Understanding Corporate Taxpayers

Oct 13, 2025 by talynt.org 38 views

Beneficial Owner's Accountability for Violations of Corporate Taxpayers through the Principle of Piercing the Corporate Veil

Introduction

In Indonesia, the practice of tax avoidance remains a significant challenge for taxation authorities, often occurring through the establishment of certain legal entities or corporations. To overcome this issue, the concept of Beneficial Owner (BO) plays a crucial role in preventing various tax violation practices. This article will discuss BO accountability for violations committed by corporate taxpayers by referring to the principle of "Piercing the Corporate Veil".

Understanding Corporate Taxpayers

Corporate taxpayers refer to individuals or entities registered as taxpayers in Indonesia, including legal entities such as companies. Article 23A of the 1945 Constitution of the Republic of Indonesia requires all tax levies in Indonesia to be in accordance with applicable laws and regulations. According to Article 1 number 2 of the General Provisions and Tax Procedures (KUP), taxpayers include both individuals and entities who have tax rights and obligations.

The Role of Beneficial Owner in Taxation Regulations

Beneficial Owner is an individual or entity that gets the economic benefits of a legal entity, although it may not be officially registered as the owner. In Indonesian tax regulations, BO is regulated in several legislation, such as Article 18 paragraph (3B), (3C), and (3D) Income Tax Law (PPH), as well as the Regulation of the Director General of Taxes per 10/PJ/2017 and Presidential Regulation Number 13 of 2018. This rule aims to increase transparency and accountability in tax reports.

The Principle of Piercing the Corporate Veil

The principle of "piercing the corporate veil" is a legal doctrine that allows deviations from the protection given to the owner of the legal entity when there is a fraud or violation of the law. In the context of taxation, this principle can be applied to transfer the tax responsibility of the legal entity to BO. If there are tax violations committed by corporate taxpayers, BO can be held accountable, both individually and collectively, to uphold tax justice.

Responsibilities and Proof

BO responsibility related to corporate tax violations can arise both in individual and collective form, depending on the organizational structure and functional position in the company. BO which acts on behalf of the legal entity will be considered a beneficiary of the violation. However, they can prove their innocence to free themselves from responsibility. If BO can show that they are not involved in decisions or actions that cause tax violations, they may not be subject to sanctions.

The Importance of BO Accountability

The regulation regarding the benefit of the tax in taxation in Indonesia plays an important role in upholding tax compliance and reducing tax avoidance. Through the principle of "piercing the corporate veil, the tax authority has a strong tool to overcome tax violations committed by legal entities. With this approach, it is expected that the practice of tax avoidance can be minimized, and tax justice can be upheld. Understanding the responsibilities of BO and regulations that regulate them will help create a more transparent and accountable tax environment in Indonesia.

Challenges and Limitations

Despite the importance of BO accountability, there are several challenges and limitations that need to be addressed. Firstly, the definition of BO is not clearly defined in Indonesian tax regulations, which can lead to confusion and disputes. Secondly, the principle of piercing the corporate veil is not widely applied in Indonesian tax law, which can limit its effectiveness. Finally, the lack of transparency and accountability in tax reporting can make it difficult to identify and hold BO accountable for tax violations.

Conclusion

In conclusion, BO accountability for violations committed by corporate taxpayers through the principle of piercing the corporate veil is a crucial aspect of upholding tax compliance and reducing tax avoidance in Indonesia. Understanding the responsibilities of BO and regulations that regulate them will help create a more transparent and accountable tax environment in Indonesia. However, there are several challenges and limitations that need to be addressed to ensure the effective application of this principle.

Recommendations

Based on the discussion above, the following recommendations are made:

Clear Definition of BO: The Indonesian government should provide a clear definition of BO in tax regulations to avoid confusion and disputes.
Wider Application of Piercing the Corporate Veil: The principle of piercing the corporate veil should be widely applied in Indonesian tax law to ensure that BO are held accountable for tax violations.
Improved Transparency and Accountability: The Indonesian government should improve transparency and accountability in tax reporting to make it easier to identify and hold BO accountable for tax violations.

