Changes to Bookkeeping Methods Require Tax Director General Approval, Here Are the Regulations

Changes to Bookkeeping Methods Require Tax Director General Approval, Here Are the Regulations

Taxpayers cannot change their bookkeeping methods arbitrarily. Indonesian tax regulations stipulate that any alteration to a bookkeeping method must receive prior approval from the Director General of Taxes (DGT).

Taxpayers are required to submit an application explaining their rationale before the start of the accounting year. Additionally, companies must meet specific requirements to change their accounting methods. What are these requirements?

Taxco Solution provides this comprehensive guide to help you navigate the regulations governing changes to bookkeeping methods under Article 28, Paragraph (6) of Law No. 28 of 2007 on General Tax Provisions and Procedures, as amended by Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU KUP s.t.d.t.d. UU HPP).

Bookkeeping in Tax Regulations

Article 28 of the UU KUP (as amended by the UU HPP) emphasizes that individual taxpayers engaged in business activities or independent professions, as well as corporate taxpayers, must maintain bookkeeping in accordance with the principle of consistency, utilizing either an accrual or cash basis of accounting.

The consistency principle dictates that taxpayers must apply the same accounting methods used in previous tax years to prevent profit or loss shifting. If a change in bookkeeping methods or accounting periods becomes necessary, the taxpayer must obtain explicit approval from the DGT.

Requirements for Requesting a Change in Bookkeeping Method

Under Article 10, Paragraph (4) of Director General of Taxes Regulation No. PER-8/2025 regarding Specific Tax Administrative Services in the Context of Implementing the Core Tax Administration System (Coretax), taxpayers must satisfy several conditions to secure approval from the DGT:

  1. Provide a Valid Business Rationale Submit the reason for changing the bookkeeping method or accounting period, accompanied by supporting documentation that justifies the change.
  2. Submit a Formal Statement Letter Provide a written statement confirming that:
    • The proposed change is requested by shareholders, creditors, business partners, the government, or other key stakeholders, and that failing to adjust the bookkeeping method or accounting period would result in operational difficulties or financial losses for the company.
    • There is no intention to intentionally shift profits or losses to minimize tax liabilities.
    • The application represents a first-time request, if applicable.
  3. Fulfill Tax Clearance Certificate (SKF) Eligibility Pursuant to Article 4 of PER-8/2025, taxpayers can obtain a Tax Clearance Certificate (SKF) if they meet the following criteria:
    • Have submitted Annual Corporate/Individual Income Tax Returns (SPT PPh) for the last two tax years and Periodic Value Added Tax Returns (SPT Masa PPN) for the last three tax periods.
    • Have no outstanding tax arrears, or have secured official approval for tax payment installments or deferrals.
    • Are not currently under investigation or prosecution for tax offenses.
  4. Demonstrate 5-Year Consistency for Subsequent Requests For second or subsequent requests, the taxpayer must prove that they have consistently maintained the current bookkeeping method or accounting period for a minimum of five consecutive tax years.

Application Procedure via Coretax

Taxpayers requesting a change in bookkeeping methods must follow the procedure outlined in Article 10, Paragraph (3) of PER-8/2025. Applications can currently be submitted online through the Coretax system:

  1. Log in to the Coretax portal.
  2. Navigate to the “Administrative Service Application” menu.
  3. Select service type “AS.15 Change in Bookkeeping Method and/or Accounting Period”.

Note: The application must be submitted no later than one month prior to the start of the relevant accounting year.

Conclusion

Changing a bookkeeping method or accounting period is far more than a routine administrative task—it directly impacts a company’s tax compliance status.

Taxpayers must navigate a series of regulatory requirements under PER-8/2025, primarily concerning their tax compliance track record, such as the timely filing of Annual Income Tax and Periodic VAT Returns. Furthermore, businesses must present a well-reasoned justification backed by solid supporting documentation.

Unilateral changes made without the prior approval of the DGT carry significant risks, including potential fiscal adjustments or tax audits prompted by suspected profit/loss shifting. These issues can ultimately lead to administrative penalties, prolonged tax disputes, or even criminal proceedings. 

