2018 Expat Retiree Tax Analysis

I don't agree with the logic or rationale behind this post - i.e., don't dare enforce your tax laws against me or I won't employ as many low wage locals...As you know if you are on a retirement visa you will always have to employ at least one household staff. In any case it's a crocked argument to make as just about any 1. expat, or even 2. locally-owned business, can use the same rationale to argue why they shouldn't pay taxes.

I never said anything about a dare....that's your interpretation.

My information to snpark was many Indonesians are employed, even by retiree expats, who generally don't have an NPWP and pay tax yet, by law, they should.

If retiree pensions were diluted by the application of high taxes in RI, which would not be so highly taxed in the source country, could mean they may not be able to afford to employ staff. If the tax was so onerous that a retiree could not comply with employing even one local staff member I presume the retirement Kitas/Kitap would be invalidated...maybe?

1. Any expat that earns money in Indonesia pays taxes whether they have an NPWP or not...I have FD's that pay 20% on the interest accrued.
2. If locally-owned businesses are earning in Indonesia they are eligible to pay tax....nobody could rationally suggest otherwise so I don't see the relevance of this point.
 
I don't agree with the logic or rationale behind this post - i.e., don't dare enforce your tax laws against me or I won't employ as many low wage locals...As you know if you are on a retirement visa you will always have to employ at least one household staff. In any case it's a crocked argument to make as just about any expat, or even locally-owned business, can use the same rationale to argue why they shouldn't pay taxes.

I understand Davida's view point differently. What he is supposed to pay if he would be taxed to government he is simply spending on employing someone. 4 people x 2 jt. (just to ease calculations) 8 jt. in salaries vs 8 jt. paid monthly to government. Besides once he will have to pay NPWP it is just a matter of time for tax office to track his employees and they will have to pay tax as well meaning Davida will have to spend even more. Income tax from abroad + employees tax + net salary + yearly increases + inflation will finally squeeze all the juice/money out of you. On top of that he will expose himself to ever changing tax rules leading to tax office penalties. I don't think he is trying to avoid paying taxes.

I don't know too much about retirement visa conditions but if employing one person is a must then people who have to pay taxes will search for some solution like employment agencies, part time employees. Just to bypass paying too many taxes. They will try to comply with the local laws while minimizing their spending.

You are also talking about businesses .... most businesses when they struggle financially they cut their employment first. I have seen plenty of factories/business owners in Indonesia who simply cannot afford to pay regional min salaries and they moved their factories to other "more affordable" places in Indonesia.
 
All expats pay tax on the interest they earn on bank deposits etc, yes I think it is 20% BUT if you have NPWP then you only pay 15%
 
All expats pay tax on the interest they earn on bank deposits etc, yes I think it is 20% BUT if you have NPWP then you only pay 15%

You only pay 15% on government bonds and similar investments through a bank with a NPWP but pay 20% on term and savings deposits regardless of having a NPWP or not.
 
I never said anything about a dare....that's your interpretation.

My information to snpark was many Indonesians are employed, even by retiree expats, who generally don't have an NPWP and pay tax yet, by law, they should.
Technically, the many Indonesians casually employed as drivers, domestic help, gardeners, pool guys, etc should have NPWP. However, because the personal exemption for income tax is nearly 65 juta, most don't make enough to have to pay tax. In this case, it makes no sense for the government to go after them as they would end up owing nothing. Rich expats on nice pensions, on the other hand...
 
Technically, the many Indonesians casually employed as drivers, domestic help, gardeners, pool guys, etc should have NPWP. However, because the personal exemption for income tax is nearly 65 juta, most don't make enough to have to pay tax. In this case, it makes no sense for the government to go after them as they would end up owing nothing. Rich expats on nice pensions, on the other hand...

