The Common Reporting Standard For Taxation

brian@bekasi

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The International Common Reporting Standard requires countries to share financial and banking information about people who are foreign tax residents of other countries.

We have discussed this on the forum before about what may happen and impacts on people with or without TFN's in Indonesia.

Well folks judgement day has arrived as I received the following email from my Australian Bank:

To ensure we can uphold our responsibilities to you and to our Bank regulators, up-to-date customer information is important.

Customer information for your account suggests that you may have foreign tax residency for:

INDONESIA

Foreign tax residency refers to the country or countries in which you are liable to pay tax, irrespective of whether a tax return must be filed or any tax is actually payable.

To ensure your customer information is accurate, and we don't inadvertently report incorrect information, we need you to confirm your tax residency status. Please ensure this information is updated within 45 days from the date of this message.

Why we are contacting you

An international agreement, the Common Reporting Standard (CRS), requires all Australian banks and financial organisations to identify customers who have a foreign tax residency. We are required by law to provide the information of all customers who have foreign tax residency to the Australian Taxation Office (ATO). The ATO may then share this information with tax authorities in other countries.

What do I need to do?

Go to Tax Residency Information to update your foreign tax residency status . You can enter your country(ies) of foreign tax residency and the associated Tax Identification Number (TIN)".


I would suggest that this could be a major problem for all of us who earn any form of income in Indonesia including bank interest.

If the Indonesian Government receives the information and starts investigating individuals it could be a real problems particular as Indonesian Tax is paid on worldwide income.
 
Hi brian@bekasi,

I've received the same thing from my Australian bank. I have been ignoring it for now, want to see if they block my account. Luckily, it’s just a few hundred AUD sitting in the account that I just use when I'm home for the holidays. However, I can see how this could be a real problem for many expats in Indonesia.

Who knows what the Indonesian tax department will do. For me personally its fingers crossed that they find me too small a fish to come after, considering how understaffed the tax department is.

This was a worrying article https://www.reuters.com/article/us-...nt-for-tax-assets-after-amnesty-idUSKCN1HB0GQ

It states that there are 43,000 tax officials for 38 million tax payers. Makes the ratio of 1 tax official per 884 tax payers. (I’m not sure if the 38 million includes companies)

Are expats the low hanging fruit that the tax department wants to harass first to increase their income? Or would coming after expats start an exodus?

The safest thing to do is cancel your Tax ID and make sure that you do not spend more than 180 days per year in Indonesia, but it is a costly solution. For more mobile people I think that Vietnam hasn't signed the CRS yet. This is not an option for most of us here with families.

I do not have a solution, we can only hope that they decide to leave us alone.
 
LOL - why would following the law be a major problem? Just pay the taxes you owe, make use of double taxation & other treaties to reduce it,
 
The safest thing to do is cancel your Tax ID and make sure that you do not spend more than 180 days per year in Indonesia, but it is a costly solution. For more mobile people I think that Vietnam hasn't signed the CRS yet. This is not an option for most of us here with families.

I really have have not yet got my head around developing a strategy. I will be ringing the bank next week to have a discussion and outcome of the conversation will inform my strategy.

I live in Indonesia permanently and have transferred most assets to Indonesia. To leave the country for 180 days a year is not a viable or desired option for me nor is moving to another country.

I am an Australian resident for tax purposes as I receive a payment from the Australian Government which is tax free. I have an Indonesian TFN and now wish I had not got it. However, I don't think having a TFN or not in Indonesia will make any difference if Indonesia Tax officials pursue the issue.

Ignoring the request will not work also as Australia Government departments use data matching and share all information so the ATO will be well aware of who lives overseas.

A worst case scenario for me would be for Indonesian Tax officials to pursue both my Australia taxed and tax free income and then wanting me to pay Indonesian Tax on the lot as world wide income.

I also think Australian Banks are doing the right thing and advising customers and I suspect that banks in some other signatory countries may just be providing the data to their National tax department without notifying the customer.

The real question is will Indonesian Tax officials pursue the expat community or will continue just to chase the "big fish". Time will tell but I suspect that they may not immediately but probably will in the future as the integrity of their data systems mature. The worst case scenario would be for them to do nothing now then decide in a couple of years to pursue people with a backdated tax bill.
 
If I could add Brian, the tax rates which would be levied here on your foreign income are quite high, and one needs to consider the very significant penalties which would be applied for Indonesian taxes unpaid on past income.
 
Do you also have to declare world wide assets to the Indonesian tax authority and if you haven't in years past is there penalties for catching up?
 
LOL - why would following the law be a major problem? Just pay the taxes you owe, make use of double taxation & other treaties to reduce it,

That's probably not bad advice if you're income is relatively low or mostly on a government pension. However, if the income you have offshore is quite large, it's a much different story.

With that said, I've actually gone to the trouble to fully create the Indonesian tax formulas in excel, worked with an international tax consultant, and ran several simulations. Indonesia provides a modest tax exemption, and excludes income from a government pension. However, it's a progressive tax that ends up at a flat rate of 30% over a certain amount. For higher income people, this can get quite ugly. Even with the ability to apply a tax credit for the offshore country taxes, the high water mark for your taxes will be from Indonesia.

