After much delay, the Tax Amnesty Draft Law (comprising 13 chapters and 25 articles) was passed by Indonesia’s House of Representatives on 28 June 2016. The Tax Amnesty period appears to last from 1 July 2016 to 31 March 2017.
According to the Indonesian government, the Tax Amnesty is expected to uncover up to Rp 4,000 trillion (about US$301 billion) in undeclared assets, of which at least Rp 1,000 trillion (about US$75 billion) should return to Indonesia. The government also expects to collect approximately Rp 165 trillion (about US$12.4 billion) in additional tax revenue.
Scope, definition and eligibility
The Tax Amnesty is a waiver of tax due, tax administrative sanctions and tax crime sanctions on unreported income. It covers income tax, value-added tax as well as sales tax on luxury goods.
All taxpayers are eligible for the Tax Amnesty except for taxpayers whose cases have been fully investigated by the prosecutor, taxpayers who are in the midst of court proceedings for tax matters or those undergoing punishment for tax crimes.
Tax Amnesty is granted on net assets (assets minus liability1) and taxpayers are required to use the Asset Declaration Letter for Tax Amnesty (Surat Pernyataan Harta untuk Pengampunan Pajak, i.e. SPHPP) to declare their assets.
Tariff redemption rates
Special tariff redemption rates will be offered to those who declare their assets:
|General taxpayers||Assets located abroad to be invested in Indonesia for a minimum of 3 years||Assets located in Indonesia to be invested in Indonesia for a minimum of 3 years||Assets located abroad that continue to be maintained overseas|
| July 2016 to
|Oct 2016 to Dec 2016||3%||3%||6%|
|Jan 2017 to Mar 2017||5%||5%||10%|
|Small and medium-sized firms (turnover of up to Rp 4.8 billion as at
31 December 2015)
|Declaration of up to Rp 10 billion in assets||0.5%|
|Declaration of more than Rp 10 billion in assets||2.0%|
The tariff redemption rates will be imposed on the net asset value1 of unreported assets.
Approved investments in Indonesia
The repatriated assets must be invested in the form of:
- Government securities;
- State-owned enterprise bonds;
- State-owned financing bodies bonds;
- Financial instruments in designated banks;
- Bonds of private company supervised by the Financial Services Authority;
- Investment in Indonesian infrastructure development via government and private sector cooperation;
- Investment in the real sector (to be determined by the government); and / or
- Other forms of investment (to be determined by the government).
Data and information in the Tax Amnesty letter may not be disclosed to anyone except with the consent of the taxpayer.
Three new regulations are expected to be issued that will act as guidance for administration of the Tax Amnesty. The Indonesian government is currently in the process of drafting the documents, which will be issued in due course.
The Indonesian tax authorities also announced that they would set up information centres at Indonesian embassies in Singapore, Hong Kong and London where most Indonesians have kept their assets. Branches of Indonesian banks outside Indonesia will also disseminate the Tax Amnesty programme.
Relevant Indonesian taxpayers will now need to decide whether to take up the Tax Amnesty offered by the Indonesian government. While this is an important decision to make, the affected taxpayers should look at the structure of their investments going forward.
Taxpayers should consider restructuring their investments to streamline them and conform to current tax laws and global developments such as OECD’s Base Erosion Profit Shifting project and information exchange initiatives.
1Special formula applies
If you require any further information or assistance on the matter, please contact any of our tax specialists listed below:
Cindy Lim, International Tax Partner
T +65 6594 7852
William Chua, International Tax Partner
T +65 6594 7860
Koh Puay Hoon, International Tax Partner
T +65 6594 7820
Chua Hwee Theng, Director, Tax
T +65 6594 7301
Wang Chai Hong, Director, Tax
T +65 6594 7306
Cheah Paik An, Director, Tax
T +65 6594 7859
Ivy Chiong, Associate Director, Tax
T +65 6594 7381