Distress Warrant & Confiscation

Referring to the provisions of Article 20 of the General Provisions and Tax Procedures Law (UU KUP), taxes that are not paid according to the due date will be collected through a Distress Warrant (Surat Paksa). These collection actions must be carried out according to a predetermined timeframe with the following provisions:

Warning Letter (Surat Teguran): If the tax debt has not been paid within 7 days after the due date, the Directorate General of Taxes (DJP) will issue a Warning Letter. This is the first notice to the taxpayer to immediately settle their debt.

Distress Warrant (Surat Paksa): If the tax debt is still unsettled 21 days after the Warning Letter is sent, the DJP will issue a Distress Warrant. This warrant is a more serious collection order and is delivered directly to the taxpayer by the Tax Bailiff (Jurusita Pajak).

Confiscation of Assets (Penyitaan Barang): If the tax debt is still not paid within $2 \times 24$ hours (2 days) after the Distress Warrant is delivered, the Tax Bailiff will confiscate the taxpayer's assets. This confiscation serves as a guarantee to settle the debt.

Announcement of Auction (Pengumuman Lelang): If the tax debt is still not settled 14 days after the confiscation, the DJP will announce the auction of the seized assets.

Sale of Seized Assets (Penjualan Aset Sitaan): If the tax debt is still not settled within 14 days after the auction announcement, the DJP will immediately sell the seized assets through the state auction office. For assets that are not subject to auction, such as cash or securities, the DJP will directly use, sell, or transfer them to settle the tax debt.

In addition to the above efforts, in certain situations, the DJP may immediately take firm action without having to go through the auction process, namely Prevention (Pencegahan) and Detention (Penyanderaan).

Prevention: Is a Tax Collection Action carried out instantly and simultaneously if there are signs that the Tax Debtor (Penanggung Pajak) will evade payment, such as:

• Intending to leave Indonesia.

• Transferring their assets.

• There are signs of business dissolution, merger, or expansion; transferring the company owned or controlled; making other forms of change.

• The business entity will be dissolved by the state.

• Confiscation by a third party occurs or there are signs of bankruptcy.

Detention: A taxpayer can be directly detained if:

• The right to collect taxes will expire in less than 2 years.

• There are signs that the business entity will be dissolved, merged, or transferred.

• There are signs that the taxpayer will become bankrupt.

  Detention can be carried out at the earliest 30 days before the prevention period ends.

International Tax Collection Assistance

Furthermore, based on the latest provisions, namely Article 20A contained in the HPP Law (Harmonization of Tax Regulations Law), it is stipulated that the Minister of Finance is authorized to enter into reciprocal cooperation with partner countries for tax collection assistance carried out by the Director General of Taxes.

This cooperation is based on international agreements which include:

• double taxation avoidance agreements (DTAA);

• conventions on mutual administrative assistance in tax matters; or

• other bilateral or multilateral agreements.

  The basis for tax collection in Indonesia is the tax claim from the partner country, which is executed with a Distress Warrant. The claim must at least include:

• the value of the tax claim for which collection assistance is requested; and

• the identity of the Tax Debtor for the tax claim.

Priority Right (Hak Mendahulu)

Furthermore, based on Article 21 of the UU KUP, it is stipulated that the State also has a Priority Right over tax debts. This right covers the principal tax, penalties, and collection costs and is valid for 5 years from the issuance of the tax assessment letter.

This means that if there are other bills that must be settled by the Taxpayer, the tax claim must be prioritized over those other claims, including in cases of bankruptcy. Therefore, if a Taxpayer becomes bankrupt, the curator or liquidator is prohibited from distributing assets to shareholders or other creditors before the tax debt is settled.

However, there are a few exceptions to this right, namely:

• court costs incurred solely for the judgment to auction movable and/or immovable goods;

• costs that have been incurred to save the goods in question; and/or

• court costs, incurred solely due to the auction and settlement of an inheritance.