Tax planning for US Expat

[centurion]

What you need to be aware of; Indonesia take part in Common Reporting Standard (CRS) framework. So Foreign banks and financial groups in participating countries will automatically send your annual summary, The EoY Balance directly to Indonesian tax authorities if you are an Indonesian tax residence.

They are not reporting day to day transaction, but the annual summary/EoY balance could reveal a lot of things such as significant increase in balance, overseas earning from interest, dividend, house sales proceed, etc. This initial evidence might be enough to allow them to summon and quiz the person for an alleged unreported overseas income.

It has been reported previously that they manage to track someone, an Indonesian tax residence renting their properties abroad without reporting it to Indonesian tax authorities and they got summoned.

US is not in Indonesian CRS participation list (meaning US does not deliver data to Indonesia).

https://www.pajak.go.id/sites/default/files/2026-01/DAFTAR%20YURISDIKSI%20PARTISIPAN%20DAN%20YURISDIKSI%20TUJUAN%20PELAPORAN%20DALAM%20RANGKA%20PERTUKARAN%20INFORMASI%20REKENING%20KEUANGAN%20SECARA%20OTOMATIS%20AUTOMATIC%20EXCHANGE.pdf

 

[Helpful Herbert]

What you need to be aware of; Indonesia take part in Common Reporting Standard (CRS) framework. So Foreign banks and financial groups in participating countries will automatically send your annual summary, The EoY Balance directly to Indonesian tax authorities if you are an Indonesian tax residence.

Wrong. This would only happen if you are fully registered in the Indonesian tax system (eg if you are employed by an Indonesian company). Someone retiring to Indonesia without making Indonesian tax declarations would not be affected despite being resident.

 

[Blackfield]

Thanks for the vote of confidence jstar!

So I'd agree with snpark about your visa....rather than jumping head first, really take a deep breath and try out the VOA first, if 30 days is not enough try the extendable up to 60 days total (and watch the need-to-leave the country deadline very closely ). Again--my knowledge of the visas and its development is limited and can be outdated.

Once you're here, I assume you have friends/family? Don't make big announcement yet to everybody you're a US citizen, coming 'home' etc etc just pick a few trusted ones to share what you need. Many Indonesians fall into more of the 'kepo' category and you'd spend lots of time answering questions than getting answers!

Second choice of visa...not sure if the sosbud visa (the 'family visit') is still available? if it is, you'll get more than 30-60 days in the country (like up to 180 days/6 months), but I used to know one or two expats who just did what snpark mentioned...voa...then every 60 days a quick 2 days visit/short vaca outside Indonesia, then fly back in apply another VOA. I hear the airport immigration (depending on your luck) kinda frown a bit at same day in-and-out of indonesia just to apply for another VOA. I would think after hanging out within Indonesia with 2-3 VOAs you'll get the idea what to do a bit better.. and I understand this from living in the US for half of my life (at that time) and being here for quite a few years, it is important for you to keep balance between our American mindset and how people do things here in Indonesia..

Banks: Not sure about now, but I think while they might let you you open a bank without NPWP (again- maybe not recently), they will require at least KITAS to open one...so if you're on voa, i don't think you can open a local bank account...(like BCA), but a few of my expat friends have been living here for years (english teacher, engineer, etc) and they always use non-Indonesian cards, some even until they finish their job and left Indonesia. If you MUST have a BCA- maybe have a really trusted family member open a BCA account, you hold the debit/atm card and the token...and you can use it to transfer, withdraw money...not sure about QRIS set up btw (good to have if you really want convenience). Again- no judgement here, just saying this is what some people have done.

@Banana72 - thank you! We have to rule out VOA as our child will need to attend school during our stay in Indonesia.
I think E32E (ITAP) or E32C (KITAS) are our top two options at the moment.

I hear you about the kepo-ness, , we definitely want to stay under the radar.

BCA is not a must have, we are open really.
I would trade BCA's convenience for other banks (e.g. OCBC or HSBC) if it means we can open one without NPWP.

