Hot Subject 2016 Sept - Tax Amnesty

[dafluff]

As far as I know, the tax amnesty is not for expats. If your Indonesian wife has no NPWP, it's not for her too.

Tax amnesty is for all tax residents of Indonesia, that includes expats who stay in country 183+ days a year.

Not concerned for being an Expat, wife, or amnesty. What I am wondering is if the part about Prenup vs no prenup is factual or the information given in regards to a foreign pension.

I'm pretty sure the prenup situation is incorrect. In case of no prenup, then virtually all assets obtained during the marriage are joint property, so it is impossible to "gift" any jointly owned assets to your spouse in this situation, and there is no tax burden for any partner using their joint assets. In the case of prenup, then maybe you have to document asset transfers more carefully, but still anything given to a spouse is "bukan objek pajak" since there is no gift tax to immediate family members (parents to children, or between spouses). In this case you should document any change of hands of assets in your SPT.

As for foreign income, it really depends on the situation. Of course, if the expat in question is in Indonesia fewer than 183 days, then no taxes to any income outside of Indonesia. Even if he/she is, depending on where in the world the income is earned there may be tax treaties that apply, which exempts it from taxes in Indonesia if it is already taxed abroad. So in other words, it depends on each individuals situation.

 

[fastpitch17]

As for foreign income, it really depends on the situation. Of course, if the expat in question is in Indonesia fewer than 183 days, then no taxes to any income outside of Indonesia. Even if he/she is, depending on where in the world the income is earned there may be tax treaties that apply, which exempts it from taxes in Indonesia if it is already taxed abroad. So in other words, it depends on each individuals situation.

OK, what about an individual who doesn't make enough annually to owe taxes in their own country. They are exempt from taxes there by reason of amount paid but must still file. Would all their income from that country be taxed in Indonesia? This could apply in the US to pensions, social security, or retirement accounts. What if an expat living in Indonesia only had savings which was taxed prior to their arrival here?

 

[jstar]

That is probably the case for many (esp. pensionado) ex-pats. Luckily they are not so interested in these cases (and it's hard to proof also) but yes, officially you need to declare all income (above a certain limit) even if it was already taxed. Now this is the case in practically all countries I know; they request the information on the foreign income, even if there are treaties in place which would make it 'untaxable'.

About the gift; this we discussed before in scenarios to have the WNI spouse buying a property with money from the WNA (and having a prenup). Our method was to provide a loan. There are some dangers there; there needs to be an end date and a realistic interest that has to be paid on the total, otherwise it would be a gift. (And I disagree with Dafluf, there is something called hibah, currently 2.5%. And as in many other countries, a gift to buy a house is like giving a house.) And you could be accused of banking activities, a big no no in RI.

 

[mauricio]

Tax amnesty is for all tax residents of Indonesia, that includes expats who stay in country 183+ days a year.

This page from the President's website says "it is for all Indonesians"
http://presidenri.go.id/kabar-presi...erlaku-bagi-semua-warga-negara-indonesia.html

 

[dafluff]

OK, what about an individual who doesn't make enough annually to owe taxes in their own country. They are exempt from taxes there by reason of amount paid but must still file. Would all their income from that country be taxed in Indonesia? This could apply in the US to pensions, social security, or retirement accounts.

Not sure what the situation with regards to US pension/SS etc. I know Indonesian pensions are exempt up to Rp 50mil/year, then are taxed 5% over that amount.

What if an expat living in Indonesia only had savings which was taxed prior to their arrival here?

No income prior to an expat becoming an Indonesian tax resident is subject to Indonesian taxes. Now the interest that is continually generated from these savings may be taxed. However, in Indonesia bank interest is taxed automatically at the bank, so tax officials may not bother with interest earned abroad.

 

[dafluff]

This page from the President's website says "it is for all Indonesians"
http://presidenri.go.id/kabar-presi...erlaku-bagi-semua-warga-negara-indonesia.html

It doesn't say it's only for Indonesians, does it?

