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  • Tax on worldwide income

    So I spoke to a tax consultant and he told me that all my foreign income (shares, savings accounts, rental income) will be seen as personal income and taxed in the progressive scale (up to 30%).
    Double Tax treaties apply, but only mean that you get a deduction. E.g. right now I already pay about 10% tax on rental income in Europe, that means I still have to pay Indonesia 20% extra to end up at 30%. 
    Now I already feel this is unfair considering that the rental tax in Indonesia isn't this high, but ok now comes the next part. I still have a mortgage on the properties (about 50%), for the sake of argument let's use the following numbers:
    Monthly rental income 10.000.000
    Monthly interest 5.000.000
    Various monthly costs 1.500.000

    So before tax I make about 3.500.000/month. However according to my tax consultant, Indonesia wants 30% of 10.000.000.

    This seems excessive to me and I'd probably be better off just keeping it empty then. Anyone has experience with this?

  • #2
    Originally posted by steven86 View Post
    (1) So I spoke to a tax consultant and he told me that all my foreign income (shares, savings accounts, rental income) will be seen as personal income and taxed in the progressive scale (up to 30%).

    (2) Double Tax treaties apply, but only mean that you get a deduction.

    (3) E.g. right now I already pay about 10% tax on rental income in Europe, that means I still have to pay Indonesia 20% extra to end up at 30%.
    Now I already feel this is unfair considering that the rental tax in Indonesia isn't this high, ...

    (4) let's use the following numbers:
    Monthly rental income 10.000.000
    Monthly interest 5.000.000
    Various monthly costs 1.500.000
    So before tax I make about 3.500.000/month. However according to my tax consultant, Indonesia wants 30% of 10.000.000.

    (5) This seems excessive to me and I'd probably be better off just keeping it empty then. Anyone has experience with this?

    (1) I think this tax consultant is mistaken . I would check this with some officers of the Indonesian Tax Office/Kantor Pajak . Interst from saving accounts in Indonesia , for example , are not added to the other incomes to apply the 5% , 15% , 25% , 30% taxation .

    (2) I did read part of few Tax Treaties and found them stating a lot more subjects than that . Regardless of Tax Treaties , Indonesian Income Tax Law does not apply double taxation .

    (3) I guess you know that part of your income is taxed : 5% , 15% , 25% and 30% .

    (4) I would certainly check that in Kantor Pajak . I never paid rental income in Indonesia but in my country (South America) we pay over the net rental income (deducting all costs) .

    (5) The question I asked many Indonesian Tax officers : "do I have to declare all my worldwide incomes ?" . All 3 different officers (from 3 different Kantor Pajak) gave me the same answer : "you must declare all worldwide incomes IF you work in Indonesia" . You better confirm this again , because I did ask that almost 10 years ago . Few other members of this Forum got the same answer . Few other members also said that they could not even get the Indonesian Tax number (NPWP) after telling they don't work in Indonesia .

    Comment


    • #3
      A related question: If you're on the retirement visa and not working, do you have to declare the income from your pension being paid out from your Super Pension account in Australia?

      Comment


      • #4
        Originally posted by Brissi.Bill View Post
        ... If you're on the retirement visa and not working, do you have to declare the income from your pension being paid out from your Super Pension account in Australia?

        I suggest you to read the Tax Treaty between Indonesia and Australia . Usually government pension is not taxed . If it is , I would suggest you what I wrote in item (5) of my post above .


        ----------------------------------------


        From https://www.thejakartapost.com/news/...ostviewed&pg=/ (Nov 2019)

        [Indonesian Finance Minister Sri Mulyani Indrawati on Thursday shared the government's planned tax reforms, which includes relaxing income tax for Indonesian and foreign expatriates ...

        The planned reforms would change the Indonesian tax regime into a territorial tax system, so foreign residents and overseas Indonesians would no longer be taxed on income earned outside the country's borders.

        Foreigners who work in Indonesia for more than 183 days will be taxed on only the income they earn in Indonesia, while Indonesians who work abroad will be exempt from paying income tax in Indonesia.

        "We will revise [the regulation] that expatriates need to pay tax on their incomes [earned both] in Indonesia and abroad," Sri Mulyani told ... ]

        Comment


        • #5
          Any updates on these proposed changes too the tax laws regarding foreign expat's income (from abroad)?



