Tax Amnesty: Gov't to extend administrative period, but penalties to be paid on time.

[dafluff]

Despite pleading by taxpayers and petitions on change.org to extend the first period of the Tax Amenesty (the period with the smallest penalty), the government insists that it will not extend it. The first period will end on Sept 30, 2016. Extending the period is difficult, as it is written in the law covering the Amnesty (UU Tax Amnesty No. 11 Tahun 2016).

The government however has made a concession in that taxpayer seeking to avail themselves to the amnesty can pay the penalty by Sept 30 to enjoy the lower rate, while completing the administrative process up to Dec 31, 2016.

Spokesperson for the Directorate General of Taxation, Hestu Yoga Saksama in a release dated 23 September 2016, stated that "First, SPH (Surat Pengakuan Harta) must still be submitted within that time frame, enclosing SSP (Surat Setoran Pajak) of the penalty, list and value of assets (not detailed), list and value of liabilities (not detailed)."

After that, Hestu continues, filling out the details of assets an liabilities within the SPH, and enclosing supporting documents can be done until 31 December 2016.

http://ekbis.sindonews.com/read/114...k-perpanjang-periode-i-tax-amnesty-1474630570

"Pertama, SPH tetap disampaikan dalam jangka waktu tersebut dengan dilampiri SSP uang tebusan, daftar harta dan nilai dari harta (tidak detail), daftar utang, nilai utang (tidak detail," kata dia dalam rilisnya di Jakarta, Jumat (23/9/2016)‎.

Kemudian, lanjut Hestu, pengisian kelengkapan rincian daftar harta dan utang pada SPH beserta penyampaian dokumen yang dipersyaratkan dapat dilakukan sampai 31 Desember 2016.

 

[dafluff]

Tax offices throughout the country have been instructed to also work on Saturdays and Sundays to help taxpayers with the Amnesty program.

http://bisnis.liputan6.com/read/2591450/layani-tax-amnesty-kantor-pajak-buka-sabtu-minggu

 

[rabbit_39]

I've been meaning to ask the logic of some situations.... So if someone has a non income generating asset (savings account at 0%) outside of Indonesia, it has to be reported? And when it does it incurs a 2% penalty? What if that money was earned as non Indonesian taxable?

Does Indonesian law tax all assets annually? I mean if someone owns assets outside of the country that was earned legally and under non taxable status for Indonesian law, why should they care?

 

[dafluff]

I've been meaning to ask the logic of some situations.... So if someone has a non income generating asset (savings account at 0%) outside of Indonesia, it has to be reported? And when it does it incurs a 2% penalty? What if that money was earned as non Indonesian taxable?

Does Indonesian law tax all assets annually? I mean if someone owns assets outside of the country that was earned legally and under non taxable status for Indonesian law, why should they care?

For an Indonesian tax payer, who is also a tax subject (ie. resides in Indonesia), you're supposed to report your total assets every year when you file taxes. Any increase in assets is deemed income, however obviously not all income is taxable. A lot of people conveniently neglect to declare some assets, some due to carelessness, others because they want to hide the income. This is addressed by the Tax Amnesty, where you are supposed to come clean on your total world-wide assets. Even if you have non-income generating assets, the government wants to know the existence of that asset.

The 2% penalty applies when an asset in Indonesia (or 4% for assets abroad not repatriated) was previously unreported, is reported under the Tax Amnesty program. If one does not use the tax amnesty, and the government later finds out about an undeclared asset, and you can not substantiate that this asset stems from non-taxable income, then the penalty will be significantly harsher than 2%.

The tax amnesty is completely optional, so one does not have to participate.

 

[rabbit_39]

Ah okay. So as long as later it can be proven that it is non income generating it is okay? Because later when the asset owner want to transfer it in, the asset owner can prove it is non taxable income.

Obviously if it earned interest the interest become taxable when the money is taken out to be transferred to Indonesia. Is that how that works?

 

[rabbit_39]

Just to clarify, I'm not expecting a tax consultation here. Just curious as to the logic of the Indonesian tax system.

 

[dafluff]

Ah okay. So as long as later it can be proven that it is non income generating it is okay? Because later when I want to transfer it in, the asset owner can prove it is non taxable income.

Not sure I'm understanding this. You want to transfer it in, but it is currently owned by someone else? If the asset is not yours currently, you don't need to do anything. When it becomes yours, then you will declare it.

