What is a Letter of Inquiry?

The Directorate General of Taxes (DGT) provides various incentives to help taxpayers affected by the spread of the Coronavirus (Covid-19). However, DGT will continue to supervise the use of these incentives to prevent misuse.

Supervision is carried out starting from the submission of the application to the filing of the use of tax incentives. In the early stages, if irregularities are found, the DGT will issue a Letter of Inquiry (Surat Permintaan Penjelasan atas Data dan/atau Keterangan, hereinafter referred to as SP2DK). As such, what is meant by SP2DK?

Definitions

Referring to the Director General of Taxes Circular Number SE-39/PJ/2015, SP2DK refers to a letter issued by the Head of the Tax Office (KPP) to request an explanation of data and/or information to a taxpayer concerning alleged non-fulfilment of tax obligations pursuant to statutory tax provisions.

This implies that SP2DK is issued if a taxpayer tends not to exercise their obligations pursuant to applicable regulations. In other words, SP2DK is issued as a form of supervision of the implementation of the self-assessment system.

Even though the government has granted trust to taxpayers, supervision must continue to be carried out to ensure compliance with tax provisions. Thus, taxes can be collected and tax revenues remain optimal.

In the implementation, even though the authority lies with the Head of the Tax Office, the request for an explanation of data and/or information to taxpayers is submitted by Account Representatives (AR) and/or Extensification and Dissemination Division.

Request for an Explanation of Data

Pursuant to the Director General of Taxes Circular Number SE-39/PJ/2015, the SP2DK issuance process consists of 5 stages, namely preparation, taxpayer’s response, analysis of taxpayer’s response, follow-up and administration.

The first stage, preparation. In the preparatory stage, if based on verification results and analysis of the held data and/or information, the Head of the Tax Office indicates the need for an explanation, the request process is carried out using SP2DK.

The SP2DK can be sent by post or by courier/facsimile service. In addition, SP2DK can also be sent directly to taxpayers through visits.

The Head of the Tax Office is authorised to determine how to submit the SP2DK by taking into account the distance, time, costs and other considerations.

The Head of the Tax Office allows taxpayers to submit responses to the SP2DK no later than 14 days after the SP2DK sending date if it is sent by post, forwarder services or courier services, or the date SP2DK is submitted if delivered directly by the Tax Office to the taxpayer

The second stage, the taxpayer’s response. Taxpayers can respond to SP2DK directly or in writing. If the taxpayer does not respond within 14 days after the SP2DK is sent or submitted, the Head of the Tax Office is authorised to determine one of 3 decisions or actions.

First, extending the period for the request for an explanation of data and/or information to the taxpayer based on certain considerations. Second, visiting the taxpayer.

Third, proposing that the taxpayers be subject to verification, audit or preliminary investigation pursuant to statutory tax provisions.

The third stage, verification and analysis of the correctness of the data on the taxpayer’s response. AR/executors of the Extensification and Dissemination Division verify and analyse data and/or information obtained based on knowledge, expertise and professionalism.

The verification and analysis are aimed at concluding and recommending follow-up, which is set forth in Letter of Inquiry Report (Laporan Hasil Permintaan Penjelasan atas Data dan/atau Keterangan, hereinafter referred to as LHP2DK). Verification and analysis are carried out by comparing the following elements:

First, data and/or information held and/or obtained by the DGT. Second, data and/or information in the response submitted by the taxpayer as well as evidence or supporting documents. Third, tax obligations that have been fulfiled by the taxpayer.

If based on verification and analysis, the Tax Office has not been able to conclude the correctness and has not been able to recommend follow-up, the Head of the Tax Office is authorised to re-request an explanation of data and/or information within 14 days after the first request period ends.

The fourth stage, recommendations and follow-up. In summary, there are 4 follow-ups on the conclusions obtained from the request for an explanation of data and/or information.

First, without follow-up or the case is deemed complete, if the data and/or information is appropriate/reported and the taxpayer has filed the Tax Return according to the tax authorities’ request.

Second, supervising the filing of the Tax Return if the taxpayer agrees with the results of the verification and analysis of AR/executors of the Extensification and Dissemination Division and is willing to file the Tax Return or rectified Tax Return.

Third, audit/verification, if there is concrete data or other considerations based on the DGT’s authority that it is necessary to assess compliance.

Fourth, preliminary investigation if there is an alleged tax incident or crime.

The fifth stage, administering the request for an explanation. To implement administrative order, the AR/executors of the Extensification and Dissemination Division must document the request for an explanation of data and/or information,

The administration includes SP2DK, Letter of Inquiry Report (LHP2DK), Minutes of Inquiry, Minutes of Rejection of Inquiry and/or Minutes of Non-Fulfilment of Inquiry.

AR/ executors of the Extensification and Dissemination Division must prepare the LHP2DK no later than 7 days after the expiration of the request for an explanation of data and/or information to the taxpayer. (Bsi)