 

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Changes to Bookkeeping Methods Require Tax Director General Approval, Here Are the Regulations

Changes to Bookkeeping Methods Require Tax Director General Approval, Here Are the Regulations

Taxpayers cannot change their bookkeeping methods arbitrarily. Indonesian tax regulations stipulate that any alteration to a bookkeeping method must receive prior approval from the Director General of Taxes (DGT).

Taxpayers are required to submit an application explaining their rationale before the start of the accounting year. Additionally, companies must meet specific requirements to change their accounting methods. What are these requirements?

Taxco Solution provides this comprehensive guide to help you navigate the regulations governing changes to bookkeeping methods under Article 28, Paragraph (6) of Law No. 28 of 2007 on General Tax Provisions and Procedures, as amended by Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU KUP s.t.d.t.d. UU HPP).

Bookkeeping in Tax Regulations

Article 28 of the UU KUP (as amended by the UU HPP) emphasizes that individual taxpayers engaged in business activities or independent professions, as well as corporate taxpayers, must maintain bookkeeping in accordance with the principle of consistency, utilizing either an accrual or cash basis of accounting.

The consistency principle dictates that taxpayers must apply the same accounting methods used in previous tax years to prevent profit or loss shifting. If a change in bookkeeping methods or accounting periods becomes necessary, the taxpayer must obtain explicit approval from the DGT.

Requirements for Requesting a Change in Bookkeeping Method

Under Article 10, Paragraph (4) of Director General of Taxes Regulation No. PER-8/2025 regarding Specific Tax Administrative Services in the Context of Implementing the Core Tax Administration System (Coretax), taxpayers must satisfy several conditions to secure approval from the DGT:

  1. Provide a Valid Business Rationale Submit the reason for changing the bookkeeping method or accounting period, accompanied by supporting documentation that justifies the change.
  2. Submit a Formal Statement Letter Provide a written statement confirming that:
    • The proposed change is requested by shareholders, creditors, business partners, the government, or other key stakeholders, and that failing to adjust the bookkeeping method or accounting period would result in operational difficulties or financial losses for the company.
    • There is no intention to intentionally shift profits or losses to minimize tax liabilities.
    • The application represents a first-time request, if applicable.
  3. Fulfill Tax Clearance Certificate (SKF) Eligibility Pursuant to Article 4 of PER-8/2025, taxpayers can obtain a Tax Clearance Certificate (SKF) if they meet the following criteria:
    • Have submitted Annual Corporate/Individual Income Tax Returns (SPT PPh) for the last two tax years and Periodic Value Added Tax Returns (SPT Masa PPN) for the last three tax periods.
    • Have no outstanding tax arrears, or have secured official approval for tax payment installments or deferrals.
    • Are not currently under investigation or prosecution for tax offenses.
  4. Demonstrate 5-Year Consistency for Subsequent Requests For second or subsequent requests, the taxpayer must prove that they have consistently maintained the current bookkeeping method or accounting period for a minimum of five consecutive tax years.

Application Procedure via Coretax

Taxpayers requesting a change in bookkeeping methods must follow the procedure outlined in Article 10, Paragraph (3) of PER-8/2025. Applications can currently be submitted online through the Coretax system:

  1. Log in to the Coretax portal.
  2. Navigate to the “Administrative Service Application” menu.
  3. Select service type “AS.15 Change in Bookkeeping Method and/or Accounting Period”.

Note: The application must be submitted no later than one month prior to the start of the relevant accounting year.

Conclusion

Changing a bookkeeping method or accounting period is far more than a routine administrative task—it directly impacts a company’s tax compliance status.

Taxpayers must navigate a series of regulatory requirements under PER-8/2025, primarily concerning their tax compliance track record, such as the timely filing of Annual Income Tax and Periodic VAT Returns. Furthermore, businesses must present a well-reasoned justification backed by solid supporting documentation.

Unilateral changes made without the prior approval of the DGT carry significant risks, including potential fiscal adjustments or tax audits prompted by suspected profit/loss shifting. These issues can ultimately lead to administrative penalties, prolonged tax disputes, or even criminal proceedings. 

 

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