Is a spouse-sponsored Kitas/Kitap really worth it?

[R Cameron]

how could they even know what your worldwide income is?

Common Reporting Standard - Wikipedia

en.wikipedia.org

 

[pantaiema]

As for having to pay tax on worldwide income. I've never heard of someone with a spouse kitap who does that (how could they even know what your worldwide income is?).

They could detect it ot or least will put you on the spotlight if you are using bank transfer (or the like) especially if it is done quite often with a relatively large sum and the Indonesian financial Institutions get involved.

I read somewhere here in this forum a person where put under scrutiny for suspected foreign earning, assets that have not been reported. If my memory serves well, it is about rental income in other countries.

I do not have good knowledge in this matter, but I think a good way of receiving money regularly (say weekly/monthly) is to maintain your bank account overseas and you use your debit card, preferably zero fees for foreign withdrawal to withdraw money from ATM in Indonesia. There is a daily limit for withdrawal say US$300 but with weekly withdrawal, it will be USD$1200 per month. If this is not enough, you could have multiple debit cards from different banks. If you withdraw cash via ATM, it is next to impossible for them to differentiate between foreign residence or tourist withdrawing cash from ATM. The exception is certainly if you are already under the spotlight of suspected criminal, terrorist.

This is not to discuss on tax evasion but there might be genuine case where a person gets a gift, from close relatives, friends, etc. A gift is a non taxable item.

I am interested in knowing how other people get their pensions in Indonesia and reporting it if it is above the tax threshold.

 

[snpark]

Pension is tax free
That's the whole point
You get taxed on your salary
Then on your savings

 

[Hawk256]

I have pension am on a KITAP and don't work in Indonesia. I was told they were not giving me a tax number since I had nothing to report. YMMV.

 

[Samoerai]

Not sure about Indonesia. In the US you have to declare foreign assets above a certain threshold (two thresholds set by two government ministries actually)...

and many banks worldwide would either refuse to deal with Americans or file the appropriate paperwork to report your foreign income.

I think if you bring in substantial amounts of money from overseas you would eventually end up audited. Then again one of the two parties here like to defund the IRS (tax agency) on behalf of their rich buddies ...

Banks do exchange info. .. and report to tax authorities. Indonesia is on the list.

 

[Samoerai]

Pension is tax free
That's the whole point
You get taxed on your salary
Then on your savings

Pension is tax free?
Please, let me know where in Indonesian Tax Law it says pension from "luar negri" is tax free. As far as I know only social security income (e.g. from USA) is tax free in Indonesia according to the Tax Agreement between USA and Indonesia.

 

[Hawk256]

I found out from a former BOI director when helping me track down a transfer one time that ALL transfers to or from Indonesia and the US over $600 have to be approved manually. Bascially someone is seeing every transfer to and from the US and has to click OK for the transaction to take place. This was a few years ago and I don't know what if any other countries have the same scrutiny or if it still the current procedure. Chances are if your transfer isn't instant and usually doesn't happen the same business day, then the transaction is going through this process.

 

[pantaiema]

Pension is tax free?
Please, let me know where in Indonesian Tax Law it says pension from "luar negri" is tax free. As far as I know only social sucurity income (e.g. from USA) is tax free in Indonesia according to the Tax Agreement between USA and Indonesia.

As mention before this is the subject that I do not have good knowledge of so eager to learn. Please correct it if I get it wrong. Probably if someone could provide the link to the authoritative source that will be more accurate and convincing.

I understand Indonesian pension is still taxable in Indonesia if it is above the threshold e.g. IDR50m (?). Below IDR50m per member per tax year are not subject to income tax. But Pension payments that exceed this amount are subject to income tax at a rate of 5%.

In developed countries pension income are also taxable if it is above the personal tax-free allowance. For that reason people use a planed drawdown synchronised with other incomes to do their best paying the income tax as low as possible.

If you are a tax resident of Indonesia, you are typically subject to tax on your worldwide income including pensions received from both domestic and foreign sources. But it will also depend on the countries where they are coming from as Indonesia has subscribed to Double Tax Avoidance Agreement (DTAA) with many countries to avoid the double taxation.

 

[Samoerai]

Regarding foreign citizen living in Indonesia the taxation will depend on the countries they are coming from, whether there is residence If you are considered a tax resident of Indonesia, you are generally subject to tax on your worldwide income, including pensions received from both domestic and foreign sources. But Indonesia has subscribed to Double Tax Avoidance Agreement (DTAA) with many countries to avoid the double taxation.

Yes, the "source" of how one's pensiun is taxed or not, is the Tax Agreement between countries. @centurion gave in one of the threads a link to all agreements. But, in general pensions from "luar negri" are taxed in Indonesia by means of settlement methode meaning the tax you already paid offshore you can deduct from the tax you have to pay in Indonesia. So, let say you already paid 20% and in Indonesia you have to pay 35% income tax, then you still need to pay 15% in Indonesia .. roughly speaking.

