In Indonesia, a rate of 25% is charged as corporate tax. However, when public companies are able to satisfy the 40% minimum listing requirements, they are entitled to a 5% cut on the corporate tax payments. Other small enterprises, with an annual turnover of under Rp50 billion, can exercise a 50% discount on the normal tax rate. This is imposed in proportion to the chargeable income, which is the gross revenue of up to Rp4.8 billion.
Why is Tax Management Essential?
Understanding the company’s tax components and planning savings can maximize the income that the organization would make after its tax obligations. For instance, Google was able to avoid over $2 billion in corporate tax payments for the financial year 2011, on income incurred from its operations the world over. How did they manage to do it? They legally shifted over $9.8 billion into a Bermuda based company. And because Bermuda does not have corporate tax, the multinational was able to reduce its liability by more than half.
Why is Planning Essential?
Planning in advance is the key here. Consider beginning at the start of the financial year, rather than towards the end. This will minimize last minute decision frenzy, bound cash flow and other financial bottle necks. A few things to consider while planning include:
- Planning at the start of the financial year would mean incorporating the possible tax saving schemes within the framework of the budget.
- Some tax saving areas are well travelled by all, and features in every return statement.
- In-depth knowledge of tax savings is also required for making optimized corporate tax payments. An expert in the subject will be a sound guide for tax planning.
Here are certain points to remember while planning and managing your company’s tax liability:
- Corporate tax payment is due before the company’s tax returns. This means that monthly tax installments (Article 25 income tax) and withheld tax falls under the prepayments for the current year. So, if the advance tax and tax paid abroad is less than what is due, the shortfall must be settled before filing the returns. Paying early will help avoid the interest liability.
- Plan you cash flows so that payments can be made on time. Also, make use of deductions, exemptions and exclusions. Make use of professional tax advisory assistance to get the most out of your corporate tax payments.