Provisions on Preliminary Restitution for Collective Investment Contracts Amended

The Directorate General of Taxes (DGT) has amended the rules on preliminary tax refunds (preliminary restitution) for low-risk taxpayers, specifically those under collective investment contracts (Special Purpose Companies). A Special Purpose Company is a limited liability company whose shares are owned by a Real Estate Investment Fund in the form of a collective investment contract.

The amendment was made through the issuance of Directorate General of Taxes Regulation Number PER-16/PJ/2025, issued on August 13, 2025, which revises Directorate General of Taxes Regulation Number PER-6/PJ/2025.

The new regulation was issued because, according to the DGT, the previous rule, PER-6/PJ/2025, did not sufficiently regulate preliminary refunds for Collective Investment Contracts, thereby creating legal uncertainty.

In principle, preliminary restitution may be granted to certain taxpayers, taxpayers meeting specific criteria, or low-risk VAT-registered persons. The granting of preliminary restitution is based on an application submitted by the low-risk taxpayer.

Criteria for Low-Risk VAT-Registered Persons

In general, there are ten criteria under which a taxpayer may be designated as a low-risk VAT-Registered Person:

1. Companies whose shares are traded on the Indonesia Stock Exchange
2. State-Owned Enterprises (BUMN) and Regional Government-Owned Enterprises (BUMD)
3. VAT-Registered Persons that are Primary Customs Partners (Mitra Utama Kepabeanan)
4. VAT-Registered Persons that are certified Authorized Economic Operators
5. Manufacturers/producers of taxable goods or services that have production facilities
6. VAT-Registered Persons applying for a refund of up to IDR 1 billion
7. Pharmaceutical wholesalers meeting specific criteria
8. Medical equipment distributors meeting specific criteria
9. Subsidiaries of State-Owned Enterprises with more than 50% share ownership
10. Collective Investment Contracts

Key Changes to Preliminary Refund (Restitution) Rules

Preliminary refund applications submitted by low-risk taxpayers can only be based on tax returns (SPT) or amended returns for tax periods, parts of the tax year, or full tax years, either before or after the designation as a specific or low-risk taxpayer.

1. Input Tax Provisions

The change made by the DGT relates to input tax that has been credited and can be accounted for as part of the tax overpayment.

In the new regulation, the DGT provides more detailed provisions, stating that the input tax must first be listed in a Tax Invoice, Specific Documents deemed equivalent to a Tax Invoice, and certain documents deemed equivalent to import customs declarations and letters of assessment for import duties, excise, or taxes.

The Tax Invoice containing input tax that can be accounted for as part of the tax overpayment must meet several criteria. Firstly, it must have been reported in the VAT Periodic Tax Return of the VAT-Registered Person who issued the Tax Invoice.

If the above criteria are not met, the input tax cannot be considered as a tax credit in the application for tax overpayment. Meanwhile, the previous regulation did not specifically require input tax to be listed in the Tax Invoice and the related documents.

2. Follow-up on Preliminary Refund Requests from Individual Taxpayers

Another change in PER-16/PJ/2025 relates to the follow-up actions on preliminary refund requests submitted by individual taxpayers, excluding civil servants and military personnel (TNI members).

Specifically, this concerns preliminary refund requests from the 2024 Annual Individual Income Tax Return showing an overpayment. If the overpayment is caused by an error in reporting Income Tax Article 21 payable, the DGT will take the following actions:

• Deemed No Tax Overpayment
• No decision letter for the preliminary tax refund will be issued.
• The application will not be processed in accordance with Article 17B of the General Provisions and Tax Procedures Law (UU KUP).

The exception provision applies as long as several criteria are met. First, the individual taxpayer only receives income and withholding tax slips for Article 21/26 Income Tax using Form 1721-A1. Second, there are no deductions from gross income in the form of zakat or mandatory religious donations. Third, the Income Tax Article 21 payable according to the taxpayer is less than the tax payable based on the withholding slip.

Designation of Low-Risk VAT-Registered Person

The designation of a Collective Investment Contract as a low-risk taxpayer is carried out by the DGT based on the taxpayer's application or ex officio. The decision letter for the designation as a low-risk VAT-Registered Person must be issued no later than 15 days from the date of receipt of the application.

However, it should be noted that the designation of a Collective Investment Contract as a low-risk VAT-Registered Person will be revoked if the VAT-Registered Person is subject to a preliminary evidence audit, investigation, or criminal proceedings, or if an audit concludes that it is not operating under a collective investment contract scheme. (ASP/KEN)