GUIDE FOR EXPATRIATES WORKING IN INDONESIA
As the year progresses, more and more expats decide to work and stay in Indonesia. Like any other country, there are requirements that need to be fulfilled. Yet the explanation can be confusing and unclear for some. Read the Frequently Asked Questions (FAQ) below.
FREQUENTLY ASKED QUESTIONS
1. Do I have to file an individual income tax return?
If you a resident of Indonesia and you earn income that is more than the non-taxable income threshold (PTKP), you have to register and file an individual income tax return.
2. Who is a resident?
A resident of Indonesia is one who meets the following conditions:
a) An Indonesia citizen
b) Present in Indonesia for more than 183 days within any 12 month period: or
c) Present in Indonesia during a tax year with an intention to stay in Indonesia.
3. If I spend less than 183 days in Indonesia, am I still obligated to register?
No, unless you have already established your residency your residency in Indonesia through you intention. Intent is demonstrated among others things by the length of your assignment, appointment letter etc.
4. Is this a new law?
No, the requirement to register and file has been in existence since 1984.
5. How and when do I register?
You need to submit the completed and signed registration form together with the following attachments:
a. Copy of passport
b. Copy of KITAS (Limited Stay Permit Card)
c. Copy of employer’s tax ID number (NPWP) –for employees only
d. Copy of IKTA (Work Permit) –for employees only
e. Copy of business permit (for a taxpayer who is conducting a business/independent profession)
f. Power of Attorney, if needed
You should register within one month after you earn income above the non taxable threshold amount. If you are a self employed, you should register within one month after the start of your business activity.
6. Where do I register?
You should register at the local tax office situated in the area where you live or are domiciled. If you live in Jakarta. You should register at the Badora tax office.
7. If I live in DKI Jakarta and work in Tangerang, should I register at Badora or Tangerang?
You should register at Badora.
8. If I live in DKI Jakarta and travel to Surabaya each week to work and return home to Jakarta on weekends, where do I need to register
You should register at Badora.
9. If the address on my KTP is different from where I live, should I register at the tax office based on the address on my KTP or my actual residential address.
You should register at the tax office based on your actual residential address.
10. What documents do I need to register?
See answer to question 5 above
11. I have been here since June 15, 2000 and did not register in 2000. In 2001, I will stay in Indonesia for less than 183 days (or my work permit is valid for less than 183 days). Should I still register for a tax ID number?
Yes, because you have met the time test; You have lived in Indonesia for more than 183 days within a 12 month period.
12. What income do I include in my return?
You should include your income from all sources (i.e. employment and non-employment) earned outside and in Indonesia.
13. What deductions can I claim?
You can claim following items as deduction:
a. Occupational expense (for employees only)
b. Pension Contribution to approved pension funds
c. Non-taxable income threshold (PTKP)
d. Opening expense (for self employed individuals)
14. Will be subject to double taxation, in both Indonesia and in my home country?
You can claim foreign tax you pay as a credit on your Indonesia tax return provided it does not exceed the Indonesia tax payable on income that taxed twice.
15. What are the consequences of not registering or filing?
The tax office has the authority to issue an NPWP officially. Further, if this action was conducted intentionally and caused losses to the state, you may be charged with criminal sanctions.
16. My wife and I are both working as employees and we are planning to file separately. The guide book indicated that to determine our tax liability, we need to combine our income, calculate tax on the combined income and then allocate the tax based on our separate income over total income. This means that we are losing the benefit of the lower tax rates since our tax is calculated based on combined income. Please confirm if this is the correct way of calculating the tax.
17. My home country’s tax year runs from July 1 through June 30 of the following year. If I wish to claim credit for my home country tax paid, it means that my Indonesia tax return will always be filed after the due date of March 31, or even later until after the final extended due date of September 30 (if approved). What are the consequences of filing late? Is there any relief for late filing due to delays my control, as in the situation mentioned above?
Filing an annual tax return after approved extended due date will result in the following:
a. late filing penalty of Rp. 100.000,-
b. interest of 2% per month for any underpayment of tax.
c. The possibility of tax audit
18. I own a house in my country which I am renting out. How will rental income be taxed in Indonesia? Can I deduct interest expenses incurred in connection with renting out the property? For example, ca I deduct interest on the mortgage for the house, property taxes, property and fire insurance, agency fees, maintenance, and repair expenses?
Your rental income will be taxed based on tax rates set forth under Article 17 of Law No. 17/2000. You can generally deduct expenses incurred in connected with renting out the property as long as you can prove that the expenses are directly connected to the income received. For that purpose, you need to attach supporting documents.
19. Do I need to attach a statement of assets and liabilities to my tax return?
The statement of assets and liabilities should be attached to your 2001 and future year tax returns.
20. My wife is an Indonesia and I am not an Indonesia citizen. We plan to return to my home country after my assignment in Indonesia. If my wife decides to work when she is in my home country, does she have to file an Indonesia income tax return?
As she is Indonesia citizen and therefore a resident for tax purposes, she needs to register and file an Indonesia tax return. She can claim foreign tax paid on her Indonesia tax return.
21. I am an employee and I have just registered and received a tax ID number (NPWP) this month. How should I calculate my monthly tax liability on my personal income for this month?
Your tax liability this month should be calculated based on your estimated personal income for the year multiplied by 10 % and then divided by 12 (twelve).
22. My assignment ands next month. What should I do to deregister?
Submit the following to the tax office one month before your date of departure:
a. The completed and signed deregistration form
b. Statement from your employer stating that your contract in Indonesia has ended (if you are an employee)
c. Letter of cancellation of business permit (if you are conducting a business/independent profession)
The EPO may be submitted later.
23. How long will deregistration take?
Within 12 months from the date complete documents are submitted to the tax office. The tax office will endeavour to finalize the deregistration process as soon as possible.
24. Do I need to present any document or tax clearance letter to the immigration counter when I leave Indonesia or when my goods are shipped to my home country?
At this moment it is not necessary.
25. If I underpay my monthly taxes will I be charged interest?
Yes, interest will be charged at 2 % per month on amount underpaid/unpaid.
26. I earned income from one employer and this income has been subjected to article 21 tax. I also have investment income overseas. Am I still required to file monthly taxes?
No, as long as the overseas income is passive income. However, you are still required to pay monthly tax.
27. If I have losses from my home country, can I deduct those losses? What about the prior year losses, are they deductible?
No, you cannot deduct losses from your home country against income from Indonesia or other countries.
Your overseas prior year losses are not deductible.
28. I am a dual resident of both Indonesia and my home country. Indonesia has an income tax treaty with my home country. Am I still required t file an Indonesia tax return?
As you are a resident of Indonesia you need to file Indonesia tax return until such time when the competent tax authorities determined your residency.