38
Building & Maintenance
31 August - 14 September, 2016
Bali Advertiser
“Taxidermy for Beginners” “Oh bum, the tax man cometh and I’m stuffed” “Fear not, help is at hand.” Major moves are afoot (or ahand?) in the Indonesian tax department that may or may not have an impact on many people, both locals and foreigners, who live or own property or have other assets in Indonesia. These moves provide a rare opportunity to clear out the closet, skeletons and all, and come clean, a chance to pay a nominal sum, draw a line under all previous history and start again with a clean slate. I am, of course, referring to the Indonesian Government’s tax amnesty. The people’s darling, Sri Mulyani, a highly respected economist with high integrity, has returned from her role as Managing Director of the World Bank and has been appointed Jokowi’s new Finance Minister. Several years ago Sri came up with the idea of a “tax amnesty” to get everyone honest again and bring them into the real world of paying their fair share of taxes. Her scheme is now up and running. Whilest it is available for everyone the main aim is to repatriate the huge sums of money salted away in overseas (mostly Singapore) bank accounts and investments. Already, after only a short time, large sums of money are returning to Indonesia and, as at August 24th, Rp 53.7 trillion in assets have been declared and Rp1.07 trillion repatriated to Indonesia. I must stress at this stage that I am not a tax expert or even a taxidermist although I do have a very good accountant and an excellent tax consultant to help me get through the tax jungle. I provide this information as accurately as I can determine at this stage because a deadline approaching and it is important that people, particularly property owners are made aware of it. As many people will know the advice we get from “experts”can vary according to who you talk to and what their agenda happens to be so I advise that you seek out second or third opinions if the answers you get are inconsistent. So what is this tax amnesty all about? The Indonesian government is aware that there are many people and companies who have not been paying taxes on their income. To bring people and companies into the system and give them a fresh start the government is offering a tax amnesty to give them the opportunity to clear up their existing tax issues at a nominal cost and start again with a clean slate. If you are resident in Indonesia for more than 183 days you are classed as resident and you should have a tax ID number (an NPWP or Nomor Pokok Wajib Pajak), you need to fill in a tax return each year and pay income tax on any income you receive more than a min. amount of Rp. 54 million a year. Note that overseas pensions, superannuation, and other overseas income that is based on income that has already been taxed are, as far as we understand, tax free but you need to be careful and get advice on this. The tax amnesty applies to everyone living or having investments in Indonesia. It also applies to companies. When you fill in your tax return you state your income and you are supposed to notify the tax department of all assets you own as part of the income tax declaration process. The thinking is logical, to acquire assets you must have had some income so the question follows “have you paid tax on that income?”
concern. We understand that the tax department are forbidden from sharing any information from the amnesty with any other government departments (such as the KPK, land registration department, manpower, immigration. etc). There are serious penalties (up to 5 years in jail) for any tax office employee that does share information. Property ownership and the tax amnesty Probably the biggest issue for most people is property ownership. If you have undeclared land or property then you will need to declare it and make a one off 2% payment on it. If it is in your wife’s name (as long as you have a prenuptial agreement) then she should declare it. If you are a foreigner and you do not have a prenuptial agreement your wife cannot own land anyway. If the person declaring the asset does not already have a tax number they will need to register one to make the declaration. If you have a nominee ownership arrangement you may need to be careful. If the land is family land that the nominee’s family has owned for many years there may or may not be a problem however if the land was bought by you in your nominee’s name and your nominee does not declare it he/ she may be vulnerable to being found out and getting a very heavy penalty at a later date which may or may not impact you indirectly. It would be best to clear the matter up now while you still can. It may be that you can pay the 2% for your nominee however he will need to have a tax number. You should get some professional advice on this. If you are leasing land or property this is probably classed as an asset and the value of the outstanding lease at 31st December 2015 should be declared. Penalties will be heavy for non declaration. If assets, such as your property, are not declared now but are discovered later then the asset will be regarded as income and a heavy tax may be charged (if the “income” is more than Rp500 million a hefty tax rate of 30% applies). Not only this but, as a penalty, an additional 200% of the tax will also have to be paid. It can be seen that the amnesty tax rate of 2% is a low cost to pay to avoid what could be very expensive problems in the future. C/Bm/I-03 Feb 16
Income tax rates at present are: On annual income less than Rp54 million no tax is payable. On anything more than the Rp 54 million threshold the following applies: The first 50 million above the threshold - 5% 50 to 250 million - 15% 250 to 5000 million - 25% Above 500 million - 30% The amnesty will continue until the end of March 2017. Tax is paid at different rates increasing as time goes on: if declared before the end of September the rate is 2%, if declared in the period October to December 2016 the rate is 3%, and if declared in the period January to March 2017 the rate is 5%. This opportunity should not be taken lightly, as already stated if people don’t take the opportunity now they will be penalised heavily later on if they get found out. Will they get found out? Very possibly - the tax department is starting to get serious about collecting taxes and, starting in 2018, they will have access to all bank records. In addition international moves to stop money laundering are closing tax havens and making banks across the world share customer account information.
Obviously going back through many years of work history and whether tax was or was not paid is a bit of a nightmare so the government has come up with this plan to get around this problem.
I must stress again that I am not a tax expert and to get more dependable information you need to go to a GOOD accountant who understands this stuff. Unfortunately tax agents are rather like visa agents and finding one you can trust can be rather like trying to find a needle in a porcupine’s underpants.
For most people their assets reflect income that they have made in the past. For purposes of the amnesty people can declare any undeclared assets that they had at 31st December 2015 (the end of the last tax year) and pay a very reasonable tax rate (2% if paid before the end of September 2016) on them before the end of the amnesty period in March 2017 and in return the tax office will clear any tax liability before that date and they will not ask where the asset or money came from. It is a quick easy way of drawing a line in the sand on the past and providing a new start.
The tax amnesty may be very useful to clear up your outstanding tax issues but it may also give you another benefit - the opportunity to free yourself from a poor accountant or a dodgy agent who has got you into a mess. I am aware of a couple that always tried to do everything correctly but ended up losing their business and moving overseas because of the dodgy practices of a tax consultant who gave them some very bad advice. This amnesty could have saved them.
Assets that have already been declared (and continue to be declared) on a person’s tax return are not included for amnesty purposes and do not attract the amnesty tax. Assets may include financial assets such as money in the bank, investments, land and property that is owned or leased, cars, etc. The amount to be declared is their value at 31st December 2015. For some people the sharing of information may be a major
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C/BM/M-20 July. 16
Phil Wilson Previous “Fixed Abode” articles can be found subject indexed on our website at www.mrfixitbali.com. Opinions expressed are those of Phil Wilson. He can be contacted through the website or the office on 0361 288 789 or 08123 847 852. Copyright © 2016 Phil Wilson You can read all past articles of Fixed Abode at www.BaliAdvertiser.biz
Email : mano@mrtrusted.asia www.mrtrusted.asia C/Ns/G-11 May 16