Gross Circulation Is: Understanding, Rules, And How To Calculate It

YOGYAKARTA - In the business world, understanding the concept of gross circulation is very important. Gross circulation reflects the total revenue the company earns before deducting costs or other expenses. Gross distribution is not only an indicator of business performance, but also has direct implications for tax obligations

This concept is one of the main indicators in assessing the financial health of a business and determining tax obligations that must be fulfilled. By understanding gross circulation, business actors can plan a more effective financial strategy and avoid the risk of tax sanctions.

Gross circulation is the total income received by a company or business entity from its business activities before deducting costs such as cost of goods sold (HPP), operational costs, or other pieces.

In the context of taxation, gross circulation includes all revenues related to business activities, including sales of goods, services, or other regular income.

A simple example if a company sells a product worth IDR 1 billion in one year, then the figure of IDR 1 billion is its gross circulation. It is important to note that gross circulation is not the same as net profit.

Net profit is the final result after deducting various costs. Meanwhile, gross circulation is an early picture of the company's sales performance or revenue.

Gross distribution has an important role in determining tax obligations for corporate taxpayers. In Indonesia, the Directorate General of Taxes (DJP) has set rules related to gross circulation that must be obeyed by the company. Here are some of the main rules:

The gross distribution is used as the basis for determining the applicable corporate income tax rates. Based on Law Number 36 of 2008 concerning Income Tax, the corporate income tax rate is 25%.

However, for companies with gross circulation below IDR 50 billion a year, the corporate income tax rate imposed is lower, which is 50% of the normal rate (12.5%).

Gross distribution also affects the company's obligation to collect and deposit VAT. Companies with gross circulation of more than IDR 4.8 billion a year are required to become Taxable Entrepreneurs (PKP) and collect VAT on the sale of goods or services.

Gross distribution is one of the criteria for classifying a business as a Small and Medium Enterprise (SME). According to Law Number 20 of 2008, small businesses are businesses with a maximum gross circulation of IDR 2 billion per year, while medium-sized businesses have a gross circulation of between IDR 2 billion to IDR 50 billion per year.

Companies with gross circulation above IDR 4.8 billion are required to carry out complete bookkeeping and submit regular financial reports to the DGT. This aims to ensure transparency and accountability in tax reporting.

A calculation of gross circulation can be done by summarizing all receipts obtained in one period. Here are simple formulas for calculating gross circulation:

Gross Circulation = Total Revenue From Other Sales + Revenue As An Example, If a company has the following income details:

So the company's gross circulation is: IDR 5,000,000,000 + IDR 50,000,000 + IDR 100,000,000 = IDR 5,150,000,000

This gross distribution will then become the basis for determining the amount of tax that must be paid in accordance with applicable regulations.

That's a review of what gross circulation is and its importance in business activities. Gross circulation is an important indicator that describes the sales performance or income of a company and has significant implications for tax obligations. Also read corporate pph rates.

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