Taxable Entrepreneur (PKP) and PKP Obligations

Taxable Entrepreneur (PKP)

Simply put, a Taxable Entrepreneur (Pengusaha Kena Pajak/PKP) is an entrepreneur who supplies Taxable Goods (Barang Kena Pajak/BKP) and/or Taxable Services (Jasa Kena Pajak/JKP) which are subject to VAT (Value Added Tax). Anyone can be an entrepreneur, whether they are an individual or a business entity (such as a PT - Limited Liability Company, CV - Commanditaire Vennootschap, or cooperative) that has business activities, including producing, importing, exporting, trading, or providing services.

Threshold for Small Entrepreneurs

Essentially, all entrepreneurs who supply BKP/JKP are considered PKPs. However, to provide fairness and administrative ease, the government sets a threshold for small entrepreneurs. A small entrepreneur is defined as an entrepreneur whose gross turnover (omzet) does not exceed IDR 4.8 billion in one fiscal year.

Entrepreneurs who fall into this category are not obligated to be confirmed (registered) as PKPs, so they are not burdened with the administrative obligations of VAT. However, they can still choose to be confirmed as a PKP. If they choose to become a PKP, they must fulfill all VAT obligations, namely collecting, depositing, and reporting the tax.

Obligation for PKP Confirmation

Entrepreneurs whose turnover exceeds IDR 4.8 billion are obliged to report their business for confirmation as a PKP. This obligation must be fulfilled no later than the end of the fiscal year in which their turnover crossed the threshold.

This confirmation process is based on self-assessment, where the entrepreneur reports their business to the tax office themselves.

If the entrepreneur fails to fulfill this obligation, the Director General of Taxes has the authority to compulsorily confirm them as a PKP (ex officio). This confirmation can be applied retroactively up to 5 years and potentially result in tax bills for previous tax periods.

Conversely, if the turnover of an already-confirmed PKP falls below IDR 4.8 billion in one fiscal year, they can submit an application to revoke their PKP status.

Place of PKP Confirmation

In general, the place for PKP confirmation is at the tax office whose working area covers:

1. The residence or domicile of the entrepreneur.

2. The place where the business activities are carried out.

If the PKP is an individual and has a business location separate from their residence, they only need to be confirmed at the place of their business activities. Meanwhile, for PKP in the form of a business entity, confirmation must be done at their domicile.

If a PKP has more than one business location, each location is legally considered a place where the tax is due. However, to simplify administration, the PKP can apply for the centralization (pemusatan) of the payable VAT. With this centralization, all VAT obligations from various business locations can be managed and reported through a single tax office, after obtaining approval from the Director General of Taxes.