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Government asked to clarify income tax on construction service

July 16, 2009 - 09:26 AM

Tax observer from Citas Konsultan Global (Citasco) Ruston Tambunan has asked the government to provide affirmation with regards to grey area in the withholding of income tax by construction service providers, Bisnis Indonesia Daily reported on Thursday.

ďThe grey area means there is one transaction with two kinds of treatment. One is governed by ministerial regulation and another is ruled by government regulation. Which must taxpayer choose? Itís not an option thus confusing taxpayer, he said in a workshop on taxation treatment of construction service in Jakarta on Wednesday.

He cited the payment of compensation for individual architect is an object of income tax-article 21 according to the provision of Article 3 letter c point 1 of Regulation of the Minister of Finance Number 252/KM/2008, while Government Regulation Number 51 Year 2008 stipulates the payment as object of final income tax .

"The Directorate General of Taxation must provide affirmation whether the payment comes into object of income tax-article 21 or final income tax. If single treatment is applied, itís necessary to amend the ministerial regulation or government regulation. If not, it would continue to trigger dispute,Ē he said, adding that the grey may arise because the government is hurried to issue a taxation rule, especially for construction service.

Responding to the criticism, Head of the Income Tax Regulation, Withholding and Collection and Individual Sub-Directorate Dasto Ledyanto said that grey area is not found in the regulation regarding the obligation to withhold income tax by construction service providers.

"The provision has been clear so that itís not necessary to make affirmation about the issue,Ē he said, adding that the withholding of income tax is based on the provision of Article paragraph (2) of the Income Tax Law if the tax object is categorized as construction service. (*)

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