March 2018     20 Mar 2019

PROVISIONS ON CALCULATION OF IMPORT DUTY ON IMPORTED GOODS CONTAINING ASSIST FROM INDONESIAN CUSTOMS TERRITORY

 

 PROVISIONS ON CALCULATION OF IMPORT DUTY ON IMPORTED GOODS CONTAINING ASSIST FROM INDONESIAN CUSTOMS TERRITORY

 

 

 

A.     Background

 

The provisions on customs value for calculation of import duty are regulated in Article 15 of Law No. 10 of 1995 concerning Customs which has been amended by Law No. 17 of 2006 (hereinafter referred to as the Customs Law) wherein part of the elucidation in Article 15 explains about the value of transactions including materials, components, parts, equipment, moulds, techniques, sketches, development, etc. which are supplied directly or indirectly by the buyer for the materiality of production and sales to export imported goods that are bought by the buyer.

 

The Directorate General of Customs and Excise (DGCE) has the authority to set customs values for imported goods in accordance with Article 16 of the Customs Law, whereby Customs and Excise Officials can set customs values before or within 30 days from the date of notification of import of goods (PIB). The determination is in the form of a SPTNP (Determination Letter on Tariff and/or Customs Value). Based on Article 17 of the Customs Law, the DGCE also has the authority to re-stipulate by issuing a SPKTNP (Letter of Re-determination of Tariff and/or Customs Value) within a period of up to two years from the date of PIB.

 

Whereas to date the customs value related to assists containing raw materials from within the Customs Territory has not been applied by stakeholders, it needs to be further regulated through a Regulation of the Director General of Customs and Excise.

 

B.     Regulations on Customs Value

 

There are several regulations regarding customs value, but the rules on customs values which discuss assists are only in:

 

a. Finance  Minister  Regulation  No.  160/PMK.04/2010  concerning  Customs

Value for Import Duty Calculation (hereinafter referred to as "PMK-160/2010")

 

b. Finance Minister Regulation No. 34/PMK.04/2016 concerning Amendment to Finance  Minister  Regulation  No.  160/PMK.04/2010  concerning  Customs Value  for  Calculation  of  Import  Duty  (hereinafter  referred  to  as  "PMK-

34/2016")

 

C.     Definition of Assist and Customs Value for Calculation of Import Duty

 

1) Definition of Assist

 

Customs value for the calculation of import duty is the transaction value of the imported goods concerned in the CIF incoterm (cost, insurance and freight) that meets certain conditions.


 

There are several requirements/elements of customs value; in this paper we will only discuss the element of assists. The assist is one element or condition of customs value which must be included in the calculation of import duty.

 

The definition of assist according to PMK-160/2010 is the value of goods and services supplied directly or indirectly by the buyer for free or at a reduced price, for the purpose of production and sales to export the relevant imported goods, insofar as the value is not included in the price that is actually paid or should be paid (payable).

 

In other words, assists are raw materials, goods, services, equipment, machinery, designs, etc. that are supplied/sent by the buyer/importer either from within the Customs Territory or from outside the Customs Territory to the seller/exporter (free of charge) to conduct the production  process for the benefit of the buyer/importer.

 

 Assist consists of (whether from outside the Customs Territory or from within the Customs Territory):

 

a)   Materials,  components, parts and similar items contained  iimported goods, for example: wood, steel in sheets, fabrics, switches, capacitors etc.

 

b)   Equipment,  moulding  and  similar  items  used  for  the  manufacture  of imported goods, for example: sewing machines, carpentry tools, moulding to make goods made of plastic or rubber.

 

c)   Material  used  for  the  manufacture  of  imported  goods,  for  example:

chemicals, fuel and others.

 

d)   Engineering, development, artwork, design, planning or sketching which are carried out anywhere and are needed for the manufacture of imported goods, for example: production engineering, technical and engineering studies of the project, conceptual formulation, construction of prototypes, blueprints, sketches for the construction.

 

2) Calculation of Import Duty containing assists from within the Customs

Territory

 

 

Since the amendment to the taxation laws in 1983 as the beginning of Indonesian tax reforms that replaced the taxation laws made by the Dutch colonialists (for example: the 1925 Company Tax Ordinance and the 1944

Income Tax Ordinance), Indonesia has changed its tax collection system from an official assessment system to a self-assessment system. The self- assessment system is a tax collection system that gives trust to taxpayers to calculate, pay, and report on the amount of tax that should be owed based on

the tax laws and regulations.

