We have bid farewell to Lunar New Year and Cap Go Meh Festival of 2019, which means February is about to say Adieu!, and March has started peeking, ready to surprise everyone. Yes, tax month is already around the corner. For individuals who are Indonesian tax residents for the tax year of 2018, the deadline to submit their Annual Tax Returns (SPT) is on March 31, 2019. Only 34 more days to go!
Uniquely Indonesian, individual tax residents are not only required to report their income and calculate any taxes due in their SPT, but also the ASSETS and LIABILITIES that they still have at the end of a tax year (read: December 31). Many people complain to me why they are required to report ASSETS and LIABILITIES in their SPT, but this is actually not a new requirement from the Tax Guys. The requirement to report assets and liabilities in Individual SPT has been there since 1984 as stipulated in Directorate General of Tax (DGT) Decision no. KEP-113/PJ.BT5/1984, which is one of the derivative regulations of General Tax Provision Law No. 6 Year 1983.
One question that often arises whenever I assist clients with their SPT is what are considered as assets that should be reported. There is a specific regulation that discusses this. The latest is DGT Regulation no. PER-36/PJ/2015, in Attachment II and IV. However, the way taxpayers apply this regulation into their specific situations may differ from one person to another. In addition to tax regulations, I also use this guideline in determining whether an asset needs to be reported in SPT:
1. It’s Liquid? REPORT!
It is interesting how a person can immediately think of the house or apartment that he owns as his asset, but not the money in his bank account. I still find cases like this from time to time. Those end of year balances in your bank accounts. Those time deposits that are still outstanding by end of the year. The stocks and bonds that are still in the portfolio by December 31. The mutual funds (read: reksadana) balances at the end of the year. These are all liquid assets and should be reported in the SPT. They are considered liquid because they can be converted into cash quickly, just within a few days. Then how about those stacks of cash that you pile up in a safe deposit case, or somewhere in your drawer? They are not just liquid. They are extremely liquid. They should be reported.
2. Does it have present and/or future financial value to the person?
“Do I need to report my iPhone X as my asset? It costed me Rp. 10 Million. How about my Macbook laptop? This is the latest edition, you know.” Each asset mentioned actually falls into the category of “Electronics and Furnitures (asset code 055)”, based on the prevailing tax regulation, but there is no easy, straight-forward answer to this type of questions.
For some people, even though it costed them Rp. 10 Million to purchase an iPhone X, they do not really consider that phone as an asset with significant present or future financial value. They only view it as a tool for communication. If the phone becomes obsolete, they do not consider selling the phone, but to give it out to someone, or trade it with a new iPhone for some extra discount. In this situation, this person may opt not to report the iPhone X as his asset.
But there are some other people who consider buying a new iPhone X as an investment. In fact, he is thinking of only using it for a couple months, and then keeping it safely as part of his collectibles. When some time in the future iPhone X becomes an antique, he will be able to sell it possibly at a profit. In this situation, the person may want to report the iPhone X as his asset.
Yet there are also some people who finally are able to buy iPhone X after diligently saving up some money for a couple of months. For them, a ten-million-rupiah phone is indeed a luxury. This price may be a third if not half of their monthly salary. But for the going forward, should at a given time they are in need of cash, they can sell their iPhone X, even though at a lower price. For those people, they may want to report the iPhone X as asset in their SPT.
3. Is it under my name?
There are cases where clients have certain assets such as car, house, land, or private stock that are under their names, while in fact those assets are owned by someone else. The money used to purchase those assets were not their money. My clients actually are just the nominees of the actual owners of the assets. So what should you do in this kind of situation? This is where the column “Keterangan” in the “Daftar Harta” table of the SPT comes in handy. I would suggest for the asset to still be reported in your SPT, but in column “Keterangan” put some information such as “on behalf of, and as Nominee of Mr. Scrooge Duck”. And if the actual owner of the asset is also an Indonesian tax resident, it would be better if he also reports those assets in his SPT, and put in the column “Keterangan” some information such as “asset under the name of Mr. Donald Duck”.
Lao Tzu once said, “A journey of a thousand miles begins with a single step.” Now for us who soon will be heading to the tax month of March, “A journey of preparing an SPT begins with collecting all the relevant information for income earned during the year, and assets and liabilities owned at the end of the year”. So start collecting the relevant data, and documents for your SPT, including your assets outstanding at the end of the year. Thirty-four days is not too many of days for us the busy bees.
Happy preparing tax returns!
(by: Cindy R. Salaki)