The problem is not being taxed, but progressively taxed. If one has more income sources, these are stacked and then taxed with progressive rates. So, in the end ... it was all for nothing, or better said for uncle sam.
INFORMATION AND COMMUNITY FOR EXPATS IN INDONESIA
Coming home to Indonesia, need guidance...
- Thread starter Cloudcat
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Progressive taxation has always been the case in many countries (if not all). It does not matter whether you are still actively working or if you are in retirement age. It is generally justifiable for rich people with more income will need to pay more tax.The problem is not being taxed, but progressively taxed. If one has more income sources, these are stacked and then taxed with progressive rates. So, in the end ... it was all for nothing, or better said for uncle sam.
But for many individuals, post-retirement income is unlikely to exceed their earnings during active employment.
A drawdown from pension saving pot, people could even avoid paying the income tax at all by only withdrawing it monthly up to the income tax threshold. But for many people this is too small to support their needs.
I think I could see your point now.The problem is not being taxed, but progressively taxed. If one has more income sources, these are stacked and then taxed with progressive rates. So, in the end ... it was all for nothing, or better said for uncle sam.
Indonesia - Individual - Taxes on personal income
Detailed description of taxes on individual income in Indonesia
taxsummaries.pwc.com
| Taxable income (IDR*) | Tax rate (%) |
| Up to IDR 60 million | 5 |
| Above IDR 60 million to IDR 250 million | 15 |
| Above IDR 250 million to IDR 500 million | 25 |
| Above IDR 500 million to IDR 5 billion | 30 |
| Above IDR 5 billion | 35 |
Income tax in NL for Instance
Tax in the Netherlands | Netherlands Tax Guide - HSBC Expat
Moving in to or out of the Netherlands? Get in-depth information for expats on different taxes and how to deal with them.
www.expat.hsbc.com
| Taxable income band EUR | Tax rates for box 1 income |
|---|---|
| 1 to 35,472 | 9.42% |
| 35,473 to 69,398 | 29.09% |
| 69,399+ | 31% |
Income tax in DE
| Income | Tax Rate |
|---|---|
| Less than 11.604 euros | 0% |
| 11.604 - 66.760 euros | 14% to 42% |
| 66.761 - 277.825 euros | 42% |
| More than 277.826 euros | 45% |
Tax free allowance (Non taxable income threshold) for a couple in Indonesia: IDR 63m = EUR 3,662
https://www.pbtaxand.com/menu/detail/whats_new/787/cara-menghitung-penghasilan-tidak-kena-pajak-ptkp
As of 2023, the basic tax-free allowance in DE is EUR10,908 for singles and EUR21,816 for married couples who file their taxes jointly
There is a massive difference between Tax free allowance in DE vs ID, e.g. EUR21,816 vs EUR3,662.
Supposed you were living with your pension in the DE with income/pension up to EUR21,816 your payable income tax was nil. But when you are living in Indonesia and subject to Indonesian taxation you will be paying tax of any income above EUR3,662, e.g EUR21,816 - EUR3,662=EUR18,154 (IDR312m) is taxable and you will be taxed @25% tax rate.
I am not a tax expert but would like to learn. Could someone else double check it if there is an error in that assumption and calculation ??
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Tax free allowance of 57,000 euro is for assets, meaning if one has e.g. shares or bonds of 100,000 euro, one has to pay tax on the 'return on assets (= fixed fictitious percentage of 6.17%) x (100,000 -57,000) euro x tax rate (=fixed rate of 32%).
Assets must be reported in the so called box 3 (= assets)
Income must be reported in the so called box 1 (= income)
One's home must also be reported in box 1, which is strange, but for political reasons it has been reported in box 1 for decades, together with the mortgage (hypotheek). The mortgage interest can be subtracted from one's income in box 1. But, one's home is seen as a source of income, and for that reason a fictitious percentage (0.45%) of the value of one's home is added to one's income.
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Yes EUR53k free allowance for income tax is very high what is the free allowance for income tax in NL then ??
Edit:
I just found that the Netherlands has a system of tax credits rather than a tax-free allowance like other countries Personal Allowance. The tax credits in the Netherlands work differently than allowances in other countries, as they reduce the amount of tax you owe rather than the amount of income you can earn tax-free.
In the UK tax free allowance is £12,570, in DE EUR21,816 for married couples who file their taxes jointly. I have updated my post #43 to reflect this
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True. It's called "algemene heffingskorting" and "arbeidskorting". How much depends on your wages, but it's a couple of hundreds max couple of thousands euros.
Yes ... not wise to move to Indonesia then. But this reasoning applies also to people, i.e. Germans with higher incomes, because they will always pay tax in Indonesia on that first part (of their income) being the free allowance (25% x 18,154 euro = 4,538 euro). And are taxed with the higher tax rates (in Indonesia) for the next parts of their income. Ya Ampuuuun!
And still they call this DTA-treaty. Ya Allah!
