Who Are Tax Bearers?

Strict and consistent tax collection is expected to ensure the fulfilment of tax obligations. In its implementation, tax collection does not only target taxpayers.

Based on the Director General of Taxes Circular No SE-01/PJ/2020, in principle, taxes are collected on tax bearers constituting individuals or entities responsible for tax payments, including representatives.

The term tax bearer is indeed widely used in provisions relating to tax collection. The term tax bearer, however, seems to frequently be considered unfamiliar. As such, who exactly constitutes tax bearers?

Definition
Referring to Article 1 number 28 of the General Provisions and Tax Procedures Law in conjunction with Article 1 number 5 of MoF Reg. 189/2020, a tax bearer refers to an individual or entity responsible for tax payment, including a representative that exercises the rights and fulfils the obligations of a taxpayer pursuant to statutory tax provisions.

Representatives that exercise the rights and fulfil the obligations of taxpayers, pursuant to Article 32 paragraph (1) of the General Provisions and Tax Procedures Law, include entities, by the management and undivided inheritance, by one of the heirs, executor of the will or trustee. 

Further, a minor child or person under custody shall be represented by the guardian or custodian. The representatives shall be responsible, personally and/or collectively for the payment of tax payable. 

However, exceptions are granted if the tax bearers can prove and assure the Director General of Taxes that within their position, it is not possible to assume the responsibility for tax payable.

Referring to the Elucidation of Article 32 paragraph (1) of the General Provisions and Tax Procedures Law, taxpayers’ representatives or attorneys are to be determined as they are not able or it is not possible for them to perform legal actions on their own.

The term tax bearer is broadly outlined in the Law concerning Tax Collection Using Distress Warrants. The definition of tax bearer in the Tax Collection Using Distress Warrants Law is the same as the definition outlined in the General Provisions and Tax Procedures Law and the implementing regulations thereto.

To provide legal certainty in the implementation of tax collection actions and regulatory simplification, the government details who constitute tax bearers in the implementation of tax collection.

These details are outlined under MoF Reg.189/2020 which was promulgated and came into force on 23 November 2020. Article 5 of the regulation states that taxes are collected on tax bearers of individual taxpayers or tax bearers of corporate taxpayers.

Pursuant to Article 6 of MoF Reg.189/2020, taxes are collected on tax bearers of individual taxpayers, constituting 6 parties. First, the individual concerned responsible for all tax liabilities and tax collection costs.

Second, the wife of the individual taxpayer concerned responsible for all tax liabilities and tax collection costs, if the exercise of tax rights and the fulfilment of tax obligations are combined as a single unit.

Third, one of the heirs, executors of the will or trustee, responsible for tax liabilities and tax collection costs of a maximum of the amount of the undivided inheritance, if the taxpayer passes away and the inheritance has not been divided.

Fourth, the heirs responsible for tax liabilities and tax collection costs of a maximum of the amount of the share of the inheritance received by each heir, if the taxpayer has passed away and the inheritance has been divided.

Fifth, the guardian of a minor child responsible for tax liabilities and tax collection costs. Sixth, the custodian of a person under custody responsible for tax liabilities and tax collection costs.

Both the guardian and the custodian are responsible for a maximum of the value of the assets of the minor child under their guardianship or the vallue of assets of the person under their custody.

However, if the officials can prove that the guardian or custodian concerned benefits from the management of the assets, the guardian or custodian will be liable for all tax liabilities and tax collection costs.

On the other hand, taxes are collected on the tax bearers of corporate taxpayers, including the corporate taxpayers concerned responsible for all tax liabilities and tax collection costs as well as the management of corporate taxpayers.

Article 7 paragraph (2) of MoF Reg.189/2020 describes the management constituting tax bearers of 9 categories of corporate taxpayers. In further detail, the 9 categories range from limited liability companies, permanent establishments and limited partnerships and civil partnerships and firms.

Further, there are also cooperatives, foundations, joint operations, other agencies and work units of government agencies. The management of each category of corporate taxpayers as well as the amount of their liabilities are described and can be seen in MoF Reg.189/2020.

Conclusion
In essence, a tax bearer is an individual or entity responsible for the payment of taxes, including representatives that exercise rights and fulfil the obligations of taxpayers pursuant to statutory tax provisions. (Bsi)