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Value-Added Tax in The Liquidation Process of A Company

Liquidation is the process of dissolving a limited liability company, accompanied by the sale of its assets to meet their outstanding payment obligations, and distribute the remaining balance to all shareholders. Law No. 40 of 2007 concerning Limited Liability Companies (“Company Law”) stipulates that the company liquidation can be caused by:
  1. Resolution of General Meeting of Shareholders (“GMS”). The GMS is a company organ other than the Board of Directors, and Board of Commissioners. Based on Article 142 paragraph (1) letter (a) of the Company Law, the GMS has the authority to decide the dissolution of the company.
  2. The tenure of the company ends. The Articles of Association of the company may set a time limit for the establishment of the company. It is possible that the company has established it for 30 years, 75 years, or the limit is not determined. In the event that there is a time limit, and if that time period has lapsed, the company dissolution will immediately occur due to the law.
  3. Dissolution based on court order. Certain parties who have the rights or legal standing can submit a request to determine the company dissolution to the court. The interested parties are not only shareholders, Board of Directors and Board of Commissioners. Pursuant to Article 146 paragraph (1) of the Company Law, the prosecutor can submit a request for a court order if the company violates any public interest or commits any act that violates statutory regulations.
  4. The company’s assets are not sufficient to pay bankruptcy costs. The insufficient bankrupt assets to be realized to pay the bankruptcy costs for curator services, based on Article 142 paragraph (1) of the Company Law, may have implications for the revocation of the decision on the bankruptcy declaration at the suggestion of the Supervisory Judge (Hakim Pengawas). In such a case, the company’s dissolution will also occur.
  5. The assets of the company that have been declared bankrupt are in a state of insolvency. After the bankruptcy resolution has been filed, the bankruptcy is in a state of insolvency (staat van faillissement, state of bankruptcy). From that moment, the company has been dissolved in accordance with Article 142 paragraph (1) letter (e) of the Company Law.
  6. The company’s business license is revoked so that it requires the company to carry out liquidation in accordance with the applicable regulations. According to Article 142 paragraph (1) letter (f) of the Company Law, the revocation of the company’s business license will also have an impact on the company’s dissolution, if the revoked license is the only type of business license owned by the company.
In the liquidation process, the parties authorized to carry out the company liquidation process are the curator and liquidator. The curator is the Balai Harta Peninggalan (BHP) appointed by the court to manage and clear up company assets that have been determined to be bankrupt debtors. The liquidation process of the company carried out by the curator is under the supervision of the Supervisory Judge. The liquidator is the person appointed to carry out the liquidation of the company, with the obligation to regulate and realize the company assets. The liquidator is appointed if the decision to liquidate the company is due to-the resolution passed by the GMS, the tenure of the company ends, or when the bankruptcy status is revoked by the Commercial Court. The GMS shall appoint a liquidator. If not, the Board of Directors by law will by default act as the liquidator, as stipulated in Article 142 paragraph (3) of the Company Law. Although liquidators and curators have the same roles, they seem to have different functionalities. Liquidators are responsible for the company’s liquidation process on behalf of GMS or the court that appointed it. Meanwhile, the curator is responsible on behalf of Supervisory Judge regarding the company’s liquidation process. In the company’s liquidation process, the Value-Added Tax (“VAT”) aspect has an important role. The existence of VAT and other taxes such as income tax is an obligation that must be complied with before completing the company liquidation process. In terms of the tax object, it refers to Article 16 letter (d) of Law No. 42 of 2009 concerning Value-Added Tax for Goods and Services and Sales Tax on Luxury Goods, the sale of assets remaining during the liquidation of the company, is subject to VAT even though the existence of these assets from the beginning is not for sale. The imposition of VAT is also levied on sale/delivery of Taxable Goods (Barang Kena Pajak) in the form of assets and inventories, which from the beginning were not intended to be sold. Liquidators who oversee the company’s liquidation process may not share the liquidated company’s assets with shareholders or other creditors before using these assets to pay tax debts. This is because the state has the right to precede the tax debt on the assets owned by the company. In addition, the obligation to make a tax invoice remains attached to a company, even though it is in the liquidation phase. The obligation to make tax invoices is still necessary because the sale proceeds of company assets is subject to VAT. The authorized signatory on tax invoices in the context of company liquidation is the liquidator, as the representative appointed to settle corporate liquidation issues. Schinder Law Firm is well experienced and with the expertise of our legal professionals, we will help you with every aspect pertaining to the dissolution of your company and including all issues that may arise in the process. Should you need to have a legal consultation related to the dissolution of the company, please do not hesitate to contact us or drop us an email at info@schinderlawfirm.com.

Schinder Consultant London Ltd.


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