Naturally, business aims for profit which is easily described by accounting transactions. What if a company has no accounting transactions? In the business world, this situation is called ‘dormant’. Referring to www.businessdictionary.com, dormant is a status of company/firm which for a prolonged period has no significant financial transaction. So, the term dormant can be simplify as inactive.
Dormant is a quite common term for business practice in Indonesia. But, unfortunately, there is no Indonesian law specifically regulates this matter. Even, the Limited Liability Company Act, Law Number 40 of 2007 only slightly mentions about dormant in the explanation section of Article 146 verse 1f.
The Article 146 verse (1) stipulates about company dissolution by the court. The complete substance states “The Court can dissolve the company based on: (a) a request of prosecutor’s office, based on the reason that the company has violated the public interest or the company has violated the law; (b) a request of relevant party, based on the reason that the deed of establishment if found to be defect; (c) a request of Shareholders, Board of Directors, or Board of Commissioners, based on the reason that the company is impossible to carry on.
In the explanation section, the phrase “company is impossible to carry on” means: (a) company is inactive (dormant) or has no business activity for three years or more, which is proven by an official notification letter to the tax authority; (b) most of shareholders can not be traced their address eventhough they have been summoned through newspaper ads so that the general meeting of shareholders can not be established; (c) composition of shareholders has created a situation that the general meeting of shareholders can not make any decision; (d) company’s assets have been declined so that it can not carry on.
So, dormant in Law Number 40 of 2007 is considered as one of the reason for company dissolution through judicial process. The Shareholders, Board of Directors, or Board of Commissioners may file a petition to the court to dissolve the company based on the reason of the company has been in dormant status for three years or more. In other words, a company is allowed to be dormant as long as under three years.
During in dormant status, a company still has certain obligations, including tax reporting. Legally, a dormant company is still exist which means it remains as Taxpayer. As defined in Law Number 28 of 2007 regarding General Rules and Procedure of Tax, Taxpayer is a person or an institution including limited liability company that has tax obligations as set by the regulation.
One of taxpayer’s main obligations is routinely submitting the Tax Return (Surat Pemberitahuan) related to Corporate Income Tax (Pajak Penghasilan) and Value Added Tax (Pajak Pertambahan Nilai). If the company failed to submit the Tax Return, there will be fine sanction. A company in dormant status is exempted from that sanction as stipulated in Minister of Finance Regulation Number 186/PMK.03/2007.
As a comparison, in United Kingdom, Company Act 2006 stipulates a dormant company is a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years or has not filed financial statements and annual returns during the last two financial years.
A dormant company is exempted from annual audit obligation. This exemption applies for a company which is dormant since its formation or since the end of previous financial year and the following conditions are met.
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