Indonesia: Procedures for Seizing Assets in the Form of Debt Instruments in the context of Tax Collection by Warrant

Last Updated: 31 December 2002
Article by Prijohandojo Kristanto

(DGT Decree No. KEP- 459/PJ/2002 dated 16 October 2002)

This decree, which takes effect on 16 October 2002, sets out the procedures for the seizure of a taxpayer’s assets in the form of debt instruments. Debt constitutes an asset of a taxpayer that is in the hands of a third party. Such an asset may be seized so as to pay off tax arrears.

The procedures of the seizure of a debt instrument are as follows:

  • The tax officer sends a warning to the taxpayer informing him that the debt instrument in question will be used to settle his tax arrears and the recovery costs.
  • If after the expiry of 14 days from the issuance of the warning the taxpayer has failed to pay his tax arrears and the recovery costs, the official will order the tax bailiff to execute a seizure of the debt instrument.

The seizure of a taxpayer's assets in the form of debt instruments will be carried out as follows:

The tax bailiff takes an inventory and draws up a detailed list of the types and amounts of the debt instruments that have been seized. This list is attached to the Minutes of Seizure. The said list will be made up of the promissory notes for amounts that are owed to the taxpayer by third parties, the particulars of the third parties and the value of the debts that are owed to the taxpayer. The tax bailiff may seize the debt instruments directly from the taxpayer or from the third party and will draw up minutes of the seizure. The tax bailiff will also issue a Minutes of Agreement for Assignment of Debt instruments, with copies to be given to the taxpayer and the party obliged to pay the debt to the taxpayer.

Should the taxpayer refuse to sign the Minutes of Agreement for Assignment of Debt instruments, the seizure may still be executed. In such a case the tax bailiff will issue a Minutes of Seizure in accordance with the following procedures:

  1. In the case of a promissory note that is not tradable on the stock exchange, the Minutes of Seizure will be signed by the tax bailiff and two witnesses, with one of the witnesses being an official of the local government of at least the rank of sub-district secretary or village secretary.
  2. In the case of promissory notes that are traded on the stock exchange, then the Minutes of Seizure shall be signed by the tax bailiff and two witnesses, with one of the witnesses being an official of the Capital Markets Supervisory Board or a custodian.

Should a taxpayer fail to pay his tax and the costs of recovery within a period of 14 days subsequent to the seizure, then the tax arrears and the recovery costs will be paid out of the debt instruments that have been seized. This will be carried out in accordance with the following procedures: the debt is sold by an authorized officer to a purchaser and the proceeds of the said sale paid into the State Treasury by attaching a signed Tax Payment Slip that is stamped by the State Treasury, or the tax arrears are paid in cash by an authorized party into the State Treasury at the request of the Officer, with a signed Tax Payment Slip that is stamped by the State Treasury being attached.

Should the debt that is owned to the taxpayer, or the proceeds of the sale of such debt, be larger in value than the amount of the tax arrears and the recovery costs, then the surplus monies arising from the sale of the debt shall be returned by the authorized officer to the taxpayer immediately after the sale of the debt.

The seizure of a debt instrument will be lifted if the taxpayer settles his tax arrears and the recovery costs, whether using the seized debt instrument or otherwise, based upon the presentation of a signed Tax Payment Slip that has been stamped by the payment bank within 14 days of the lifting of the seizure. A Notice of Revocation of Seizure will then be forwarded to the taxpayer with a copy being forwarded to the party owing the debt to the taxpayer. The issuance of this Revocation of Seizure Notice will simultaneously serve to cancel the Minutes of Seizure.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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