Whether the asset is income generating or not has no effect. If you gain asset that was previously not yours, that is considered income. Then you need to establish whether it is taxable income or not.

Example: Last year you filed taxes and listed all assets in Indonesia, but forgot to put down US$10,000 in a checking account in the US. Now where did the 10,000 come from?

a) It was payment from a client, and you didn't pay tax on it ->Amensty
b) It was payment from a client, you paid taxes on it, but forgot to declare it ->File a correction on last year's tax return.
c) It is a gift from your father ->Not taxable
d) It is proceeds from selling a car you had in the US, and is listed as an asset in your 2015 return ->File a correction on last year's tax return.

and many other cases, which is why tax consultants have a job...

Edit: Just to clarify: No tax consultation given! verify everything with your own consultant.

 

[Davita]

Dafluff has given good info but the reality is the law was intended for a different purpose and not for small-fry like normal citizens, and certainly not for resident foreigners.

It was intended to allow those with ill-gotten money, deposited in banks (principally Singapore), to repatriate those funds back to Indonesia with no questions asked and a small penalty of 2% applied. This is in lieu of taxes on income those assets may have accrued and not reported....so long as those assets are invested in Gov't sponsored investments for min. 3 years.

The written law unfortunately meant that Indonesians are panicking to ensure their previous non-compliance with normal tax reporting is covered under this same amnesty. It was never intended for that and why the tax inspectors are working hard with (so far) very little repatriations from those originally intended. It is reported that not even one senior civil servant or politician has made any repatriation.

We resident foreigners are also included, because of the tax laws, but my contention is they will not apply any penalties on foreigners unless not in compliance with assets in Indonesia. (i.e. I have some fixed deposits (FD) in IDR but the interest is taxed at 20%). It would be counterproductive to go after foreigner's assets back in their home countries because it would send a message that Indonesia is NOT a place to do business, something they are spending millions on advertising to show it is.
It will be focused on repatriating those huge amounts of money that their own citizens have stashed away in foreign banks.

As a retired resident only on a Kitap I'm not going to raise any red flags by declaring I own a bicycle back in Vancouver...nor anything else.

If they permitted us to own our own property in RI I'd be happy to declare that.....as I do with my FD's in IDR.

 

[dafluff]

It was intended to allow those with ill-gotten money, deposited in banks (principally Singapore), to repatriate those funds back to Indonesia with no questions asked and a small penalty of 2% applied. This is in lieu of taxes on income those assets may have accrued and not reported....so long as those assets are invested in Gov't sponsored investments for min. 3 years.

The written law unfortunately meant that Indonesians are panicking to ensure their previous non-compliance with normal tax reporting is covered under this same amnesty. It was never intended for that and why the tax inspectors are working hard with (so far) very little repatriations from those originally intended. It is reported that not even one senior civil servant or politician has made any repatriation.

This a pretty good summary of the situation. The law was pushed through quickly and without regard for anyone other than allowing those with the most ill-gotten gains to legally launder the money.

But the amnesty is voluntary, and if you don't have any violations, you do not need to do anything. The fact is that most Indonesian taxpayers, big and small, are not compliant. Most Indonesian business owners pay a fraction of a penny for every dollar of income, so to speak. As far as senior politicians/civil servant, I can assure you that many are participating (the program is almost exclusively designed for them, after all). Of course they are not going public with not being compliant with taxes all these years. Also, most of the assets held by those people, due to the nature of how they were acquired, are usually not in the name of the politician/civil servant in question. I have talked two different tax consultants here in Bali who are long time friends, and they said that many big name officials are participating via their family members.

 

[Bad_azz]

It is all being ignored at our house.
I assume we have nothing to hide- I personally own nowt
To the best of my knowledge a WNA spouse doesn't have to declare tax as such- they can be "attached" to their WNI spouse's declarations- hence me not having an NPWP.
I am clueless about everything tax related, despite this thread ,so if I am in the wrong then so be it- and I refuse to be worried about it- if they want dosh from me then they are going to have to come looking for me.

