New tax will apply to construction, consulting services<\/p>\n
JAKARTA (JP): The government has introduced a ruling to impose
\nproject-based final rates of income tax on construction and
\nconsulting services, Director General of Taxes Fuad Bawazier
\nannounced yesterday.<\/p>\n
Under the ruling, companies and individuals will not be taxed
\na second time on this income according to progressive corporate
\ntax rates of between 15 percent and 30 percent.<\/p>\n
Fuad said the new rules on project-based income taxes were
\nstipulated in Government Regulation No. 73\/1996, dated Dec. 20.
\nThe ruling will come into force on Jan. 1, 1997.<\/p>\n
The ruling stipulates that 2 percent final income taxes will
\nbe imposed on contractors and 4 percent on architects and project
\nmanagers for public and private projects.<\/p>\n
The 2 percent income tax applies to both individual and
\ncorporate taxpayers. The 4 percent income tax only applies to
\ncompanies.<\/p>\n
The government now imposes a 1.5 percent income tax on all
\nconstruction services. On public projects, it already applies the
\nnew tax system stipulated in the ruling.<\/p>\n
Fuad said the new tax ruling addressed problems faced by
\ncontractors, architects and project management firms in
\ncalculating their tax.<\/p>\n
The new ruling stipulates that a 4 percent final income tax
\nwill be imposed on all consulting firms, except law firms and tax
\nconsultants.<\/p>\n
The new ruling states that the stipulated income tax rates are
\nderived from the gross value of projects.<\/p>\n
The government now imposes a 6 percent income tax on
\nconsulting services.<\/p>\n
Fuad said that cutting consulting firms' income taxes would
\nimprove the competitiveness of local consulting firms amid
\nglobalization.<\/p>\n
The final tax system requires building companies to pay their
\ntaxes immediately upon receiving their contracts. The tax payment
\nis final, meaning they are not required to state their income
\nfrom construction in their annual tax returns.<\/p>\n
Under the present system, contractors are allowed to ask for a
\nrefund if they suffer losses, but if their profits exceed 20
\npercent they must pay more income tax.<\/p>\n
Daniel Hutapea, the chairman of the building companies'
\nassociation, hailed the government's decision to replace the tax
\nsystem on construction.<\/p>\n
He acknowledged that the present tax system, in which payments
\nwere mainly based on contractors' book keeping, was often
\nproblematic because most contractors' book keeping was
\ndisorganized.<\/p>\n
\"We often win only one project in a year, sometimes even one
\nin three years so it is difficult for us to maintain good book
\nkeeping,\" he said, adding that many construction companies did
\nnot have accounting staff.<\/p>\n
Daniel said that construction companies, which must be mobile
\nand pay many bribes, often had trouble asking for tax refunds
\nwhen they lost money.<\/p>\n
\"We never get invoices for the payment of illegal levies. So
\nit is difficult for us to ask for tax refunds,\" he said. (rid)<\/p>",
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