Retired Expat, no Indonesian income: Do they need NPWP?

[dafluff]

I think there is some confusion among even the Indonesian tax officers as to when Expats need to have an NPWP (tax payer number).

In particular, if an Expat is not working in Indonesia, and their income derives solely form pensions and investments abroad (or investments in Indonesia subject to only PPh Final), the Indonesian tax office will not issue them with an NPWP. Many expats in this situation have also been told (even by tax officials) that they do not care about this income derived abroad. However, the strict interpretation of the law is that Indonesian residents are subject to taxation on world wide income.

This creates a situation where an Expat should file for taxation in Indonesia, but the tax office will not issue an NPWP. What to do in this situation?

Example:

Expat A is in Indonesia on retirement KITAS, and lives here full time. His income from investments abroad include capital gains, interest, dividends and rental income from properties. He also receives a pension and social security type payment. The total amount of income easily exceeds the reporting threshold.

In this case I believe Expat A needs to file taxes in Indonesia. However, there is a good chance he will not be given a NPWP if he applies for one.

 

[mauricio]

Just my two-cents, I will not apply for NPWP if I am Expat A. No.1, I'm not Indonesian. No.2, I'm retired with no job nor business in Indonesia. No.3, applying for one means obligation to file/report every year. It is not easy, you need to hire a tax consultant. Someone majoring in accounting may not be competent enough. Tax regulations change often in Indonesia, you need a specialist to keep up with all the changes. That's why some larger companies in Indonesia have a position called "Tax Accountant". No.4, there is no law that require a retired expat to apply for one. No.5, why do I have to become a tax target and go through the trouble. No.6, if asked, I can always say that I already checked with the tax office (no NPWP for me). No.7, it is not easy to cancel your NPWP, even if you move to another country.

 

[Anglian]

I received my NPWP while working here in Indonesia, after I retired I went to the Tax office and showed them my tax and pension paperwork from U.K. The tax office was basically not interested on any taxable earnings I had in UK, so no filling in forms, I was a bit concerned so I went again last year, some story not interested, this year not bothered, what I find odd is that for some services i.e banking you need a NPWP, how you get that if the tax office aren't interested in you as you earn no salary here I have no idea.

 

[mauricio]

I received my NPWP while working here in Indonesia, after I retired I went to the Tax office and showed them my tax and pension paperwork from U.K. The tax office was basically not interested on any taxable earnings I had in UK, so no filling in forms, I was a bit concerned so I went again last year, some story not interested, this year not bothered, what I find odd is that for some services i.e banking you need a NPWP, how you get that if the tax office aren't interested in you as you earn no salary here I have no idea.

You can open bank account without NPWP, you just have to sign "Surat Pernyataan" (tidak ada NPWP). The form is prepared by the bank, if no form is available, just go to another bank (better to call the bank first).

 

[dafluff]

Just my two-cents, I will not apply for NPWP if I am Expat A. No.1, I'm not Indonesian. No.2, I'm retired with no job nor business in Indonesia. No.3, applying for one means obligation to file/report every year. It is not easy, you need to hire a tax consultant. Someone majoring in accounting may not be competent enough. Tax regulations change often in Indonesia, you need a specialist to keep up with all the changes. That's why some larger companies in Indonesia have a position called "Tax Accountant". No.4, there is no law that require a retired expat to apply for one. No.5, why do I have to become a tax target and go through the trouble. No.6, if asked, I can always say that I already checked with the tax office (no NPWP for me). No.7, it is not easy to cancel your NPWP, even if you move to another country.

My understanding is that many people do this. I am not certain that this is the correct stance, since the law says that if you live in Indonesia for 183 days, you are subject to taxes on your world wide income.

Now no 6 is possibly a good "defense" in case you get audited or some enterprising tax collector shows up at your house (this has happened, as reported in this very forum). But I think you will need at least some sort of paper proof that you were rejected while applying for an NPWP.

 

[Smallworld]

You can open bank account without NPWP, you just have to sign "Surat Pernyataan" (tidak ada NPWP). The form is prepared by the bank, if no form is available, just go to another bank (better to call the bank first).

May I ask in which bank and when did you open your account with? (without NPWP)

 

[Davita]

For Info...
My wife and I have had a joint account in HSBC since 5 years. She has had an account in Mandiri for about three years.... mainly used for local transfers.
We started a joint account in Mega Bank until I cancelled as they wouldn't issue a credit card. The only reason for wanting an account in Mega was because their sales people persisted we could get C/C discount in Carrefour (which they own).... then the branch noticed we were on Kitas which I told the sales people at the outset.

Neither of us have an NPWP but we did need a Kitas/Kitap to open those accounts.

 

[Smallworld]

Just my two-cents, I will not apply for NPWP if I am Expat A. No.1, I'm not Indonesian. No.2, I'm retired with no job nor business in Indonesia. No.3, applying for one means obligation to file/report every year. It is not easy, you need to hire a tax consultant. Someone majoring in accounting may not be competent enough. Tax regulations change often in Indonesia, you need a specialist to keep up with all the changes. That's why some larger companies in Indonesia have a position called "Tax Accountant". No.4, there is no law that require a retired expat to apply for one. No.5, why do I have to become a tax target and go through the trouble. No.6, if asked, I can always say that I already checked with the tax office (no NPWP for me). No.7, it is not easy to cancel your NPWP, even if you move to another country.

