxes within the stipulated installment agreement or postponement period;

How to Submit an Application to the DGT

Article 36 of the KUP Law authorizes the DGT to:

1. Reduce or write off administrative sanctions resulting from taxpayer negligence or circumstances beyond their control;
2. Correct or cancel an erroneous tax assessment letter;
3. Correct or cancel an incorrect STP as specified in Article 14; or
4. Cancel the outcomes of a tax audit or a tax assessment letter if conducted without:

• An official notification letter of the audit results; or
• A final discussion of the audit results with the taxpayer.

Generally, applicants may submit their requests up to two times, except for number 4, which permits only one cancellation request.

Conclusion

Taxpayers should exercise caution in fulfilling their tax responsibilities to avoid administrative sanctions. Those needing clarification on tax regulations can visit the tax office or consult with experienced tax consultants, licensed by the DGT.

Tax Consultant Assistance – PT Prime Services International

For inquiries related to the STP or other tax obligations (monthly and annual) for individuals or corporations, including tax disputes, reviews, advisory services, transfer pricing, tax planning, and facility applications, please feel free to contact us.

We hope this information proves useful to our valued partners.