Referring to Art 3, UU 11 2016 which has already been linked in this thread:

(1) Setiap Wajib Pajak berhak mendapatkan Pengampunan Pajak.

All tax subjects may obtain Tax Amnesty. Wajib pajak here includes all persons and legal entities in Indonesia. Including expats and PT. PMAs

 

[jstar]

Tax amnesty is for all tax residents of Indonesia, that includes expats who stay in country 183+ days a year.

This page from the President's website says "it is for all Indonesians"
http://presidenri.go.id/kabar-presi...erlaku-bagi-semua-warga-negara-indonesia.html

And the DitJen Pajak (from the Ministry of Finance), states on their website's faq section that all tax subjects are eligable for the amnesty, but for those foreigners married to an Indonesian, if they have NO prenup. No specific mentioning of a WNA married with prenup. See point 9.

 

[mauricio]

It doesn't say it's only for Indonesians, does it?

Referring to Art 3, UU 11 2016 which has already been linked in this thread:

(1) Setiap Wajib Pajak berhak mendapatkan Pengampunan Pajak.

All tax subjects may obtain Tax Amnesty. Wajib pajak here includes all persons and legal entities in Indonesia. Including expats and PT. PMAs

Thanks dafluff, but as an expat, why should I disclose my assets outside Indonesia?

 

[mauricio]

And the DitJen Pajak (from the Ministry of Finance), states on their website's faq section that all tax subjects are eligable for the amnesty, but for those foreigners married to an Indonesian, if they have NO prenup. No specific mentioning of a WNA married with prenup. See point 9.

Thanks jstar.

 

[dafluff]

And the DitJen Pajak (from the Ministry of Finance), states on their website's faq section that all tax subjects are eligable for the amnesty, but for those foreigners married to an Indonesian, if they have NO prenup. No specific mentioning of a WNA married with prenup. See point 9.

Nothing in #9 form the FAQ from DitJen pajak contradicts what we know. There is no mention about marriages with prenup, because it is not a special case. Without a prenup there could be a situation where one spouse is a tax subject, and the other one isn't, and that is confusing for a joint property marriage. This is what #9 tries to address, ie: Not whether a foreigner is eligible for tax amnesty, but how to handle a situation where one spouse is not a tax subject. In the case of a prenup, both spouses are separated financially and should act individually.

Thanks dafluff, but as an expat, why should I disclose my assets outside Indonesia?

1) Because you want to follow the law, and/or

2) Because if they find out you may be penalized.

And if you think #2 is unlikely, then you probably haven't heard about Common Reporting Standards.

Again, all this has been mentioned previously in this thread.

 

[Nimbus]

Thanks dafluff, but as an expat, why should I disclose my assets outside Indonesia?

If you live in Indonesia for more than 185 days a year, then you are a subjek pajak dalam negeri (domestic tax subject). In other word, your income and property is subject to Indonesian income tax law.

 

[fastpitch17]

Looks like Singapore will do whatever it takes to keep Indonesian money there. I imagine a lot of that cash was gotten illegally but Singapore is going to ignore it unless you want tax amnesty in Indonesia.

http://jakartaglobe.beritasatu.com/...ort-indonesians-embracing-tax-amnesty-police/

"The moment the client tells you he's participating in the amnesty, you have a suspicion that the assets with you are not compliant, and so you have to report to the authorities," said a senior executive at a Singapore-based wealth manager.

 

[dafluff]

"The moment the client tells you he's participating in the amnesty, you have a suspicion that the assets with you are not compliant, and so you have to report to the authorities," said a senior executive at a Singapore-based wealth manager.

Ahahahah....typical Singaporeans. Never questioned all that money coming in from Indonesians before, until the moment they want to take it out. The biggest corruption enablers in SEA.

 

[fastpitch17]

Ahahahah....typical Singaporeans. Never questioned all that money coming in from Indonesians before, until the moment they want to take it out. The biggest corruption enablers in SEA.