This is also stated in the Tax Law of Indonesia. Article 24 (1) and (2).

Article 24
(1)
Taxes paid or payable abroad on income from abroad received or earned by domestic Taxpayers may be credited against taxes payable under this Law in the same tax year.
(2)
The amount of the tax credit referred to in paragraph (1) is the amount of income tax paid or payable abroad but may not exceed the calculation of tax payable under this Law.

Also this is stated by PWC in https://taxsummaries.pwc.com/indonesia/individual/foreign-tax-relief-and-tax-treaties Foreign tax relief and tax treaties


It's not fair. In my opinion, because your money is still double taxed!

 

[Hawk256]

As mention before this is the subject that I do not have good knowledge of so eager to learn. Please correct it if I get it wrong. Probably if someone could provide the link to the authoritative source that will be more accurate and convincing.

I understand Indonesian pension is still taxable in Indonesia if it is below the threshold e.g. IDR50m (?) per member per tax year are not subject to income tax. But Pension payments that exceed this amount are subject to income tax at a rate of 5%.

In developed countries pension income are also taxable if it is above the personal tax-free allowance. For that reason people use a plan drawdown synchronised with other incomes to do their best to avoid being taxed.

If you are a tax resident of Indonesia, you are typically subject to tax on your worldwide income including pensions received from both domestic and foreign sources. But it will also depend on the countries where they are coming from as Indonesia has subscribed to Double Tax Avoidance Agreement (DTAA) with many countries to avoid the double taxation.

I was asked if I paid tax on my pension in the US, which is no. I was told that it wasn't taxed here and since I wasn't working here, they told me I didn't need a tax number. I assumed that the tax people in the government knew what they were talking about so it was left at that.

 

[fastpitch17]

They could detect it ot or least will put you on the spotlight if you are using bank transfer (or the like) especially if it is done quite often with a relatively large sum and the Indonesian financial Institutions get involved.

I read somewhere here in this forum a person where put under scrutiny for suspected foreign earning, assets that have not been reported. If my memory serves well, it is about rental income in other countries.

I do not have good knowledge in this matter, but I think a good way of receiving money regularly (say weekly/monthly) is to maintain your bank account overseas and you use your debit card, preferably zero fees for foreign withdrawal to withdraw money from ATM in Indonesia. There is a daily limit for withdrawal say US$300 but with weekly withdrawal, it will be USD$1200 per month. If this is not enough, you could have multiple debit cards from different banks. If you withdraw cash via ATM, it is next to impossible for them to differentiate between foreign residence or tourist withdrawing cash from ATM. The exception is certainly if you are already under the spotlight of suspected criminal, terrorist.

This is not to discuss on tax evasion but there might be genuine case where a person gets a gift, from close relatives, friends, etc. A gift is a non taxable item.

I am interested in knowing how other people get their pensions in Indonesia and reporting it if it is above the tax threshold.

We maintain a US Bank account. Everything is direct deposited to that. We both have debit cards with 500 dollar daily limits so we can access $1,000 together per day. That is the only way we access cash from our US Account. My wife maintains 2 Mandiri accounts here. One for savings for biannual rent and general savings. The other for day to day. Our debit cards can be used the same as credit cards but we do not. Our US account is set up to only use ATMs and nothing else and there us no fee for that. We also limit our cards to only work in Indonesia but when traveling we simply inform our bank on the days we need cards to work where we will be going. Never had a problem. If for some reason one of us loses our card we still have the other until a replacement is received. Works well.

No tax number. Told by tax office not needed.

 

[pantaiema]

This is not official document from Indonesian Authority, so might not be 100% accurate but carry some weights as it is coming from those who specialise in Indonesian taxation.

Pajak Pesangon: Simak Tarif dan Cara Perhitungannya

Bingung dengan Pajak Pesangon? Temukan informasi tentang jenis, tarif, contoh kasus & cara tepat & cepat menghitung pajak pesangon.

www.online-pajak.com

 

[Samoerai]

This is not official document from Indonesian Authority, so might not be 100% accurate but carry some weight as it is coming from those who specialise in Indonesian taxation.

Pajak Pesangon: Simak Tarif dan Cara Perhitungannya

Bingung dengan Pajak Pesangon? Temukan informasi tentang jenis, tarif, contoh kasus & cara tepat & cepat menghitung pajak pesangon.

www.online-pajak.com

View attachment 3245

What is the relevance of this document for pensions received from overseas? Are these pensions from overseas taxed at a lower tax rate, meaning 5% max? Or 35% max as is the maximum tax rate for income in Indonesia?

 

[pantaiema]

What is the relevance of this document for pensions received from overseas? Are these pensions from overseas taxed at a lower tax rate, meaning 5% max? Or 35% max as is the maximum tax rate for income in Indonesia?