About having trusted family member to open a BCA account, we will have to wire transfer to the account to fund our lives in Indo, I am not sure the tax implication to the family member.

 

[Blackfield]

Now AFAIK on bank forms etc they ask and request it BUT I truly feel this is a box ticking request and not something they really need and use and follow up about.
....
I'm just saying that for some things with banks they really don't care in the branch and just filling in the blanks. No one is going to check you out. And if they do? Ooops oh yeh sorry it ends 4321 not 4312
.....
Anyway point is while we all understand your eagerness to comply most of it is irrelevant and unnecessary
.....
Obviously you are asking because of the US perspective and for that I don't really know.

@snpark - thank you for sharing the above.

To all, I am encouraged by your experiences thus far.
There are several things that are still not clear to me, and I hope you can shed some light on them.

Let me mention again that we will fund our spending in Indonesia using US interest, dividends, and some bonds. We are not eligible for foreign government pensions (or US Social Security) yet.

We will obviously have to transfer USD to a bank in Indonesia to fund our lives while living there.

I read that the DJP may flag wire transfers that surpass $25,000 per month. We will surpass this amount initially, as we need to pay for rent, school tuition, and furnishing our rental home on a yearly basis.

If your bank account does not have an NPWP associated with it:

1. Have you ever had an issue (e.g., being flagged by the DJP) when transferring a large amount to an account without an NPWP?
2. If you are retired and do not have a salary, you will still have income (even if it is not large) from bank interest. Do you still file taxes with the DJP and only pay tax on your Indonesian income (e.g., interest)?
3. My wife mentioned that Indonesian banks may deduct tax from bank interest automatically. Is this your experience? If the account does not have an NPWP, how can the bank attribute the tax to the correct person? Perhaps I am naive to think that the DJP and the banks care about this.

If someone has a bank account linked to an NPWP and does NOT have a foreign government pension (or US Social Security), I assume this is when they must at least declare their overseas assets when filing Indonesian taxes?

Otherwise, if you report your foreign assets as $0, it wouldn't make sense how you can transfer money to an Indonesian bank on a regular basis.

I can only laugh at myself for how clueless I am as an ex-WNI trying to navigate this.

 

[jstar]

1. I have transferred a lot to different Indonesian bank accounts, never issues even with bigger (>€100K) amounts. Having said that, I do avoid sending large sums to accounts where the holder has no tax ID. I know quite some people -as Harry and Balifrog- who have no tax ID and live fulltime in the country and send money regularly, they use systems like WISE for (also smaller) transfers and credit cards and QRIS for payments in shops and restaurants. Cash is often not accepted anymore.
2. As said before, in many cases when not sponsored by a company the Pajak will not even give you a tax ID. “Ah you don’t work here? No need”
3. It’s even more stringent than that; just like in many other countries the banks always automatically deduct the (20%) tax from the interest. On deposito’s and savings accounts etc. That has in itself little to do with NPWP or not (but depending on the bank‘s policies), obviously they do require a NIK to open those accounts.

 

[marcus]

... We will obviously have to transfer USD to a bank in Indonesia to fund our lives while living there...

If you use Wise (https://wise.com/br/send-money/) you can send Rupiah instead . See more about Wise here : https://www.expatindo.org/community/threads/wise-formerly-transferwise.7474/

But if you choose to send USD to Indonesia , I suggest you to choose a bank with the best exchange rate for USD to Rupiah , or if you choose HSBC , withdraw USD notes and exchange them elsewhere , at VIP Money Changer (https://www.vip.co.id/) for example . Note : HSBC Indonesia is selling its retail products/services to OCBC/NISP .

I once searched for a bank for that purpose and chose Panin Bank , which at that time (around 8 years ago) had the difference between buy & sell of only 30 Rupiah (like VIP above) , but it seems that now this difference is around 90 Rupiah (https://www.panin.co.id/id/kurs) . At that time the bank's lady always gave me a better rate for exchanging more than US$1'000 . And Panin was the only bank that asked me for the NPWP .