Jamu...you are using the same argument to justify why the Gov't isn't vigorously applying their own law in regard to millions of low-paid Indonesians as I believe they apply to those on Retiree Visas.
IMO....The tax dept. simply hasn't considered expat retiree revenue would be significant. They have much bigger fish to fry!
Rich expats on Retiree Visas with nice pensions are not the norm....and, if so wealthy, why retire to Indonesia as so many other paradises, and/or tax havens, are available to them.

That's why I suggest we retired expats should leave this alone and enjoy the lifestyle just like our employees don't consider applying for NPWP...same laws...same principle!

BTW...with respect to casual employment we pay our permanent staffs BPJS although they are the ones registered.... so they can transfer that benefit.
Ironically, on a Retiree Visa, I do not qualify for BPJS and have recently paid about US$30,000 for medical surgery, etc. in Bali.

To put some meat on the bone of my contention does anyone have any information on how many expats reside in Indonesia on Retiree Visas?
 
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I think we have to be a little careful not to "highlight" any perceived benefits for some of our members to the powers that be , bear in mind this and other forums will be studied by the " local plod " , perhaps it may be wise to move this discussion to the cage , I would hate anyone on here to suffer because of "loose lips" , just a thought .:tape:
 
I think we have to be a little careful not to "highlight" any perceived benefits for some of our members to the powers that be , bear in mind this and other forums will be studied by the " local plod " , perhaps it may be wise to move this discussion to the cage , I would hate anyone on here to suffer because of "loose lips" , just a thought .:tape:

I disagree scouser... what perceived benefits are highlighted?

I would argue it better to have forums, and other media like those used by the RI ladies, with courage, that changed the law in regard to mixed-marriage children's Citizenship, should be more prevalent.

Proper argument and debate opens all to a reasonable future...despite deniers and negative thinkers or trash-talk 'in the cage".
 
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I think we have to be a little careful not to "highlight" any perceived benefits for some of our members to the powers that be , bear in mind this and other forums will be studied by the " local plod " , perhaps it may be wise to move this discussion to the cage , I would hate anyone on here to suffer because of "loose lips" , just a thought .:tape:

I disagree scouser... what perceived benefits are highlighted?
I would argue it better to have forums, and other media like those used by the RI ladies, with courage, that changed the law in regard to mixed-marriage children's Citizenship, should be more prevalent.

Proper argument and debate opens all to a reasonable future...despite deniers and negative thinkers or trash-talk 'in the cage".

I agree we need to be careful about conversations like this particularly when it is highlighted that a number of retired expat may not be paying the appropriate Indonesian tax on their worldwide income.

The world wide taxation issue is a far bigger issues for the Indonesian government than the needs of expats who chose to live here on a permanent basis. The tax amnesty was clear proof that the Indonesian government are serious about locating and taxing worldwide incomes.

The RI ladies on their site have had success with issues that are unique to the expat community.

I am all for us raising issues and fighting for change when issues impact on our community but I do doubt that it serves our members and community well by highlighting that some members do not register for taxation when they receive world wide income.
 
We are on the same page specifically about keeping 'mum' about retirees and pension income from abroad and said so in my posts about enjoying our lives. The tax office clearly doesn't want to deal as they reject retirees applications for NPWP.

Scouser's post opened to a more general discussion about how other expats living in RI have many issues that need to be addressed...particularly the one about spousal visas, work availability, land acquisition, mixed-marriage children, divorce and death..
With those concerns I say we should speak-out at every opportunity and show some solidarity about the unfairness of Indonesian law in regard to those areas.
 
We are on the same page specifically about keeping 'mum' about retirees and pension income from abroad and said so in my posts about enjoying our lives. The tax office clearly doesn't want to deal as they reject retirees applications for NPWP.

Scouser's post opened to a more general discussion about how other expats living in RI have many issues that need to be addressed...particularly the one about spousal visas, work availability, land acquisition, mixed-marriage children, divorce and death..
With those concerns I say we should speak-out at every opportunity and show some solidarity about the unfairness of Indonesian law in regard to those areas.