As I understand Having a KITAP you are subject to Indonesian resident taxpayer rules.

As an Indonesian tax resident, you are generally required to pay taxes on your worldwide income, which includes income earned both within and outside of Indonesia. This would include pensions, salaries, investment income, and any other income sources.

Coming from the countries where Indonesia have Double Tax Avoidance Agreement (DTAA) meaning your pension above the tax threshold most likely have been taxed at higher rate at source in their native country. But not all countries have a DTAA with Indonesia.

I am eager to learn, when you have a KITAP do you need to declare all of your foreign incomes with their estimate value e.g value of your state and private pension, property abroad, earning from tax free investment such as IRA in the US, SIIP, ISA in the UK. Also in which occasions you will need to declare it and how often ??

As an Indonesian tax resident, you are only supposed to pay the 5% for the pension of above IDR50m while in their foreign origin they are taxed at higher rate and the tax free threshold is higher. I start thinking is it possible to claim it back the difference, from their origin ??

 

[Samoerai]

Coming from the countries where Indonesia have Double Tax Avoidance Agreement (DTAA) meaning your pension above the tax threshold most likely have been taxed at higher rate at source in their native country

Not necessarely true. Retirerees get a different (read: lower) tax rate .. but in Indonesia get taxed again. So, in total have to pay 35% income tax.

 

[snpark]

Pension is not income
It's dividends from savings

You don't work to get your pension.

You've stopped working. This is the dividends from a retirement pension fund 411 etc

Of course USA has a different agreement because hey it's the USA and a $1 can of coke costs 51 different prices in 51 states

But it's widely accepted and acknowledged here by the brighter tax money people in Parliament that a pension is a specific investment vehicle purely for retirement purposes.
Not just a normal thing like rental income.

Of course the more technical you want to get the more sophisticated you can be. By borrowing money and using your pension to repay the loan. That can be written off as a tax loss.
Etc etc etc
It really is up to you how you want to declare it. I mean the pension.
Did you lend your kids $50k and he is paying you back $500 a month?

Is it salary? Rental income? Fees?

 

[Helpful Herbert]

I have pension am on a KITAP and don't work in Indonesia. I was told they were not giving me a tax number since I had nothing to report. YMMV.

Exactly

 

[Samoerai]

Pension is not income
It's dividends from savings

You don't work to get your pension.

You've stopped working. This is the dividends from a retirement pension fund 411 etc

Of course USA has a different agreement because hey it's the USA and a $1 can of coke costs 51 different prices in 51 states

But it's widely accepted and acknowledged here by the brighter tax money people in Parliament that a pension is a specific investment vehicle purely for retirement purposes.
Not just a normal thing like rental income.

Of course the more technical you want to get the more sophisticated you can be. By borrowing money and using your pension to repay the loan. That can be written off as a tax loss.
Etc etc etc
It really is up to you how you want to declare it. I mean the pension.
Did you lend your kids $50k and he is paying you back $500 a month?

Is it salary? Rental income? Fees?

Interesting point of view.

None the less .. in the tax law of Indonesia it clearly states that interest and dividend are 'income' .. and are taxed accordingly. Article 4.(1) g and Article 4 (2) a.

And in 4 (1) a it mentions "pension" as object for income tax:

Article 4
"(1)
The object of tax is income, namely any additional economic capability received or obtained by a Taxpayer, both originating from Indonesia and from outside Indonesia, which can be used for consumption or to increase the wealth of the Taxpayer concerned, in whatever name and form. , including:

a. reimbursement or compensation in respect of work or services received or obtained including salaries, wages, benefits, honoraria, commissions, bonuses, gratuities, pensions, or other forms of compensation, unless otherwise stipulated in this Law;

g. contributions received or accrued by a pension fund whose establishment has been approved by the Minister of Finance, whether paid by employers or employees;

h. income from capital invested by pension funds as referred to in letter g, in certain fields stipulated by Decree of the Minister of Finance;

See:

UNDANG

 

[pantaiema]

You have to pay 35% income tax, then you still need to pay 15% in Indonesia .. roughly speaking.
It's not fair. In my opinion, because your money is still double taxed!

Well it will depend on where you sit.

1. Taxpayers : Unfair, I get taxed twice once at 20% and another one at 15%.

2. Indonesian revenue and custom: But you are subject to the Indonesian tax residence and in Indonesia you supposed to get taxed at 35%.

3. Arbitrator: I am getting lost. But I do know 35%-20% is 15%.

As a taxpayer, if I have the chance to vote I will definitely support option (1).

 

[Hawk256]

I am eager to learn, when you have a KITAP do you need to declare all of your foreign incomes with their estimate value e.g value of your state and private pension, property abroad, earning from tax free investment such as IRA in the US, SIIP, ISA in the UK. Also in which occasions you will need to declare it and how often ??

Without having a tax number who would you declare it to?