 

[rabbit_39]

Maybe I worded it wrong. And to make it easy assume this is all one person, forget anything you know (or think you know about me). I just tend to be curious and this one particular scenario is a little foggy for me despite the explanations above and in other places. My confusion is primarily this: if someone has assets abroad and it was already taxed, except for the interest (or perhaps growth in value if it was real estate for example), and it is not being cashed out (ie if it was stocks it gas not been sold yet, if it was real estate it was not sold yet, etc) or there is really no capital gains being liquidated why should the Indonesian government care? If the asset owner is then living back in Indonesia, and they liquidate the assets, this is the time to report the capital gains, right?

Indonesian citizen earned money abroad, and it was taxed in those countries because that person was legally working and residing in those countries full time. The money is then put into a savings account.

Now said Indonesian is living back in Indonesia, and they're not liquidating their investments or savings (certificate of deposit or stocks/mutual funds or real estate), there are no taxes due anyway right? So by reporting at this time and paying the 2% they'd be paying taxes that's not due to them anyway right?

Now at the time the Indonesian who is now living in Indonesia is liquidating their assets, and there are capital gains, they need to report this to be taxed, right? Or does the amnesty mean any capital gains up to this point is only charged the 2% and no other taxes are due on this asset? What if it gains more after reporting? Does it matter whether it is being liquidated into an Indonesian account or liquidated to stay abroad?

What if the Indonesian is still abroad and they get the capital gains and paid the taxes according to the laws of the country they lived in? Would they then still owe taxes to the Indonesian government on the capital gains if the foreign country has a no double taxing agreement with Indonesia?

Sorry if these questions are basic, I'm new to this kind of knowledge and I'm now very curious.

 

[Smallworld]

Maybe I worded it wrong. And to make it easy assume this is all one person, forget anything you know (or think you know about me). I just tend to be curious and this one particular scenario is a little foggy for me despite the explanations above and in other places. My confusion is primarily this: if someone has assets abroad and it was already taxed, except for the interest (or perhaps growth in value if it was real estate for example), and it is not being cashed out (ie if it was stocks it gas not been sold yet, if it was real estate it was not sold yet, etc) or there is really no capital gains being liquidated why should the Indonesian government care? If the asset owner is then living back in Indonesia, and they liquidate the assets, this is the time to report the capital gains, right?

Indonesian citizen earned money abroad, and it was taxed in those countries because that person was legally working and residing in those countries full time. The money is then put into a savings account.

Now said Indonesian is living back in Indonesia, and they're not liquidating their investments or savings (certificate of deposit or stocks/mutual funds or real estate), there are no taxes due anyway right? So by reporting at this time and paying the 2% they'd be paying taxes that's not due to them anyway right?

Now at the time the Indonesian who is now living in Indonesia is liquidating their assets, and there are capital gains, they need to report this to be taxed, right? Or does the amnesty mean any capital gains up to this point is only charged the 2% and no other taxes are due on this asset? What if it gains more after reporting? Does it matter whether it is being liquidated into an Indonesian account or liquidated to stay abroad?

What if the Indonesian is still abroad and they get the capital gains and paid the taxes according to the laws of the country they lived in? Would they then still owe taxes to the Indonesian government on the capital gains if the foreign country has a no double taxing agreement with Indonesia?

Sorry if these questions are basic, I'm new to this kind of knowledge and I'm now very curious.

I may be wrong but aren't you talking about double taxation tax treaty? There is already a document issued which prevents citizens from some countries (check if your country is on the list) of being taxed again. Tax amnesty is something different.

https://en.wikipedia.org/wiki/Tax_treaty

 

[dafluff]

My confusion is primarily this: if someone has assets abroad and it was already taxed, except for the interest (or perhaps growth in value if it was real estate for example), and it is not being cashed out (ie if it was stocks it gas not been sold yet, if it was real estate it was not sold yet, etc) or there is really no capital gains being liquidated why should the Indonesian government care? If the asset owner is then living back in Indonesia, and they liquidate the assets, this is the time to report the capital gains, right?

Ok, to address this, first we need to examine what the Indonesian tax code deems as income. In Undang-undang No 36 Tahun 2008:

setiap tambahan kemampuan ekonomis yang diterima atau diperoleh Wajib Pajak, baik yang berasal dari Indonesia maupun dari luar Indonesia, yang dapat dipakai untuk konsumsi atau untuk menambah kekayaan Wajib Pajak yang bersangkutan, dengan nama dan dalam bentuk apa pun, termasuk:
.
.
.
p. tambahan kekayaan neto yang berasal dari penghasilan yang belum dikenakan pajak

So a net increase of assets obtained from income not yet taxed is deemed income.