Agreed. My views is we should use this forum to canvas a lot of issues facing those who come for a short period and those who decide this is their home. To my mind there are 3 distinct audiences for the forum. Those expat who come for work or other reason and stay for the short to medium term, the tourist or short term visitor and those who chose to call Indonesia home. All 3 groups have different issues and different solutions.

I had another look at forum vision page before I posted last time and aims are all fine but maybe we as group of regular users should go a little further and try and canvas new discussions on a range of issues. In addition to the topics you quoted, there are a number of social issues that we could explore on the forum. For example things like Isolation, support groups,language and medical treatment or drugs not available in Indonesia are just a few that warrant a lot of discussion and indeed possible fact sheets on the web page.

Maybe there could be more discussion about issues that impact on be people coming to Indonesia that are unique to leaving their home country.

Overall we have had little new regulations or legislation that has impacted on expats over the last year or so and as a result nothing much has changed in relation to the list of topics normally discussed. Just my thoughts!
 
Scouser's post opened to a more general discussion about how other expats living in RI have many issues that need to be addressed...particularly the one about spousal visas, work availability, land acquisition, mixed-marriage children, divorce and death..
With those concerns I say we should speak-out at every opportunity and show some solidarity about the unfairness of Indonesian law in regard to those areas.

Not true my freind , I was referring directly to the post ie taxation offshore incomes pensioners etc etc , I was trying to be " little vague " not wishing to give them further "ammo" you understand , hence my suggestion .

Generally speaking I think expats contribute a lot to RI in indirect taxation , ie food, rent, staff , car and bike purchase tax , alcohol taxes etc etc , a long list , and we all know if we wish to live a little bit " high on the hog "
Indonesia can be expensive .

Sorry if my post was a little unclear as it was done for a reason , not because I went to an "approved " school.:smile:
 
Just posting to clarify about domestic workers and filing taxes: The law says that you DO NOT need to file taxes, if your net income is below the exemption limit (PTKP). This is currently set at Rp 54jt for individuals, plus Rp 4.5jt if married, and Rp 4.5jt per dependent up to 3. An additional Rp 54jt if a wife's income is combined and filing jointly. I think this covers the vast majority of domestic workers.

Since having taxable income is one of the objective requirements for getting an NPWP, they are also exempt from having to have one.

References:

UU No 1, 2013 (KETENTUAN UMUM DAN TATA CARA PERPAJAKAN) - Pasal 3 Ayat 1
PerMen Keuangan No 243/PMK.03/2014 - Pasal 18
Statement from Dir.Gen. of Taxation - "Income under Rp 4.5jt per month do not need NPWP, do not pay income tax".
 
Copy from a member from a Malaysian forum a few days ago......
"For those who didn't attend the BHCKL/MM2H presentation yesterday, the word is out (official), even backed by tiny fold-out MM2H pamphlets. From the "middle of the year" but excluding applications presently in the pipeline:

1. Proof of liquid assets rises to RM600,000 (presently RM350,000)
2. FD rises to RM500,000 (presently RM150,000)
3. Requirement to show off-shore income of RM10,000/month exempted for over-60s

The deputy/assistant director of MM2H who was one of the speakers unashamedly said (backed by a giant slide) that they were looking for "quality not quantity"."

Wow, because quality people are the ones with cash right? Very sad use of words.
 
Once again, for the 3rd time I’ve taken all my uk pension and tax info to the tax office, once agaist the tax officials are not interested, while we were at the Tax office I met a wife of a pilot who flew for Batavia, they unfortunately didn’t pay his tax of 30 million Rp before the airline folded, so now the tax people want it, anyway the tax official and the pilots wife went outside the office for a quiet chat, it seems there has been a considerable reduction in the outstanding tax, I make no further comment
 
Once again, for the 3rd time I’ve taken all my uk pension and tax info to the tax office, once again the tax officials are not interested.

Hi Anglian,

I know this is going back to an old thread, but have meant to ask a few questions about your response here. My questions are based on a lack of understanding of how the process works - since I have not lived there (yet).