 

With the enactment of Law No. 10/1995 concerning Customs, starting from 1

April  1996  the  self-assessment  system  also  applies  to  the  calculation  of import duties and taxes in the framework of imports.


 

The self-assessment system contains several advantages and disadvantages. The disadvantage of this system is that it requires honesty from taxpayers. Import transactions containing royalty, proceeds or assist into the Indonesian Customs Territory will be difficult for Customs and Excise officials to detect without the honesty of the taxpayer itself. Transactions containing assist will be detected by Customs officials if  a customs audit is conducted by  the DGCE.

 

In  accordance  with  the title  of  this  paper,  the author  only  discusses  the calculation  of  Import  Duty  containing  assist  originating  from  within  the Customs Territory (conditions for assist calculation can be seen in Annex I of PMK-160/2010).

 

Based on the Customs Law, imported goods originating from within the Customs Territory may be exempted from Import Duty, but if the goods originating from the Customs Territory have undergone a production process (change of shape or installed/merged into new goods) outside the Customs Territory, then we need to calculate Customs Duty that contains assists from within the Customs Territory.

 

 

D.     Examples of Import Transaction Schemes Using Assist:

 

To understand the calculation of Import Duty that contains assists from within the Customs Territory, the following is an example of a simple export-import transaction scheme that occurs at Company A in Indonesia and Company Y in Malaysia:

 

-   Company  A  in  Indonesia  sends  raw  materials  from  within  the  Customs Territory to Company Y in Malaysia to produce a beverage. The beverage is produced in Malaysia because Company A does not have a mixer machine and other machines to produce the beverage. The raw material value is USD

1,000 and the freight is USD 50. The shipping of raw materials is free; this means that Company Y does not need to pay Company A for the raw material for the beverage.

 

-   Production of the beverage also involves raw materials from Company B from the USA with a price of USD 400 and freight value USD 60. For the delivery of these raw materials, Company Y in Malaysia only pays USD 100 to Company B in the USA.

 

-   Company A in Indonesia will only pay the cost of the production service (tolling fees) plus raw materials used by Company Y in Malaysia; the total margin is USD 300 and freight costs of finished goods (the beverage) from Malaysia to Indonesia is USD 60.


 

 

 

The transaction scheme containing these assists is as follows:

 

      Transaction scheme

 

Notes:

 

A

=

Assist/raw material from within the Customs Territory supplied by Company A

to Company Y in Malaysia (C&F value) is USD 1,050

B

=

Assist/raw material supplied by Company B in USA is USD 400 and freight is

USD 60 (CIF value). The total is USD 460, while Company Y only pays USD

100 to Company B (USA). So the total value of B is 400 + 60 -100 = USD 360

C

=

The total cost and the margin in Company Y (Malaysia) is USD 300

D

=

The freight value for the delivery of finished goods from Malaysia to Indonesia

is USD 70.

E

=

Company A must declare Customs Value which includes assists from within

the Customs Territory (A), assists from outside the Customs Territory (B), invoices from  Company Y  in  Malaysia (C)  and  freight value for  shipping finished goods from Malaysia to Indonesia (D), so the total becomes: E = A + B + C + D

 

 

The example of calculation (in USD):

 

A: raw materials/assist (CIF value) from Company A to Y (Malaysia) = 1,050

B: raw materials/assist (CIF value) from Company B in USA              =    360

C: Costs and margin of Company Y (Malaysia)                                   =    300

D: Freight cost and insurance of the importation                                 =      70

Total of value E (customs value) in PIB (import document)                 = 1,780

 

 

The amount of import duty on customs value containing assists from within the Indonesian Customs Territory that must be paid by Company A in Indonesia is as follows:

 

(Assumption of import duty rate of 5% and exchange rate of 1 USD = Rp.

14,000)

 

The  formula  for  calculating  import  duty  containing  assists  from  within  the

Customs Territory in PMK 160/2010 is as follows:


       Formula1


 

Where:

 

BM

 

 

=

 

 

Import  duty  containing  assists  from  within  the  Customs

 

 

Territory or from outside the Customs Territory.