By implementing these recommendations, the Indonesian government can create a more transparent and accountable tax environment, which will help to reduce tax avoidance and uphold tax justice.
Beneficial Owner's Accountability for Violations of Corporate Taxpayers through the Principle of Piercing the Corporate Veil: A Q&A Article

Introduction

In our previous article, we discussed the importance of Beneficial Owner (BO) accountability for violations committed by corporate taxpayers through the principle of "Piercing the Corporate Veil". In this article, we will provide a Q&A section to address some of the frequently asked questions related to this topic.

Q: What is the definition of Beneficial Owner (BO)?

A: BO is an individual or entity that gets the economic benefits of a legal entity, although it may not be officially registered as the owner. In Indonesian tax regulations, BO is regulated in several legislation, such as Article 18 paragraph (3B), (3C), and (3D) Income Tax Law (PPH), as well as the Regulation of the Director General of Taxes per 10/PJ/2017 and Presidential Regulation Number 13 of 2018.

Q: What is the principle of Piercing the Corporate Veil?

A: The principle of "piercing the corporate veil" is a legal doctrine that allows deviations from the protection given to the owner of the legal entity when there is a fraud or violation of the law. In the context of taxation, this principle can be applied to transfer the tax responsibility of the legal entity to BO.

Q: How can BO be held accountable for tax violations?

A: BO can be held accountable for tax violations through the principle of piercing the corporate veil. If there are tax violations committed by corporate taxpayers, BO can be held accountable, both individually and collectively, to uphold tax justice.

Q: What are the responsibilities of BO related to corporate tax violations?

A: BO responsibility related to corporate tax violations can arise both in individual and collective form, depending on the organizational structure and functional position in the company. BO which acts on behalf of the legal entity will be considered a beneficiary of the violation. However, they can prove their innocence to free themselves from responsibility.

Q: What are the challenges and limitations of BO accountability?

A: Despite the importance of BO accountability, there are several challenges and limitations that need to be addressed. Firstly, the definition of BO is not clearly defined in Indonesian tax regulations, which can lead to confusion and disputes. Secondly, the principle of piercing the corporate veil is not widely applied in Indonesian tax law, which can limit its effectiveness. Finally, the lack of transparency and accountability in tax reporting can make it difficult to identify and hold BO accountable for tax violations.

Q: What are the recommendations for improving BO accountability?

A: Based on the discussion above, the following recommendations are made:

Clear Definition of BO: The Indonesian government should provide a clear definition of BO in tax regulations to avoid confusion and disputes.
Wider Application of Piercing the Corporate Veil: The principle of piercing the corporate veil should be widely applied in Indonesian tax law to ensure that BO are held accountable for tax violations.
Improved Transparency and Accountability: The Indonesian government should improve transparency and accountability in tax reporting to make it easier to identify and hold BO accountable for tax violations.

Conclusion

In conclusion, BO accountability for violations committed by corporate taxpayers through the principle of piercing the corporate veil is a crucial aspect of upholding tax compliance and reducing tax avoidance in Indonesia. Understanding the responsibilities of BO and regulations that regulate them will help create a more transparent and accountable tax environment in Indonesia. By addressing the challenges and limitations of BO accountability and implementing the recommended solutions, the Indonesian government can create a more effective and efficient tax system.

Frequently Asked Questions

What is the definition of Beneficial Owner (BO)?
What is the principle of Piercing the Corporate Veil?
How can BO be held accountable for tax violations?
What are the responsibilities of BO related to corporate tax violations?
What are the challenges and limitations of BO accountability?
What are the recommendations for improving BO accountability?

Glossary

Beneficial Owner (BO): An individual or entity that gets the economic benefits of a legal entity, although it may not be officially registered as the owner.
Piercing the Corporate Veil: A legal doctrine that allows deviations from the protection given to the owner of the legal entity when there is a fraud or violation of the law.
Tax Compliance: The act of complying with tax laws and regulations.
Tax Avoidance: The act of reducing or eliminating tax liability through legal means.
Tax Evasion: The act of reducing or eliminating tax liability through illegal means.