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Shadrach
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Wow! This is all so complicated! Is this really how you want live your life? Money this, money that, tax this, tax that, pay to be born, pay to die! If this your perception of living on this Planet, I feel sorry for you! Life is short! Go out and enjoy nature, sit by a waterfall, look at the sunset on the beach! Smoke a delicious joint and drink some alcohol of choice, or whatever! Enjoy life while you can, Oh, sorry, I forgot, it is not allowed to have free will.
MamangDudul
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Ignorance and being clueless doesn't save you from punishment, at least not always. Sure you can go to the beach roll a spliff and let everything pass by. Only because we don't care for something doesn't mean it doesn't have influence on our life. There are things that have to be dealt with, if we like it or not. We could also try to see how our CURRENT system and society would look like without taxes. Goodbye anything social welfare and so on...
Hippie mentality is all nice and good, but some things have to be done and considered and planned, if we like it or not.
So yeah, go to the waterfall and enjoy a beer or whatever and pay the taxes that you have to pay or find a counselor that can help you save taxes here and there. It's as simple as that.
Shadrach
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I am curious about what you said? Punishment? Punishment for what? Being a free spirit, farming your land, loving your friends and family? Eating healthy, Get real! Wake up and see that most of the taxes payed, go into rich politicians pockets and are not being used to improve the infrastructure or common peoples lives!
Shadrach
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As to the post before, Yes, the So called Hippie mentality was good, and things have to be planned. That does not mean that we cannot plan everything, for the good of all, and the Planet! Taxes can be good if they are applied for the betterment of all! As I see now, people are desperate and hungry for money. So they try to cheat and overcharge a little to get more $, to cover their needs. This only creates a situation that gets more and more corrupt! I am only talking about what I see in day to day living with common people. I don't have a clue what the people in the government or the rich do. The concept of peace, love, prosperity for all, is a good idea! We cannot survive, if life continues to get more and more greedy and noninclusive! The situation now is an illusion, and will not last. We are just a species, that is out of control on this planet. I am thankful to have had my time here.
Whoa, I am sounding pretty negative here! That is really not my intention. I do, love living here and seeing all the different colors of the rainbow! Hopefully, I get to stay around and see a lot more. I just want the best for all!, If people need these governments, taxes, and religions, to make them happy so be it! Let's just find a way to make it nice for all, and that we don't screw it up for generations to come! Om Swastiastu
Whoa, I am sounding pretty negative here! That is really not my intention. I do, love living here and seeing all the different colors of the rainbow! Hopefully, I get to stay around and see a lot more. I just want the best for all!, If people need these governments, taxes, and religions, to make them happy so be it! Let's just find a way to make it nice for all, and that we don't screw it up for generations to come! Om Swastiastu
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MamangDudul
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Look I always said that some of your views towards life and a better world are something I like, although sometimes you come off a bit too far from reality for my taste.
To make it simple, nobody likes taxes and in some way surely "we don't need taxes to be happy ". On the other side a lot of the stuff in our way of living, our system, simply wouldn't be there without taxes.
You once mentioned helping out your neighbours and they wouldn't even help you back by driving you to the doctor/hospital. This has nothing to do with taxes BUT do you think people would build a hospital for your or give you a public health insurance? No. The government does, wirh taxes.
Sure in an utopian world people could theoretically handle that without a government and so on, but as I often said before - this is not a world there ever was or will be in my opinion.
As snpark said, it's start with something so simple like roads. But I don't really think i have to explain that to you. Only because some of us not all day talk about our utopian wishes and ideas and deal with the necessities a government lead society brings, it doesn't mean we don't wish for better things at all. We all love to enjoy a beer at the beach or waterfull, much better with naked women dancing in front of us BUT that's sadly not all there is to it.
EDIT:
Which taxes make sense and which not, which are too high, which not and do the rich benefit more than the middle class and so on can surely be discussed. But questioning taxing in general and making people who have to deal with this subject look kinda like weird party poopers is another thing.
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You can avoid taxes but not evade them
Which is why people hate digital nomads because they use the infrastructure that we paid for, damage it, but contribute nothing. Don't say they help the economy. They only come here because it costs $8 a night for a room and $5 to eat and they still haggle. They don't employ people or pay taxes or anything. They even gloat about it. Then have the cheek to complain. Or don't follow the law or rules or culture
Anyway back on topic
Which is why people hate digital nomads because they use the infrastructure that we paid for, damage it, but contribute nothing. Don't say they help the economy. They only come here because it costs $8 a night for a room and $5 to eat and they still haggle. They don't employ people or pay taxes or anything. They even gloat about it. Then have the cheek to complain. Or don't follow the law or rules or culture
Anyway back on topic
jstar
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There are different types of tax treaties. Don’t forget there’s a big difference between first taxing rights and sole taxing rights. You can’t just assume a tax free allowance automatically leads to double taxation and makes that part taxable in another country.
Source:
Article 23 Relief from Double Taxation. Paragraph (2). Tax shall be determined in the case of a resident of the Republic of Indonesia as follows: (b) where a resident of Indonesia derives income from the Federal Republic of Germany and such income may be taxed in the Federal Republic of Germany in accordance with the provisions of this Agreement, the amount of the German tax payable in respect of the income shall be allowed as a credit against the Indonesian tax imposed on that resident".