NA

=

Assist values originating from within the Customs Territory

NT

=

Transaction   value Custom value   of   imported   goods

 

 

containing assists

 

From the example above, the value of BM, NA and NT are:

 

 

BM = percentage rate x total customs value x exchange rate

BM = 5% x 1,780 x 14.000 = Rp 1.246.000

NA = USD 1,050 x 14.000 = Rp 14.700.000

NT = USD 1,780 x 14.000 = Rp 24.920.000

 

 

After the BM, NA and NT values are known, to calculate the actual Import Duty (import duty containing assists from within the Customs Territory) or the Import Duty value that we must declare in the import document (PIB), we use the formula, as follows:

 

Formula1

 

Rp 1.246.000 = [1 Rp 14.700.000: Rp 24.920.000] Rp 1.246.000 = [1 0.5898876404]

Rp 1.246.000 = 0.4101123596

 

(based on the equation in Mathematics, one of the values must be shifted past the "=" sign), as follows:

 

= Rp 1.246.000 0.4101123596

 

= Rp. 1,245,999.59 (according to the regulations must be rounded up so that it becomes Rp. 1,246,000)

 

 

In calculating the example above, the amount of import duty that contains assists from within the Customs Territory that must be paid by the importer is IDR 1,246,000. Using the Import Duty calculation formula that contains assists from within the Customs Territory in PMK 160/2010 it is not different from the BM value (Import Duty containing assists either from within the Customs Territory or from outside the Customs Territory).

 

Based on the result of the calculation above, the author has verified that in the example of import duty import calculation that contains assists originating from the Customs Territory in Attachment II of PMK-160/2010, the calculation does not use the formula in PMK-160/2010.


 

In connection with the above analysis, the author looks at the regulation before the enactment of PMK-160/2010, namely KEP-81/BC/1999 concerning the Implementation  Guidelines for  Determining  Customs  Value  for  Import  Duty Calculation (hereinafter referred to as KEP-81/1999). Regulation KEP-81/1999 is no longer valid since the enactment of PMK-160/2010, but the author will try to use the formula to calculate Import Duty containing assists from within the Customs Territory in Attachment XI of KEP-81/1999, since the formula is different from the formula found in PMK- 160/2010.

 

The formula for calculating import duties containing assists from within the

Customs Territory in KEP-81/1999 is as follows:

   

  Formula3

Where:

BM = Import Duty of Imported Goods that has assists both from the outside

Customs Territory and within the Customs Territory

NA = Assist from within the Customs Territory

NT = Value of Transactions of imported goods containing assists

 

Based on the formula in KEP-81/1999, the author applies the transaction value as follows:

 

BM = 5% x 1,780 x 14.000                   = Rp 1.246.000

NA = USD 1,050 x 14.000                    = Rp 14.700.000

NT = USD 1,780 x 14.000                    = Rp 24.920.000

 

The amount of Import Duty containing assists from within the Customs Territory based on the formula in KEP-81/1999 is as follows:

 

= Rp 1.246.000 [1 Rp 14.700.000: Rp 24.920.000]

= Rp 1.246.000 [1 Rp 0.5898876404]

= Rp 1.246.000 [0.4101123596]

= Rp 511.000

 

Based on the two examples above, there is a difference in the result in the calculation of the amount of Import Duty containing assists from within the Customs Territory. Using the formula in PMK-160/2010, the amount of import duty is Rp. 1,245,999.59 (rounded up to Rp. 1,246,000). This means that the value of the Import Duty containing assists from within the Customs Territory is the  same  athe  value  of  Import  Duty  containing  assistfrom  within  the Customs Territory or assists from outside the Customs Territory.

 

Meanwhile,  calculating  Import  Duty containing assists from  withiCustoms using the formula in KEP-81/BC/1999 results in Import Duty of Rp. 511,000. The value of Rp. 511,000 is a true and reasonable value because the value of assists from within the Customs Territory (in the form of raw materials for making the beverage) is Rp. 14,700,000. In accordance with the customs regulations, materials/goods originating from within Indonesian Customs Territory if re-imported into the Indonesian Customs Territory will be exempted from the collection of Import Duty provided that it does not undergo a manufacturing process. But because the raw material for beverages sent to Malaysia has undergone a manufacturing process and has a higher value than before, it is necessary to pay Import Duty.