1. Actually you have to regardless of your nationality, you are a tax subject! :

Wajib Pajak Orang Pribadi Sebagai Subjek Pajak Dalam Negeri
Wajib pajak orang pribadi yang menjadi subjek pajak dalam negeri menurut Undang-Undang Pajak Penghasilan (PPh) Nomor 36 Tahun 2008 adalah:

• Orang pribadi yang bertempat tinggal di Indonesia, atau
• Orang pribadi yang berada di Indonesia lebih dari 183 hari dalam jangka waktu 12 bulan, atau
• Orang pribadi yang dalam suatu tahun pajak berada di Indonesia dan mempunyai niat untuk bertempat tinggal di Indonesia.

2. Doesn't matter look above the law is there. If you are not married or have familly in Indonesia you may have a problem to explain your income to support yourself.

3. Reporting is easy. Its the tax deductions and multiply incomes combined with investments which can make the tax reporting complicated. For someone who lives on one income - pension and no tax deduction/claims I imagine it is dead easy and can be done in biro jasa. Yes you have to report even with 0 rp income. Also filling up zeros in tax forms is dead easy.
4. Wrong see 1.
5. You are a tax subject and have to comply with tax regulations regardless of what you want/don't want.
6. In case tax office will impose heavy fine on you for hiding/not paying tax in front of judge you will say: But I asked....
7. I don't know about NPWP in Indonesia but at home with first job comes tax number and it stays till death certificate. Regardless if it is used or not, reported any tax or not.. it simply stays 'alive'.

Please don't take my post wrong it is simply that people like you and me - yes I have no NPWP- we simply live on grace of tax office. It is just a matter of time when the summon letter from tax office may come. My guess is it can happen after the banking system will open its data to tax offices. Was it 2018? It will be done in stages.

 

[Smallworld]

For Info...
My wife and I have had a joint account in HSBC since 5 years. She has had an account in Mandiri for about three years.... mainly used for local transfers.
We started a joint account in Mega Bank until I cancelled as they wouldn't issue a credit card. The only reason for wanting an account in Mega was because their sales people persisted we could get C/C discount in Carrefour (which they own).... then the branch noticed we were on Kitas which I told the sales people at the outset.

Neither of us have an NPWP but we did need a Kitas/Kitap to open those accounts.

Well for me Banks make "minor" problems and say cannot open without NPWP these days. I tried some of them around 2-3 years ago. I can find stories on the internet where people say it is possible, some say it is not, some say sometimes it is. There is no consistency when it comes to NPWP and opening bank account. It would confirm only that different branch of any bank is a hit or miss when it comes to open an account and each of them operates on its own individual rules. I heard these days it is impossible to open bank account without NPWP because of the Bank of Indonesia requirements few years back.

Ingin buka rekening tabungan bank baru, syaratnya harus ada NPWP. Saya belum punya !

Akhir-akhir ini syarat bikin rekening bank baru makin ketat. Selain harus menggunakan e-KTP, harus disertai NPWP (Nomor Pokok Wajib Pajak) juga.

Jika anda sudah bekerja tapi tidak mempunyai NPWP, kemungkinan besar akan ditolak kalau hendak mengajukan buka rekening. Ini tidak hanya di saja, BCA bank lain seperti BNI, Mandiri, bahkan BRI pun mengharuskan calon nasabahnya mempunyai NPWP.

 

[Davita]

Re: Post # 8
I agree with Smallworld that Indonesia have many laws which they just do not vigorously apply...as in many things. We foreigners are more used to complying with law and order.
So...what to do.....I'm just keeping mum....
If the day comes when they are more vigorous with us foreigners, in any manner where I'm not happy, I'll leave...
Meanwhile...it's OK to whine on a forum but I suggest we foreigners don't make any political fuss.

Re: The banks...seems to me foreign banks are easier to deal with than local. I'm aware of many Indonesians that have bank accounts but no NPWP.

 

[dafluff]

Please don't take my post wrong it is simply that people like you and me - yes I have no NPWP- we simply live on grace of tax office. It is just a matter of time when the summon letter from tax office may come. My guess is it can happen after the banking system will open its data to tax offices. Was it 2018? It will be done in stages.

I agree with this. There is simply a disconnect between what the tax office says (won't issue an NPWP in the case of no Indonesian income), and what the law says (need to pay taxes on worldwide income if in Indonesia 183 days out of the year). I don't have a good solution for this, and was hoping that someone could share their experience/opinion/advice on this. After all answering these types of questions is why the forum exists.

 

[Anglian]

I agree with this. There is simply a disconnect between what the tax office says (won't issue an NPWP in the case of no Indonesian income), and what the law says (need to pay taxes on worldwide income if in Indonesia 183 days out of the year). I don't have a good solution for this, and was hoping that someone could share their experience/opinion/advice on this. After all answering these types of questions is why the forum exists.