1. What process prompts you to actually visit the tax office each year? Do you get a notice in the mail? Is it part of your visa (KITAS, KITAP, etc.)?

2. When you visit the tax office, and they state they are not interested in your UK pension, do you get some sort of official paperwork that proves you are clear? In other words, do you fill out a form showing this income, and the tax officer marks it as zero tax? Said another way, do you you have proof that you were cleared all these years of reporting, so it's unlikely they can come back to you for back taxes in case someone changes their mind?

Thanks.
 
After recently getting my "Malaysia My Second Home" (MM2H) visa and living in retirement in the Kuala Lumpur area a few months now. I see some definate official tax benefits there. To begin with the MM2H program excludes foreign income from taxation. In addition to that local bank fixed deposits are tax exempt as well for locals and foreigners. Currently interest on a bank fixed deposit in Malaysia is slightly above 3% for a 1 year term. While you wont get rich on that rate, its a nice place to put some cash while riding out a potential global financial crisis that may be on the horizon. Also you can open foreign currency accounts with a nice interest rate to protect from local currency devaluation.

While some of the "sugar coated" MM2H program benefits have been eroding recently. The above tax free items still apply.

Indonesia still worries me in terms of a potential income tax nightmare, "Go directly to Jail" without passing GO senario. I would love to hear from anyone on this forum that actual pays Indonesian tax on their foreign income. It would be nice to have the option of living in Indonesia as a backup should Malaysia MM2H program go the way of the "Dodo Bird" but paying 35% taxes on my US based investment income is a deal breaker.
 
It would be nice to have the option of living in Indonesia as a backup should Malaysia MM2H program go the way of the "Dodo Bird" but paying 35% taxes on my US based investment income is a deal breaker.
Actually the top marginal rate on personal income in Indonesia is 30%, not 35%, and the top rate does not kick in until one earns over 500 million Rupiah in income. In addition, Indonesia has treaties to avoid double taxation with a number of countries, including the U.S. For example, as a non-US citizen I have a 30% withholding tax automatically deducted from my US source stock dividends. I would pay no income tax on this income in Indonesia, as the US tax at a flat 30% exceeds the Indonesian liability at a 30% marginal rate. Obviously the tax treaty doesn't help when one has no foreign tax liability on income earned outside Indonesia (for example on interest income in Malaysia), but the situation is not quite as dire as your post suggests.
 
Actually the top marginal rate on personal income in Indonesia is 30%, not 35%, and the top rate does not kick in until one earns over 500 million Rupiah in income. In addition, Indonesia has treaties to avoid double taxation with a number of countries, including the U.S. For example, as a non-US citizen I have a 30% withholding tax automatically deducted from my US source stock dividends. I would pay no income tax on this income in Indonesia, as the US tax at a flat 30% exceeds the Indonesian liability at a 30% marginal rate. Obviously the tax treaty doesn't help when one has no foreign tax liability on income earned outside Indonesia (for example on interest income in Malaysia), but the situation is not quite as dire as your post suggests.

500 million IDR is only $32,853 USD, so it's very possible to hit the maximum Indonesian tax rate you mention without trying too hard in a good year. The progressive tax laws in the USA have favorable investment rules and only tax long term capital gains from stocks at a rate of 10%. Thats quite reasonable in my book and given that in the US a married couple earning less than $24,000 in wages, dividends, or investments pay ZERO taxes because of the tax laws. In Indonesia a $24,000 USD (365 million IDR) yearly income can give you a very comfortable life and probably puts a person in a moderate to high tax bracket.

The 30% withholding amount that the US goverment takes from your investments, bank interest, and dividends is not a tax. It's a prepaid amount they collect in anticipation of a tax liability for certain foreign persons and high wealth individuals. When you file your taxes every year, most of that amount should be refunded to you unless your situation is quite unusual.

Alas, Malaysia seems to be searching for NEW income tax sources given their debt situation inherited from the previous administration. So I wonder if or when the tax advantages I mentioned earlier will disapear. :(
 

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