 

Import Duty Value with customs value of USD 1,780 (import duty rate = 5% and exchange rate = Rp. 14,000) is = 5% x 1,780 x 14,000 = Rp. 1,246,000. Import duties of Rp 1,246,000 is calculated if there are no assists from within the Customs  Territory  or  if  all  assists  only  comfrom  outside  the  Customs Territory. Because the above example contains raw materials from within the Customs Territory amounting to USD 1,050 or Rp. 14,700,000, the Import Duty must be recalculated using the formula of Import Duty containing assists from within the Customs Territory.

 

The Import duties of Rp 1,246,000 (customs value of USD 1,780; BM rate: 5% and exchange rate: Rp. 14,000 = 5% x 1,780 x 14,000 = Rp. 1,246,000) is calculated if there are no assists from within the Customs Territory or all assists only come from outside the Customs Territory. Because the above example contains raw materials from within the Customs Territory amounting to USD

1,050  or  Rp.  14,700,000,  the  Import  Duty must  be  recalculated  using  the formula of Import Duty containing assists from within the Customs Territory.

 

The  following  is  a  table  of  differences  in  the  calculation  of  ImporDuty containing  assists  from  within  the  Customs  Territory  according  to  PMK-160/2010 and to KEP-81/BC/1999:

 

                                       

 

Calculation of Import Duty Containing Assists from within the Customs

Territory

KEP-81/BC/1999

dated 31 December 1999

concerning Implementation Guidelines for Determining Customs Value for Import Duty Calculation

PMK-160/PMK.04/2010

dated 1 September 2010

concerning  Customs  Value  for  Import

Duty Calculation

The Assist Formula is in Appendices I

and XI of KEP-81/BC/1999:

 Formula3 

The Assist Formula is in Appendices I

and II of PMK-160/PMK.04/2010:

Formula2 

Value of Import Duty containing assists

from within the Customs Territory:

Rp 511.000

Value of Import Duty containing assists

from within the Customs Territory:

Rp  1.245.999,59

(rounded up to Rp. 1,246,000)


 

Notes:

BM       = Import Duty of Imported Goods that has assists both from outside thCustoms Territory and within the Customs Territory

NA        =  Assist from within the Customs Territory

NT        =  Value of Transactions of imported goods containing assists

 

 

 

E.     The problems that emerge for the calculation of import duty containing

assist from within the Customs Territory:

 

 

1)  The typo error in the Assist Formula in Regulation of the Minister of Finance in PMK 160/PMK.04/2010 and PMK 34/PMK.10/2016.

 

There is a typo error in the assist formula in PMK 160/2010, and even the writing of the assist formula in PMK-34/2016 as an amendment of PMK-

160/2010 also has not been corrected. The assist formula in PMK 160/2010 is:

 

Formula2

 

While  the  assist  formula  is  correct  as  written  in  KEP-81/BC/1999,  as follows:

  Formula3 

2)  There is no assist calculation application in the import document module

(PIB module).

 

 

Ithe PIB module system  of  the Directorate General of  Customs  and Excisetheris not  yet  available a  system  for  calculating  ImporDuty containing assists originating from the Customs Territory, so if an importer has an import transaction containing assists from within the Customs Territory, but the importer cannot use the assist formula, the Import Duty paid by the importer will always be greater than it should be. From the example above, the importer will pay IDR 1,246,000, whereas in fact the importer should only pay import duty of IDR 511,000.

 

F.      Conclusions

 

 

1.  It is necessary to change the formula of assists that comes from within the Customs Territory in PMK-160/PMK.04/2010 and in PMK-34/PMK.04/2016. The formula must be in accordance with the formula in KEP-81/BC/1999. The changes must also include examples of import transactions using assists, especially assists from within the Customs Territory.

 

2.  The Directorate General of Customs and Excise must apply the formula for

assist from within the Customs Territory in the PIB module system so that


 

the import duty which is paid by importers containing the value of assists from  within  the  Customs  Territory  will  match  the  actual  value  (fairer) because there are raw materials from within the Customs Territory which are processed abroad and re-imported into the Customs Territory.

 

 

If you need our assistance & have any queries, feel free to reach us through below contact :

 

SF Customs Contact

 

 


By filling out this form you will get Our Newsletter as request.



Filled these columns correspond to the contents of the word in the picture

Tax News

Search




Exchange Rates

Mata Uang Nilai (Rp.)
EUR 17068.99
USD 15710
GBP 19949.11
AUD 10293.61
SGD 11699.88
* Rupiah

Berlaku : 27 Mar 2024 - 2 Apr 2024