The Tax Amnesty Bill has finally been passed……….. are you prepared?June 9, 2016
The truthful answer to that is probably no. There are too many uncertainties regarding how this will be implemented for many who are in the position to take advantage to do so.
Setting aside, if we may, the moral arguments for and against this long-awaited bill, the fact is that it is now upon us and it would seem that high reliance is being placed on its success in attracting the repatriation of funds in the short term and an increase in the level of tax compliance thereafter.
Both aims would appear to be sound but there is significant unease that many issues have not been thought through and the practical implementation of the regulations are likely to see many new problems arise and a lot of complexity as taxpayers try to take advantage of the favourable terms without laying themselves open to double taxation or problems in other jurisdictions. Many may find themselves in positions where the ‘tax tail is wagging the commercial dog’ as assets are liquidated or transferred in efforts to comply with the most favourable rates.
Whilst we await further details and implementing regulations, all Indonesian resident taxpayers should be aware (if this fact has somehow escaped them) that the Indonesian Tax Office has the right to impose tax on worldwide income. Certain types of income in Indonesia are subject to favourable tax regimes but (except if declared under the tax amnesty) if the income is deemed to be sourced overseas it will be taxed at up to 30% for individuals and up to 25% for corporates…….aside from ensuring a full understanding of the extent to which assets have been omitted from any tax declarations to date, taxpayers should consider the breakdown of these assets, the extent to which they may be liquidated or transferred and the extent to which any liquidated funds can be invested in assets which will allow the most favourable rate to apply on the declaration, whether this means repatriation or relates to the timing of the declaration.