Differences in PKP and Non PKP: their obligations, and their impact on business

PKP is an abbreviation of Taxable Entrepreneurs, while Non PKP means that entrepreneurs are not taxable. This status is related to taxation and operational obligations of a business. So, what is PKP? And what’s the difference with Non PKP? This article will thoroughly explore the differences between PKP and Non PKP, the accompanying obligations, and their impact on the continuity and development of your business. Understanding this difference will help you make the right decision for your business.

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What is PKP (Taxable Entrepreneur)?

PKP is an entrepreneur (both private and entity) who has been confirmed by the Directorate General of Taxes (DGT) as a party that is required to collect, deposit, and report Taxable Goods (BKP) or Taxable Services (JKP).

Referring to Article 1 number 15 of Law Number 42 of 2009 concerning the Third Amendment to Law Number 8 of 1983 concerning the Value Added Tax of Goods and Services and Sales Tax on Luxury Goods (“Law No. 42 of 2009”), PKP is an entrepreneur who delivered BKP and/or the submission of JKP subject to tax based on the law.

The inauguration of PKP is given to entrepreneurs who have met certain requirements, one of which is having a gross circulation (turnover) exceeding the limits determined by the current tax laws and regulations, which is Rp4.8 billion.

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What is Non PKP?

Non PKP is an entrepreneur who has not met the requirements to be confirmed as PKP. Usually, this is a small and medium business (UKM) with gross circulation below the set limit, which is Rp4.8 billion or those who choose not to submit confirmation as PKP.

As a non -PKP, employers do not have an obligation to collect, deposit, and report Taxable Goods (BKP) or Taxable Services (JKP).

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PKP and Non PKP Differences

The following are the differences between PKP and Non PKP:

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Advantages and disadvantages to CPP

Being PKP has its own advantages and disadvantages for business actors:

CPP Advantages:

1. A more professional business image. PKP status is often considered more credible and professional in the eyes of customers, especially for large companies that are also PKP.
2. Broader cooperation opportunities. Many companies only want to transact with PKP because they can credit input tax from purchases.
3. Business growth potential. With the ability to cooperate with a larger company, the potential for business growth is greater.
4. Credit tax input. CPP can reduce the tax burden by crediting the input tax paid when buying goods or services related to these efforts.

Lack of CPP:

1. More complex tax administration. PKP has more and more complicated tax administration obligations, including making tax invoices and reporting on the VAT Period SPT.
2. Potential Tax Sanctions. Errors in collecting, depositing, or reporting VAT can be subject to fine sanctions.
3. Higher compliance costs. PKP companies may need to pay more for accounting systems and human resources that understand tax regulations.

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Advantages and disadvantages of non -cpp

Non -PKP status also has positive and negative sides:

Strengths of Non PKP:

1. Simpler tax administration. Non -PKP tax obligations are relatively simpler than PKP.
2. Focus on business development. With a lighter tax administration, business owners can focus more on the development of products, services and marketing.
3. The potential for more competitive selling prices, because it does not collect VAT, non PKP has the potential to offer lower selling prices.

Lack of Non PKP:

1. Market limitations. Non PKP may have difficulty cooperating with large companies that require tax invoices.
2. Less professional business image in the eyes of several customers. Some customers, especially large companies, may be less interested in working with non PKP.
3. Cannot credited the input tax. Value Added Tax paid when purchasing becomes part of production or operational costs.

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The impact of the status of PKP/Non PKP on business actors

PKP or non -PKP status has a significant impact on various aspects of business:

1. Finance. PKP needs to manage cash flow related to VAT, while Non PKP is not. However, PKP has the potential for tax savings through the crediting of input tax.
2. Operational. PKP has a greater administrative burden related to the issuance of Tax Invoice and VAT Reporting.
3. Marketing and sales. PKP status can open up broader market opportunities, especially for transactions with other companies that are also PKP.
4. Legal compliance. PKP is required to comply with tax regulations related to VAT, while Non PKP focuses on other tax obligations.

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How to apply for PKP in Indonesia

If your business meets the gross circulation requirements or you want to be a PKP for your own choice, here are general steps to apply for PKP inauguration in Indonesia:

1. Prepare the requirements documents. Some documents that are usually needed include:

• Identity Card (KTP) or Passport of the Owner/Management of Business Entity.
• Taxpayer Identification Number (NPWP) of Business Entities and Owners/Management.
• Deed of establishment or other business legality documents.
• Certificate of business domicile.
• TRY NUMBER NUMBER (NIB).
• Annual turnover report.

2. Visit the Registered Tax Service Office (KPP). Submit a request for PKP inauguration to the KPP where your business entity is registered.
3. Fill in the PKP Inauguration Form. Friend will be asked to fill out the PKP Inauguration Application Form.
4. Submit the requirements document. Attach documents that have been prepared together with the application form.
5. Verification process. The tax officer will verify the document and may conduct a survey to your business location.
6. Issuance of PKP Inauguration Letter. If the application is approved, you will receive a Taxable Entrepreneur Inauguration Letter (SPPKP).

It should also be noted that with the enactment of the Minister of Finance Regulation No. 81 of 2024 concerning Taxation Provisions in the context of implementing the Tax Administration Core System (“PMK No. 81 of 2024”), now entrepreneurs can submit PKP status online through the Coretax application. This makes it easy for businesses to meet tax requirements without location obstacles.

Understanding the difference between PKP is and Non PKP is very important for every business actor in Indonesia. The decision to become a PKP or remain a non -PKP must be considered carefully based on financial conditions, target markets, and business administration capabilities of your friend. By understanding the obligations and impact of each status, you can take the right steps for your business progress.

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(This article has been edited by the perqara editorial team)

Legal basis

1. Law Number 42 of 2009 concerning the Third Amendment to Law Number 8 of 1983 concerning the Value Added Tax of Goods and Services and Sales Tax on Luxury Goods;
2. Law Number 7 of 2021 concerning Harmonization of Taxation Regulations;
3. Regulation of the Minister of Finance Number 81 of 2024 concerning Tax Provisions in the Framework of Implementing the Tax Administration Core System.