SEA. Money gets you lots of friends. Take it away and you get lots of enemies.

 

[jstar]

They will never know unless someone talks of course. The 'dedicated' banks for receiving the funds are not special or so. The only way they could 'prove' anything if someone makes the amnesty remark on the declaration.

And in fact you could keep the money there (against a double tax tariff vs. repatriation).

In both countries there is scaremongering and bullying going on.

 

[mauricio]

For several weeks, our AR (account representative or the tax official handling our case) kept nudging our accountant for the company to enroll in the tax amnesty program. What is wrong with the AR? Our company is not a tax evader nor a tax cheat, we do not have hidden assets or bank accounts either. Why should we apply for the tax amnesty? Something is wrong with the tax office, tax amnesty should be for tax evaders, tax cheaters, declaring hidden assets and bank accounts, not for the honest taxpayer.

 

[dafluff]

For several weeks, our AR (account representative or the tax official handling our case) kept nudging our accountant for the company to enroll in the tax amnesty program. What is wrong with the AR? Our company is not a tax evader nor a tax cheat, we do not have hidden assets or bank accounts either. Why should we apply for the tax amnesty? Something is wrong with the tax office, tax amnesty should be for tax evaders, tax cheaters, declaring hidden assets and bank accounts, not for the honest taxpayer.

He's probably just pushing the tax amnesty as he is told to do. Right now, the finance ministry is pushing really hard to meet targets as they have barely met 30% or so.

As an aside, I spoke to a long time friend who is a tax consultant. He told me that one of his clients, one of the biggest business family locally (think kids driving around in Lambos), paid approx Rp 500rb in tax last year. Their previous accountant even used the "Sangat Sederhana" tax form, which is the simplest form, for people making less than Rp 60 million. Now they are going to do the amnesty. This is by far the norm in Indonesia, so I think your AR just couldn't comprehend somebody actually paying their correct tax amount.

 

[fastpitch17]

Tax Amnesty and the Expat.

http://www.thejakartapost.com/news/2016/09/22/expatriates-and-indonesian-tax-amnesty.html

The Indonesian Taxation Law applies a time test on foreigners who live in Indonesia to be domestic taxpayers. Article 2 of Law No. 36/2008 concerning the fourth amendment to Law No. 7/1983 concerning income tax (the Income Tax Law) regulates material and formal requirements as to the status of foreigners who become domestic tax subjects and are required to have a taxpayer identification number (TIN)

 

[dafluff]

From the article linked above:

The material requirement is to obtain income from activities within the Indonesian territory, while the formal requirement is a length of stay in Indonesia of 183 days within a period of one year, or foreigners residing in Indonesia for a period of one tax year who intend to stay in Indonesia.

The intention to stay in Indonesia can be implied, for example, by an employment contract with an Indonesian company.

Furthermore, Article 3 of the Tax Amnesty Law regulates that all taxpayers are eligible to participate in the tax amnesty. This means that every individual who is already materially and formally qualified as a tax subject will be given a TIN and be eligible for the tax amnesty.

The bolded has been discussed in this thread before, and now should put to rest whether foreigners are qualified to take advantage of TA.

Ownership of a TIN should be distinguished from a person’s citizenship status. Therefore, all income earned and property owned by expatriates in their country of origin, or in any other countries outside Indonesia, need not be reported.

Expatriate skepticism seems to stem from the definition of wealth in the Tax Amnesty Law, which defines “the accumulation of additional economic capability in the form of all wealth, both tangible and intangible, whether movable or immovable, whether used for business or not for business, inside and/or outside the territory of the Republic of Indonesia”. This is why it is called worldwide income.

This part has led to some confusion earlier. According to this article you don't need to report income earned abroad. Good to know.

 

[dafluff]

Also, I commend the Jakarta Post for finally publishing this article, almost 3 months into the TA program, and only 1 week away from the end of the first period of amnesty. Better late than never, I suppose.