183 day tax residence rule

Helpful Herbert

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Does anyone know how the tax office expects people to document/justify how many days they have spent in the country each year, given that if you spend less than 183 days there is no requirement to pay tax?

Would they review passport stamps, ask to see boarding passes, obtain info from the ports and airports around the country (if such information is compiled centrally)? Has anyone had experience with this?
 

jstar

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Never had that scrutiny in Indonesia, Herbert. But I did get in in Europe. Then when I proved the less than 183 days (with airplane tickets etc.), they still wanted to consider me a tax resident. The argumentation was owning property and vehicles there and having family members and a social life in that country.

In Indonesia my experience (as many others') has been the other way around; they make it difficult and refuse to provide you with a NPWP if you don't work (here). Being in the country for more than 183 days is deemed unimportant. (With possible foreign income of more than 54 Juta.)

Different priorities I guess. And not so much knowledge about their own laws. A couple of months ago they announced they would apply more scrutiny on the local WNA and more lenience on the WNI abroad. Is that the reason for your question or did they ask?
 

Helpful Herbert

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It is more that my head office wants to know what the official rules are to make sure they are complying with all the rules. In Europe it is stricter in terms of looking at family etc., but in Indonesia it does just seem to be 183 days and that's it. I can't really imagine a tax officer here asking to see a passport and then trying to read all the stamps, but it would be interesting to know if it has happened.

"A couple of months ago they announced they would apply more scrutiny on the local WNA and more lenience on the WNI abroad. "
Yes I read about that, and the new omnibus law, do you have more details?
 

jstar

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..... in the country for more than 183 days. possible foreign income of more than 54 Juta......
the new omnibus law

What @Helpful Herbert is alluding to: Sri Mulyani (for those who dont know; Finance Minister) announced a bill is drafted with quite some changes as new tax rates and IPO regulations. Also changes for dividends and interest. The latter would be interesting for foreign tax subjects; they have plans to lower the 20% tax rate on interest.

And very important for foreigners residing in the country is the 183 days rule will be combined with income in Indonesia only. So that would mean foreign income is no longer considered in taxation. (I have no idea if it should still be reported.)

They expect to get the bill approved early 2020.
 

Helpful Herbert

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Update from the JP:

Relaxation of 'expatriate' income tax
The planned reforms would change the Indonesian tax regime into a territorial tax system, so foreign residents and overseas Indonesians would no longer be taxed on income earned outside the country's borders.
Foreigners who work in Indonesia for more than 183 days will be taxed on only the income they earn in Indonesia, while Indonesians who work abroad will be exempt from paying income tax in Indonesia.
"We will revise [the regulation] that expatriates need to pay tax on their incomes [earned both] in Indonesia and abroad," Sri Mulyani told a business forum on Wednesday in Jakarta.
Under the prevailing 2008 Income Tax Law, every individual (including foreign nationals) who has resided in Indonesia for more than 183 days within a 12-month period, or has resided in Indonesia for a full tax year and intends to remain in Indonesia, is considered a domestic taxpayer. Otherwise, the individual is considered a foreign taxpayer and is not obliged to pay income tax in Indonesia.
 

make_batik_great_again

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Update from the JP:

Relaxation of 'expatriate' income tax
(...)Under the prevailing 2008 Income Tax Law, every individual (including foreign nationals) who has resided in Indonesia for more than 183 days within a 12-month period, or has resided in Indonesia for a full tax year and intends to remain in Indonesia, is considered a domestic taxpayer. Otherwise, the individual is considered a foreign taxpayer and is not obliged to pay income tax in Indonesia.

The wording "183 days within a 12-month period" irritates me a bit...since the exact wording is "a 12-month period" and not "a calendar year", this means that Indonesia does not consider a whole calendar year, so that a person can be a tax resident only for a part of a calendar year as well?

For example, a foreigner and the Indonesian spouse arrive in Indonesia in September 2019. That would mean:

(a) In 2019, they are not tax residents in Indonesia and, therefore, in the beginning of 2020 they do not have to declare or pay taxes for 2019?
(b) But after 183 days of not leaving Indonesia (in this example, somewhere in March 2020) they become tax residents. This means that, in the beginning of 2021, they would have to declare and pay taxes on their 2020´s income from March 2020 - December 2020 and not the income of the whole year 2020 (therefore, January and February excluded since in those two months they were not tax residents yet)?
 

make_batik_great_again

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Nov 27, 2019
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Update from the JP:

