Tax audit is undertaken to assess the tax compliance of Taxpayers.
Tax audit refers to a series of activities of collecting and processing data, information, and/or evidence in an objective and professional manner according to an auditing standard for the purpose of assessing tax compliance and/or for other purposes in the context of enforcing the tax laws and regulations.
The purpose of tax audit is to verify the tax compliance of Taxpayers and for other purposes in the context of implementing the tax laws and regulations.
Tax audit, based on its purpose, can be classified into as follows:
Tax Compliance Audit
Tax compliance audit consists of:
- Special audit is carried out when there is an indication of non-compliance with tax obligations, whether based on concrete data or result of risk analysis;
- Routine audit is an audit conducted in connection with the Taxpayers’ performance of their tax rights and/or obligations.
Tax Audit for Other Purposes
Tax audit for other purposes is conducted in terms of:
- Issuance of Taxpayer Identification Number (TIN) and/or registration or revocation of Value-Added Tax (VAT) Entrepreneur status ex-officio;
- Revocation of TIN and/or VAT Entrepreneur status at the Taxpayer’s request;
- Determination of commercial production commencement;
- Designation of Taxpayer located in a remote area;
- Determination of exploration cost;
- Tax collection;
- Collection of materials for preparing a Net Income Calculation Norm;
- Revocation of TIN and/or VAT Entrepreneur status ex-officio.
Stages of Tax Audit
A tax audit begins with delivering a Notice of Field Audit or serving a summons in case of office audit. In special cases, such as during the pandemic, the audit can be carried out online.
The results of the tax audit must be notified and delivered to the Taxpayer through a Notice of Tax Audit Findings enclosing a list of the audit findings and the legal basis for the findings.
A tax compliance audit ends with an Audit Report and a legal product that could be in the form of:
- Notice of Tax Underpayment Assessment;
- Notice of Additional Tax Underpayment Assessment;
- Notice of Nil Tax Assessment;
- Notice of Tax Overpayment Assessment.
An audit for other purposes concludes with an Audit Report issued to contain the decision to accept or reject the Taxpayer's proposal.
Rights and Obligations of Taxpayer in Tax Audit
The auditee Taxpayer has the rights to:
- Request the tax auditor to:
- Show their auditor ID badge and produce an Audit Warrant;
- Provide a Notice of Field Audit;
- Produce a letter certifying the change in the composition of the auditor team members;
- Explain the reason and purpose of the tax audit;
- Receive a Notice of Tax Audit Findings;
- Attend the audit closing conference on the date indicated in the invitation letter;
- Propose to have a discussion with the Quality Assurance Team if a dispute between the tax auditor and the auditee arises during the audit closing conference; and
- Give their opinion and assessment with regard to the tax auditor’s performance of tax audit by completing an audit questionnaire.
The auditee Taxpayer has the obligations to:
- Comply with the summons to attend the tax audit conference for field tax audit briefing;
- Produce and/or loan documents forming the basis for income calculation;
- Give an opportunity to access and/or download electronic data;
- Give the auditor an opportunity to enter sites or rooms where documents are stored;
- Provide assistance for the smooth running of the audit, such as:
- Provide personnel and/or equipment at their expense if accessing the electronic data requires specific equipment and/or expertise;
- Provide assistance to the auditor team to access personal and/or non-personal properties; and/or
- Make available a special room if the audit is carried out on their premises;
- Loan the Audit Working Papers prepared by Public Accountant;
- Submit a written response to the Notice of Tax Audit Findings; and
- Provide other necessary written and/or verbal information.