The tax administration system in Indonesia is undergoing a fundamental transformation through the implementation of the core tax administration system (Coretax) and the issuance of Minister of Finance Regulation Number 15 of 2025 (PMK 15/2025). Based on the primary legal foundation in the Law on General Provisions and Tax Procedures, the Director General of Taxes possesses the attributive authority to conduct audits to test taxpayer compliance with tax obligations. As the latest primary implementing regulation, PMK 15/2025 simplifies the classification of tax audit types into three main categories: Comprehensive Audits, Focused Audits, and Specific Audits. Specifically, within the execution of Focused Audits, the tax authority formally implements a written notification document regarding the testing boundaries, practically known as the Term of Reference (TOR). The presence of this instrument shifts the audit paradigm to become more transparent, accountable, and measurable.
The Tax Auditor has a procedural obligation to provide the TOR to the Taxpayer at the very initial stage of the audit process. In technical execution, the Tax Auditor delivers this TOR simultaneously with the delivery of the Audit Notification Letter to the Taxpayer or their representative. The delivery date of this Audit Notification Letter holds highly crucial legal standing as it is officially established as the commencement date of the tax audit. With the delivery of this document from day one, the Taxpayer immediately receives official information from the tax authority regarding the scope of testing they will face.
The fundamental function of the TOR document is to provide certainty and establish strict boundaries regarding the scope of the audit. Through the TOR document, the Tax Auditor provides a written notification detailing the specific accounts within the Tax Return (SPT), specific data, and/or specific tax obligations that will be the target of in-depth testing. The implementation of this focused audit is grounded in the Compliance Risk Management (CRM) system within Coretax, where the system's algorithm has identified points of material non-compliance risk of the Taxpayer. Therefore, the function of the TOR restricts the Tax Auditor's authority so they do not arbitrarily expand the testing outside the designated accounts based on that risk analysis.
Within the dynamics of field audit execution, the Tax Auditor retains the legal authority to make adjustments or changes to the testing accounts within the TOR. If the Tax Auditor discovers actual conditions requiring the expansion or modification of testing accounts in the Tax Return, data, or specific tax obligations, the Tax Audit team must comply with formal procedures by delivering a written notification regarding these changes to the Taxpayer. This written notification is administered in the form of an Amended TOR (TOR Perubahan). The obligation to deliver this Amended TOR serves as an instrument to protect the Taxpayer's rights, ensuring the Taxpayer is continuously aware of the actual developments of the ongoing testing scope.
The utilization of the TOR instrument provides four highly significant strategic benefits for Taxpayers in managing tax risks. First, Taxpayers acquire a much higher level of legal certainty and procedural transparency from the moment the audit begins. Taxpayers no longer face audits that examine their entire bookkeeping randomly, but rather audits focused on clearly defined targets.
Second, Taxpayers can allocate resources efficiently to prepare evidentiary documents in a targeted manner. This is highly critical because PMK 15/2025 stipulates that the Taxpayer must submit documents no later than one month calculated from the borrowing request letter, where documents submitted past this deadline will legally be considered as not provided during the audit. As an application example, if the TOR only designates testing on Value Added Tax and Business Turnover accounts, the Taxpayer simply needs to center their focus on presenting tax invoices, sales ledgers, and bank receipt statements. The Taxpayer does not need to waste time organizing details of asset depreciation costs that are not the focus of the testing. Furthermore, Supreme Court Circular Letter Number 2 of 2024 also affirms that documents not submitted during the audit cannot be considered in dispute resolution at the Tax Court.
Third, a deep understanding of the testing boundaries within the TOR assists the Taxpayer during the Temporary Findings Discussion and the Final Audit Result Discussion stages. Taxpayers possess a measurable timeframe to formulate solid rebuttal arguments and prepare relevant equalizations exclusively for the corrected accounts.
Fourth, if the Tax Auditor proposes corrections outside the accounts listed in the TOR or the Amended TOR, the Taxpayer possesses a robust legal basis (legal standing) to reject those corrections. This understanding becomes a strategic asset for the Taxpayer if they need to submit a request for a dispute discussion with the Audit Quality Assurance Team based on unagreed legal grounds for correction.
In conclusion, Taxpayers must respond to this new audit system by building proactive audit readiness. Neat and integrated electronic data management becomes the primary key to responding to document requests based on the TOR within the short time limit to mitigate future tax dispute risks.
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