If your foreign income is taxed in your home country and and there is a reciprocal arrangement you will not as far as I know, not pay tax here in Indonesia on that income,

 

[CaturMuka]

If your foreign income is taxed in your home country and and there is a reciprocal arrangement you will not as far as I know, not pay tax here in Indonesia on that income,

Unfortunately, that's not true. If there is a Tax treaty between Indonesia and your home country to avoid Double Taxation you still have to pay the difference in tax to the Indonesian Tax office.

This will depend on your home country, but those of us from developed nations will normally need to pay more tax in Indonesia than we would've at home. You need to calculate the tax you would've had to pay in both countries on the same amount of worldwide income. You then subtract the amount you'll pay to your home country from the amount you'll pay to the Indonesian tax office.

For example:
Tax you would've had to pay in your home country = $10,000
Tax you would've had to pay in Indonesia = $15,000
Tax you will need to pay to the Indonesian Tax office is $15,000 - $10,000 = $5,000 (in rupiah obviously)

Here's the relevant quote from the Australian-Indonesian Tax Treaty. See here: http://www.austlii.edu.au/au/other/dfat/treaties/1992/40.html

Where a resident of Indonesia derives income from Australia which may be taxed in Australia in accordance with the provisions of this Agreement, the amount of Australian tax payable in respect of that income shall be allowed as a credit against the Indonesian tax imposed on that resident in respect of the income. The amount of credit, however, shall not exceed that part of the Indonesian tax which is appropriate to that income.

 

[Smallworld]

Re: Post # 8

Re: The banks...seems to me foreign banks are easier to deal with than local. I'm aware of many Indonesians that have bank accounts but no NPWP.

HSBC or BCA threats me the same. But they threat me differently because of:
Different bank branch/manager/satpam or any person serving me, employee looking how much I have on my account (Yes, I noticed they are suddenly much nicer after they checked my account). If the cashier seems to know me because of my wife's family, or friend, or "I know you from a restaurant" this also helps to "break the ice". If my wife's family member happen to be in the bank they start to threat me as VIP. The I feel embarrassed.

But if I compare HSBC in UK and HSBC in Bandung I got much more attention and outstanding customer care in the second one.

If your foreign income is taxed in your home country and and there is a reciprocal arrangement you will not as far as I know, not pay tax here in Indonesia on that income,

Correct. However I would advice to read inside the double tax treaty what part of tax you don't have to pay and which you have to. Royalties, Interest, income from property, capital gains ect....It is not like: Just because there is double tax treaty people think all taxes don't have to be paid in one country and will be paid in the second country.
But as a shareholder I have dividends do I pay tax if yes where? Country A, B or both.

 

[dafluff]

If your foreign income is taxed in your home country and and there is a reciprocal arrangement you will not as far as I know, not pay tax here in Indonesia on that income,

This also depends on the terms of the agreement I believe. In many cases if the taxes you pay in your home country is lower than that you would have to pay here, you are still due the difference. At least that's what I've been told, never had this problem myself.

 

[Anglian]

It does seem to be a regular mine field, it doesn't seem very straight forward, lots of what if and buts, I think for every case one needs a tax accountant to assist as we aren't all in the same boat,

 

[macvert]

 

[Davita]

If your foreign income is taxed in your home country and and there is a reciprocal arrangement you will not as far as I know, not pay tax here in Indonesia on that income,

I don't know how it works in Indonesia but in my experience, in other countries that have reciprocal agreements, it is more complicated than you have described.
First you file taxes for the income in the original country....then, when they advise the tax they require you re-file in the country of your tax residence. The tax forms usually have a line where you submit taxes already paid on that income That tax authority then subtracts tax already paid, from the total income, and taxes the remainder according to their tax regulation.

e.g. I paid taxes on a capital gain in USA and paid again, minus the USA payment, in Canada as the Canadian tax was higher than in USA.
I also earn two pensions from UK. I'm below the threshold for taxation in UK and, as non-resident there, am still obliged to file again in Canada.
.
Reciprocal agreements all depend on the tax rates in the different countries. Sometimes, it can be more.

 

[Anglian]

I can only speak for my self, I showed as I have said before all my financial statements from BA and state pension plus U.K. Bank account , I've been to see pajak here twice, they aren't interested, different countries have different agreements, so basically you have to go the pajak office present all your financial details and see how you get on, as everyone's finicial situation is different it is difficult to answer the question, obviously if you live in the US, Canada, Australia or any EU country you are going to give a have different answers as all I'm sure taxes aren't standard around the world, just one thing is certain someone will want to tax you, so basically the best people to answer any tax questions is the tax man or a really switched on tax accountant, and that would be my advice to anyone who has a tax query or problem

 

[Smallworld]

...so basically the best people to answer any tax questions is the tax man or a really switched on tax accountant, and that would be my advice to anyone who has a tax query or problem

I agree, each of us has got different financial situation and comes from different country better seek tax advice from reputable tax advisor / consultant.