If your bank account does not have an NPWP associated with it:

1. Have you ever had an issue (e.g., being flagged by the DJP) when transferring a large amount to an account without an NPWP?

I transferred around US$50k once , but divided in many transfers during maybe 2 months (more than 10 years ago) . I had no issue . My bank didn't ask for but I had already a NPWP .

2. If you are retired and do not have a salary, you will still have income (even if it is not large) from bank interest. Do you still file taxes with the DJP and only pay tax on your Indonesian income (e.g., interest)?

Because (in Indonesia) interests in banks are of (mostly 20%) "Final Taxation" type (are not added to Indonesian salary/... do calculate the income tax) & the tax is automatically retained by the banks , nobody needs to get a NPWP if the income is only that .
But because I had a NPWP , I had to present the Indonesian Tax Return Report . After few years one Tax officer suggested me to inactivate the NPWP after knowing I didn't have any Indonesian income other than bank interests .

3. My wife mentioned that Indonesian banks may deduct tax from bank interest automatically. Is this your experience?

Yes , banks do deduct this Government's income tax automatically .

If the account does not have an NPWP, how can the bank attribute the tax to the correct person?

I assume the Tax Office does not care who are paying these kind of tax , maybe because there are so many people paying and many (if not most) are small values .

If someone has a bank account linked to an NPWP and does NOT have a foreign government pension (or US Social Security), I assume this is when they must at least declare their overseas assets when filing Indonesian taxes? Otherwise, if you report your foreign assets as $0, it wouldn't make sense how you can transfer money to an Indonesian bank on a regular basis.

I think this way : If you have a NPWP (and it is not inactive) you must present Indonesian annual Tax Return Reports , regardless of anything else .

Not declaring your assets abroad may be a risk , but when I was presenting my first annual Tax Return Report , one tax officer told me that I did not need to declare my assets abroad because I was not working or doing business in Indonesia (but this was in around year 2010) . And since year 2000 I always transferred money from abroad to Indonesian banks .

 

[harryopal1]

With Wise transfers I always use Wise to send Rupiah. Never dollars. The exchange rate with Wise has always been better than exchanging dollars to Rupiah at this end with either the banks or local currency exchange companies.

 

[Helpful Herbert]

For paying school tuition I would suggest making the payment directly from your foreign bank account to the school's bank account, so that it doesn't have to go through your local account at all. If you use Wise or Revolut you could even send it directly in rupiah.
The same thing applies if you have to pay a year's rental in advance.

 

[pantaiema]

My wife mentioned that Indonesian banks may deduct tax from bank interest automatically. Is this your experience? If the account does not have an NPWP, how can the bank attribute the tax to the correct person? Perhaps I am naive to think that the DJP and the banks care about this.

If your saving account, current account, are earning interest in Indonesian Bank, the 20% tax will be automatically deducted by the bank from the interest you have earned. It does not really matter whether you have NPWP or not, whether you are a tax payer or not, poor or rich.

This has always been the case for ages.

 

[pantaiema]

Wrong. This would only happen if you are fully registered in the Indonesian tax system (eg if you are employed by an Indonesian company). Someone retiring to Indonesia without making Indonesian tax declarations would not be affected despite being resident.

I'm not going to rebuff this.
But under Common Reporting Standard (CRS) rules, banks usually need a Tax ID in addition to your other dat such as your name. So without an NPWP, it's hard to see how they would process the summary/EoY report. So one sensible way to avoid this CRS hassles is by not having an NPWP in Indonesia.

The question of whether foreign-earning retirees who are Indonesian tax residents actually need an NPWP has also been discussed repeatedly. I completely understand why people want to avoid getting an NPWP and produce an annual tax return, if they believe they do not have to or if it could still be delayed.

I don't think banks can pull off a 100% accurate report with so many people living abroad. It’s a massive hassle. Plenty of Indonesians or Ex-Indonesians residing abroad keep their Indonesian tax numbers and bank accounts running without bothering to make them inactive, they still have an Indonesian Bank AC and I’ve never seen anyone get into trouble or summoned for unreported income because of it.