In practice this means that every Indonesian taxpayer is required to submit a list of assets and liabilities with their tax return every year. If the total assets is a net increase over the previous year, the taxpayer then has to substantiate whether the increase has stemmed from income already taxed.

In your example above, the asset has to be reported, although no tax is due, since it was already taxed. As long as the asset has been reported, they are in the clear.

Now what happens suppose you did not report that asset and years pass, and now you want to include it, and you can no longer substantiate where it came from? Well, if you don't do the amnesty, you will have to file this as income and pay taxes on it. Or this year, you can do the amnesty and pay a much lower penalty.

The Indonesian government "cares" that you report your worldwide assets, regardless whether it is taxable or not. When you liquidate it then you will pay taxes on it as necessary but in the interim you still have to report the existence of such assets.

 

[rabbit_39]

Wait.... So any increase in value of the assets are taxable every year? So if someone has stocks or real estate and this year it gained $100k, even if they don't liquidate it they are still liable to pay taxes on it????

 

[waarmstrong]

As far as I know, essential no taxing authority levies an income tax on unrealized gains. Unfair and way too speculative.

 

[dafluff]

Wait.... So any increase in value of the assets are taxable every year? So if someone has stocks or real estate and this year it gained $100k, even if they don't liquidate it they are still liable to pay taxes on it????

No. As mentioned, not all increases in assets are considered taxable income. In this case, if the value of the stock increases, it is not "tambahan kekayaan neto yang berasal dari penghasilan yang belum dikenakan pajak". But you still need to report/update the correct value of the assets in your tax return.

 

[rabbit_39]

No. As mentioned, not all increases in assets are considered taxable income. In this case, if the value of the stock increases, it is not "tambahan kekayaan neto yang berasal dari penghasilan yang belum dikenakan pajak". But you still need to report/update the correct value of the assets in your tax return.

Okay I think most of my confusion and curiosity comes from my lack of knowledge about the definitions mentioned in the law. Will have to look into it more. For example, what's "tambahan kekayaan neto"? Is that net worth? If that's the case then increases in value of investments (even unrealized/not liquidated) should fall under the normal definition of "net worth increase". as far as "tambahan kekayaan neto yang berasal dari penghasilan yang belum dikenakan pajak", it could mean that net worth increases stemming from income that HAS been taxed, does NOT fall under that definition, even if it made you a billionaire as long as it has not been liquidated. But it could also mean that "penghasilan" is that increase itself, since it could be dividend that's rolled back into the stock/mutual fund.

Interesting stuff, this tax law.

 

[rabbit_39]

As far as I know, essential no taxing authority levies an income tax on unrealized gains. Unfair and way too speculative.

I didn't think so, and it doesn't make sense. Just that some of the wordings that I've read in different places could be interpreted as being that way. I think that perhaps some of the definitions used, that may be common in the tax world, is different than the defintion I know and use.

 

[Bad_azz]

The more I read the less clue I have... I seem to have a short circuit when it comes to words in Indonesian discussing Taxes.

Let's say our income is peanuts (it is - but I don't mind).
Let's say 3 or more years ago we bought a house in cash and paid all the taxes on the land /house etc - and have subsequently paid a yearly tax on the house which is laughably about 60,000idr
Are we supposed to declare our home and then get taxed on it ?

(I can see hubby doing what 99% of other Indonesians will do- ostrich treatment, 'cos everyone I have asked about this so far says - ignore it.)

 

[fastpitch17]

The more I read the less clue I have... I seem to have a short circuit when it comes to words in Indonesian discussing Taxes.

Let's say our income is peanuts (it is - but I don't mind).
Let's say 3 or more years ago we bought a house in cash and paid all the taxes on the land /house etc - and have subsequently paid a yearly tax on the house which is laughably about 60,000idr
Are we supposed to declare our home and then get taxed on it ?

(I can see hubby doing what 99% of other Indonesians will do- ostrich treatment, 'cos everyone I have asked about this so far says - ignore it.)

I believe the property is an asset that needs to be reported and any increase in value declaired. There may be a tax for the initial value of the asset but any gains in value will not be taxed until those gains are realized when you sell it. Not sure on the original value of the property for tax reasons. Property tax is different.

Tax laws are some of the most confusing laws no matter what country you're in.