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Tax Treatment in the Liquidation Process


Tax Treatment in the Liquidation Process

Very important to understand that liquidation is a cycle and the business decisions that impact to their own taxation.

I.                   Income Tax  

a.       Transfer of property

                                                                          i.      Profit/gain from  property transfer in a liquidation process is object of Tax Income (Article 4 paragraph 1 letter d of Law on Income Tax)

                                                                        ii.      Value of Transferred Property is market value unless stipulated otherwise by the Minister of Finance (article 10 paragraph 3 Law on Income Tax)

b.      Dividend

                                                                          i.      Repayment due to liquidation in excess of paid-in capital to shareholders is the dividend which is the object of tax. This is in accordance with article 4 paragraph (1) letter g Income Tax Act. If these conditions are met, liquidated the company is obliged to withhold income tax article 23. If the shareholder is subject to foreign tax, income tax cuts made according to article 26 or P3B

c.       Profit Debt Relief

                                                                                      i.      In accordance with article 4 paragraph (1) letter k Income Tax Act, income is the profit due to debt relief, except to a certain amount stipulated by Government Regulation. Government Regulation provides that discharge of indebtedness of small debtors, such as a family business credit prasejahtera (Kukesra), farm credit (KUT), people\'s business credit (KUR), credit for housing is very simple, as well as other small loans up to a certain amount of tax exempted as an object . Terms are governed by Regulation No. 130 of 2000 and according to the rules of the privileges granted during the credits does not exceed USD 350 million

II.                VAT

a.       Tax object

                                                                          i.      Under article 1 A (2) and article 16 VAT Act D, taxable goods (BKP) in the form of assets which, according to its original purpose is not to be traded, remaining at the liquidation of the company, and the input tax on the acquisition can not be credited as intended in Article 9 paragraph (8) b and c. Included in this definition is as follows

1.      The acquisition of taxable goods or taxable services that have no direct connection with business activities

2.      Acquisition and maintenance of motor vehicles in the form of sedan and station wagon, except the merchandise or leased

b.      Stock

                                                                          i.      Taxable goods, in the form of stock or assets which, according to its original purpose is not to be traded, remaining at the liquidation of the company (Article 1A paragraph (1) letter e Law on VAT). In other words, if supplies qualify as a taxable item, the provisions were not originally for sale, will be subject to VAT

III.             Tax Billing

a.       If there are signs the company will dissolve the firm, billing done instantaneously and simultaneously (article 20 paragraph 2 UU KUP)
ii. According to Article 21 paragraph (1) Law KUP, the state has the right to tax debt mendahulu on property taxes insurer, unless things happen following

                                                                          i.       Court fee is due only to a conviction for an auction of movable or immovable and

                                                                        ii.      costs incurred to salvage the goods

                                                                      iii.      Court fee, which only caused by the auction and settlement of a legacy.

IV.             The transfer of rights to land and or buildings that meet the provisions of Regulation No. 48 of 1994 jo. PP No. 71 year 1998 income tax payable amounting to 5% of the value of the transfer

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