Relaxation of 'expatriate' income tax
The planned reforms would change the Indonesian tax regime into a territorial tax system, so foreign residents and overseas Indonesians would no longer be taxed on income earned outside the country's borders.
Foreigners who work in Indonesia for more than 183 days will be taxed on only the income they earn in Indonesia, while Indonesians who work abroad will be exempt from paying income tax in Indonesia.
"We will revise [the regulation] that expatriates need to pay tax on their incomes [earned both] in Indonesia and abroad," Sri Mulyani told a business forum on Wednesday in Jakarta.
Under the prevailing 2008 Income Tax Law, every individual (including foreign nationals) who has resided in Indonesia for more than 183 days within a 12-month period, or has resided in Indonesia for a full tax year and intends to remain in Indonesia, is considered a domestic taxpayer. Otherwise, the individual is considered a foreign taxpayer and is not obliged to pay income tax in Indonesia.

Short update on this...could be in effect soon:
 

BBE1891

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Good day,
Are there any news on this issue with the 183 day rule regarding taxation of foreign income?
I'm more than worried, since I haven't been able to leave Indonesia, due to Corona, and may therefore have more than 183 days in the country. I have no desire to pay tax on my income made outside Indo due to this extended stay. (I have zero income in Indo, since I don't work here, even if I have an Indonesian wife).
 

snpark

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I'm sure when you report that they take this into consideration
 

BBE1891

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Well, I was hoping to not even have to report, since I'm only on VOA here, (so no NPWP), and have no intention to make any income in Indo.
 

BBE1891

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:) I'll aim to be.
Would be good anyhow, if the above mentioned reform would be activated.
 

Helpful Herbert

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To answer the question, the proposed law has not been approved yet, and there is no information about its progress or lack of it.
As to whether you have to pay tax, you need a NPWP to pay tax, so the first thing you would need to do would be to apply for an NPWP. Or you could just leave when your VOA finishes, since in any case you would not be eligible to receive a NPWP, not having conducted any work activities here.
 

BBE1891

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H.Herbert/ Big thanks för a great, informative answer.
I'm good now then, since I intend to leave Indo when it's possible to get back.
Would still be great if they pass this law though. Then I might apply for spouse KITAS.
 

Ruserious

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Does anyone know if the omnibus law did include any revisions to tax on worldwide income or not?
 

Helpful Herbert

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I think there was but it only applies to a small minority of cases (something like for foreign executives in certain industries only and limited to 4 years). Nothing for us long term residents to get excited about.
 

make_batik_great_again

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To answer the question, the proposed law has not been approved yet, and there is no information about its progress or lack of it.
As to whether you have to pay tax, you need a NPWP to pay tax, so the first thing you would need to do would be to apply for an NPWP. Or you could just leave when your VOA finishes, since in any case you would not be eligible to receive a NPWP, not having conducted any work activities here.

My case is quite similar. Due to the pandemic and due to health problems of my wife, we were not able to leave Indonesia until some months ago. Therefore, we´ve spent more than 183 days in Indonesia this year. I have a NPWP because I was told it would be easier to open a bank account when having a NPWP. But I´ve never worked in Indonesia or earned any money while I was there.

Now my Indonesian wife and I are back home, in my home country and I started to work here again. Do I have to pay taxes and/or report my income then in Indonesia for this calender year as well? Even if I did not earn any money in Indonesia (except a small amount of interest from a bank account...but for this, the tax on the interest is already and automatically deducted by the bank).
 

Helpful Herbert

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If your home country has a double tax treaty with Indonesia, then no (assuming you are paying tax in your home country).
If not, you could complete an Indonesian tax return and make a tax payment if you were keen to do so, I guess.
I'm impressed you managed to get a NPWP - I tried to get one for opening a bank account and they said I could only get one if I have a business activity. However in the end the bank accepted my home country tax number instead.
 

dafluff

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My case is quite similar. Due to the pandemic and due to health problems of my wife, we were not able to leave Indonesia until some months ago. Therefore, we´ve spent more than 183 days in Indonesia this year. I have a NPWP because I was told it would be easier to open a bank account when having a NPWP. But I´ve never worked in Indonesia or earned any money while I was there.

Now my Indonesian wife and I are back home, in my home country and I started to work here again. Do I have to pay taxes and/or report my income then in Indonesia for this calender year as well? Even if I did not earn any money in Indonesia (except a small amount of interest from a bank account...but for this, the tax on the interest is already and automatically deducted by the bank).

In your shoes, I would not worry about it. It is a one off situation that is not likely to repeat, so very unlikely the tax people will bother. If you were in Indonesia for 184 days every year, then that would be different. Your interest income in Indonesia is already taxed, so no worries there either.
 

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