In other words, if an tax-resident (i.e. a NWA-Germany) receives income from Germany and pays taxes on it, he/she can use this amount as a credit to reduce the tax levied in Indonesia. This helps prevent double taxation and ensures that the resident is not taxed twice on the same income.
However ...
I asked AI-copilot of Microsoft to do this calculation assuming:
1. German individual has an (bruto) income of EUR 80,000.
2. Pays tax on this with 'no tax on the first part of income', up to a certain threshold.
3. Tax-free allowance of EUR 21,816 (see post Pantaiema).
4. Taxable income = EUR 80,000 - EUR 21,816 = EUR 58,184
5. Progressive tax rates, but on average let's assume the tax rate for this income is 30%.
6. Tax = (Taxable income) × (Tax rate) = EUR 58,184 × 0.30 = EUR 17,455.20
7. He now becomes a resident of Indonesia.
This is AI-copilot's calculation:
8. We will take into account the tax treaty between these two countries.
9. The amount of German tax he paid is allowed as a credit against Indonesian.
10. Let's assume that the Indonesian tax rate is 30%.
11. Indonesian tax on income from Germany = 30% of EUR 80,000 = EUR 24,000
12. The tax credit EUR 17,455.20.
13. Net Indonesian tax = EUR 24,000 - EUR 17,455.20 = EUR 6,544.80
He still has to pay a net tax of EUR 6,544.80 in Indonesia on the income he receives from Germany, taking into account the tax treaty and the allowed tax credit.
Ya Ampuuun!
Article 23 Relief from Double Taxation. Paragraph (2). Tax shall be determined in the case of a resident of the Republic of Indonesia as follows: (b) where a resident of Indonesia derives income from the Federal Republic of Germany and such income may be taxed in the Federal Republic of Germany in accordance with the provisions of this Agreement, the amount of the German tax payable in respect of the income shall be allowed as a credit against the Indonesian tax imposed on that resident".
In other words, if an tax-resident (i.e. a NWA-Germany) receives income from Germany and pays taxes on it, he/she can use this amount as a credit to reduce the tax levied in Indonesia. This helps prevent double taxation and ensures that the resident is not taxed twice on the same income.
However ...
I asked AI-copilot of Microsoft to do this calculation assuming:
1. German individual has an (bruto) income of EUR 80,000.
2. Pays tax on this with 'no tax on the first part of income', up to a certain threshold.
3. Tax-free allowance of EUR 21,816 (see post Pantaiema).
4. Taxable income = EUR 80,000 - EUR 21,816 = EUR 58,184
5. Progressive tax rates, but on average let's assume the tax rate for this income is 30%.
6. Tax = (Taxable income) × (Tax rate) = EUR 58,184 × 0.30 = EUR 17,455.20
7. He now becomes a resident of Indonesia.
This is AI-copilot's calculation:
8. We will take into account the tax treaty between these two countries.
9. The amount of German tax he paid is allowed as a credit against Indonesian.
10. Let's assume that the Indonesian tax rate is 30%.
11. Indonesian tax on income from Germany = 30% of EUR 80,000 = EUR 24,000
12. The tax credit EUR 17,455.20.
13. Net Indonesian tax = EUR 24,000 - EUR 17,455.20 = EUR 6,544.80
He still has to pay a net tax of EUR 6,544.80 in Indonesia on the income he receives from Germany, taking into account the tax treaty and the allowed tax credit.
Ya Ampuuun!
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Yes. In Germany as well as in Indonesia tax rates are progressive. The calculation of the AI-copilot is just roughly showing of how the tax systems work. The AI-copilot was just "malas" to calculate it precisely
.But the example makes clear: a German individual (in Indonesia) pays 30% tax of his income in Germany. Thinks he is done paying tax. Taxed in Indonesia with 30% tax rate also, but still has to pay additional tax.
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wow... so much interesting discussion in 2 days that I missed...
Talking about tax made me want to postpone my coming back to Indonesia haha... will think of a smartest way.
Meanwhile, just enjoy nasi padang, gudeg, rawon, soto, sate, ketoprak, asinan bogor, pempek, otak-otak, martabak, pisang goreng, cendol, kelapa kopyor, and many more........
Talking about tax made me want to postpone my coming back to Indonesia haha... will think of a smartest way.
Meanwhile, just enjoy nasi padang, gudeg, rawon, soto, sate, ketoprak, asinan bogor, pempek, otak-otak, martabak, pisang goreng, cendol, kelapa kopyor, and many more........
wow... so much interesting discussion in 2 days that I missed...
Talking about tax made me want to postpone my coming back to Indonesia haha... will think of a smartest way.
Meanwhile, just enjoy nasi padang, gudeg, rawon, soto, sate, ketoprak, asinan bogor, pempek, otak-otak, martabak, pisang goreng, cendol, kelapa kopyor, and many more........
Yes and all those warungs, cash only business, no audited accounts, no taxes paid, salary is cash per day, etc etc lol
