12 Oct 2016
What should Tax Payers do after Tax Amnesty?
First period of Tax Amnesty (TA) was done and getting amazing result in term of total Redeeming Money (Uang Tebusan) and tax as related which is more than IDR 97 Trillions per 5 October 2016. Mostly Tax Payers that joined this program has disclosed their assets properly.
Tax payers must do some actions after they joined tax amnesty among others are:
- Maintaining a proper and continuing records and backed up by valid supporting documents for all disclosed assets (including the ones mentioned in 2015 tax return), especially for Individual tax payers. All TA participants are recommended to take a note / record the movement and mutation of their assets. Preparing a traceable transactions records are very useful for future checking and reporting. In general, Corporates can do it more easily through the bookkeeping systems.
- Individual tax payers should be more focus on Income received from local and overseas in 2016 onward. There are several type of income, especially from offshore, that maybe subject to tax here:
- a. Interest
Interest and dividends from other countries are subject to income tax here (World Wide Income base). If it is from treaty country, then the treatment will depend on the tax treaty between Indonesia and related country.
- b. Rental Income on Property
By tax regulations, Rental Income on local Property is subject to 10% final tax but if the property is located in the other countries, the rental income will be considered as World Wide Income. Rental Income from the treaty country it may be taxed here too and tax on rental paid in the other countries can be treated as Prepaid Tax.
These issues are not easy for individual tax payers to pay and report their tax on world wide income properly. Government should consider to change the “World Wide Income (WWI)” base to “Source of Income” base, as soon as possible. So for local tax payers who earn income from offshore, they do not have to recalculate their WWI and pay additional tax here again. This is very complicated task for tax payers that do not understand about taxation laws and regulations, also the International taxation as well.
By having the source of Income base, government can be more focus on “How to tax e-commerce transaction” which will have more bigger market in the future. Government announced that they have lost IDR 5 Trillions tax collection because Google can not be deemed as a Permanent Establishment (BUT), so automatically Google is not tax subject in Indonesia. It is time to change the tax laws and tax treaties as well. It is an urgent program to re-focus on target, from offshore income objects earned by local tax payers to the huge potential government revenue from e-commerce business.
Agung Tjahjady SH, CPA, MM, BKP
Registered Tax Consultant, Advocate