In the US, there is the ability to shelter income growth and taxes by using Individual Retirement Accounts (IRA), but with this new CRS thing, the US would be able to report to Indonesia every time I made a withdrawal - as it would be considered a taxable event in the US, and thus income. To your point, it's not the end of the world, but it's highly disappointing that my tax deferred IRA plan that I worked decades to save for, would have little or no benefit if I'm retired in Indonesia.
 
Do you also have to declare world wide assets to the Indonesian tax authority and if you haven't in years past is there penalties for catching up?
As far as I know, you should have reported all assets and income earned on them since you have been a tax resident of Indonesia. There are penalties.
 
Ignore it, if it is really important, pretty sure they would or should (or would not not) send you a reminder

With int'l post etc how can they even prove you got it? Check the postmark date - chances are its probably already 45 days passed since the date of the letter and when you got it anyway

First mail shot would have been the bulk group send, if it is financial with deadlines I am sure even by law they must send a reminder, then of course will be the last chance, final reminder, amnesty window etc etc

So for now, ignore it. Then on the second or 3rd one you can always reply - by which I mean just return it back. But leave the tax ID blank (I think it says IF you have a tax id)
Or put a digit wrong, something like that

But for now, ignore it. I got one last year from my UK / Offshore bank and it was postmarked about 3 months previous
Then I got 2 more identical the same day about a month later

All went in the bin
 
Do you also have to declare world wide assets to the Indonesian tax authority and if you haven't in years past is there penalties for catching up

You declare nothing. The countries that are party to the agreement share the information through bank and taxation information. This relates to income and not physical assets such as land.
 
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Yeah, the post...got a letter from the VA two days ago dated 13 Feb 2018. Post going out does fairly well, but coming in is a different story.
 
For Australian's the first data exchange with other signatory countries including Indonesia will start on 30 September 2018 and continue every year after on that date.
 
Most of this type of correspondence is via email or by a message sent to a dedicated inbox in an online account of the person's financial intermediary. I would think ignoring such emails would be fine for all parties concerned, if only a small amount of money were involved. For foreigners here who are non-residents for tax purposes in their home countries, and with considerable income earning assets there, this is a big concern. It is especially galling because it has an element of retrospectivity about it: these foreigners having arranged their investment portfolios thinking this reporting unlikely to ever occur. Some, perhaps most, are currently having tax withheld (as non-residents in their home countries) on their income, and have now come to realize that they will owe the Indonesian tax department an additional hefty sum as well.
 
You declare nothing. The countries that are party to the agreement share the information through bank and taxation information. This relates to income and not physical assets such as land.
When completing an Indonesian tax return it is necessary to declare (all) assets as well as (all or most) income. This is so that the tax department can see where the income comes from.
 
Most of this type of correspondence is via email or by a message sent to a dedicated inbox in an online account of the person's financial intermediary. I would think ignoring such emails would be fine for all parties concerned, if only a small amount of money were involved.

The simple fact as per the email I posted (@No1) is that if you do nothing for 45 days they will simply report you as an Indonesian Resident for tax purposes.

The email was sent to the internal email at my bank and not to my private email address so it would have been very easy to miss as I rarely read bank emails.
 
I would have ignored the email also - it was in my spam folder officer, honest.

Even IF they report you (to who?) as Indo res etc etc, that then becomes the responsibility for Indonesia to collect etc etc etc ?
I don't think Indonesia is (what's the word?) qualified? able? interested? talented?
ADEPT enough to do a full int'l check on your assets? Just declare something to keep them happy - and that would be the final last resort

Anyway I don't really know what I'm talking about but just seems to be a lot of hot air and maybe eventually in months or years to come you might have to eventually one day declare something but personally I wouldn't stress about it

It seems far too complicated for them to worry about unless it was money for them personally.
 
.....................................We are required by law to provide the information of all customers who have foreign tax residency to the Australian Taxation Office (ATO). The ATO may then share this information with tax authorities in other countries.

What do I need to do?

Go to Tax Residency Information to update your foreign tax residency status . You can enter your country(ies) of foreign tax residency and the associated Tax Identification Number (TIN)".
If you don't update, emails such as Brian's typically state as follows:

Should you not provide your tax residency certification or if you are otherwise identified as being a foreign tax resident, we are required to report information about you to the Australian Taxation Office who may then report the information to the relevant foreign tax office.
 
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"may"
"relevant"
etc etc
It will be a lot of emails and months before you are sat before a judge and he is ordering you to pay money back to a Government for some tax you may or may not owe

If it is just mass printed letter or random non personalised email, then you have a long way to go yet
Like all these things, if one day it really is serious, you will know. They will find a way to get hold of you personally. At the moment all they have is an address or an email, both of which are unreliable forms of communication for such personal financial info.

Just say you deleted it because you are scared it was a hoax, just like they always tell you to do!
 
This CRS reporting between banks, financial institutions and governments all sounds like Big Brother but the reality is it defends the banks from being persecuted that they may be co-conspirators in money laundering from nefarious deeds like drugs, human smuggling, oligarch stored stolen money and MANAFORT.
Many banks have previously had serious fines because they were......and probably didn't even know it.
The average Joe like us members will never be on anyone's radar.
 
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Davita, while what you say may all be true, I think you miss the point. This is about collecting tax owed under Double tax agreements.
 

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