          Sri Mulyani said that the sweeping reforms, intended to boost investment and stoke growth in the the sluggish economy, would be part of the omnibus law that the government was currently finalizing.

          Relaxation of 'expatriate' income tax

          The planned reforms would change the Indonesian tax regime into a territorial tax system, so foreign residents and overseas Indonesians would no longer be taxed on income earned outside the country's borders.

          Foreigners who work in Indonesia for more than 183 days will be taxed on only the income they earn in Indonesia, while Indonesians who work abroad will be exempt from paying income tax in Indonesia.

          "We will revise [the regulation] that expatriates need to pay tax on their incomes [earned both] in Indonesia and abroad," Sri Mulyani told a business forum on Wednesday in Jakarta.

          Under the prevailing 2008 Income Tax Law, every individual (including foreign nationals) who has resided in Indonesia for more than 183 days within a 12-month period, or has resided in Indonesia for a full tax year and intends to remain in Indonesia, is considered a domestic taxpayer. Otherwise, the individual is considered a foreign taxpayer and is not obliged to pay income tax in Indonesia.


          Link: https://www.thejakartapost.com/news/...penalties.html

          Comment


          • #6
            Originally posted by Lanang Tuwek View Post
            (a) Any updates on these proposed changes too the tax laws regarding foreign expat's income (from abroad)? ...

            (b) Under the prevailing 2008 Income Tax Law, every individual (including foreign nationals) who has resided in Indonesia for more than 183 days within a 12-month period, or has resided in Indonesia for a full tax year and intends to remain in Indonesia, is considered a domestic taxpayer. Otherwise, the individual is considered a foreign taxpayer ...

            (a) I am not aware of any update . Those news were from less than 2 months ago , so I am not expecting anything so soon .

            (b) It is not exactly like that (see below) .

            CONSOLIDATION OF LAW OF THE REPUBLIC OF INDONESIA NUMBER 7 OF 1983
            CONCERNING INCOME TAX AS LASTLY AMENDED BY LAW NUMBER 36 OF 2008
            Article 2
            .............
            (3) The term "Resident Taxpayer" means:
            a. individual who resides in Indonesia, an individual who has been present in Indonesia for more than 183 days within any 12 months period, or an individual who has been in Indonesia within a particular taxable year and intends to reside in Indonesia;
            b. entity established or domiciled in Indonesia, ...

            4) The term "Non-Resident Taxpayer" means:
            a. An individual who does not reside in Indonesia, has been present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) months period, or an entity which ....
            Last edited by marcus; 21-01-20, 21:47.

            Comment


            • #7
              Originally posted by marcus View Post


              (a) I am not aware of any update . Those news were from less than 2 months ago , so I am not expecting anything so soon .

              (b) It is not exactly like that (see below) .

              CONSOLIDATION OF LAW OF THE REPUBLIC OF INDONESIA NUMBER 7 OF 1983
              CONCERNING INCOME TAX AS LASTLY AMENDED BY LAW NUMBER 36 OF 2008
              Article 2
              .............
              (3) The term "Resident Taxpayer" means:
              a. individual who resides in Indonesia, an individual who has been present in Indonesia for more than 183 days within any 12 months period, or an individual who has been in Indonesia within a particular taxable year and intends to reside in Indonesia;
              b. entity established or domiciled in Indonesia, ...

              4) The term "Non-Resident Taxpayer" means:
              a. An individual who does not reside in Indonesia, has been present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) months period, or an entity which ....


              Thanks for your reply Marcus,

              I was focused on the following quote from the article where it says...
              "foreign residents (and overseas Indonesians) would no longer be taxed on income earned outside the country's borders.

              I took it that the term "foreign residents" would mean foreigners residing in Indonesia for more than 183 days a year (with a Kitap/Kitas for example).

              I am currently living in Thailand but am reconsidering moving back to Indonesia again. The one thing holding me back is the current tax laws regarding worldwide income for foreign residents living in Indonesia.

              My fingers are crossed and I am hoping for appropriate clarification and implementation of this proposal.


              Thanks again and have a great day!

              Comment


              • #8
                Originally posted by Lanang Tuwek View Post
                ... The one thing holding me back is the current tax laws regarding worldwide income for foreign residents living in Indonesia ...

                Are you thinking to come to Indonesia to work & having also other taxable income abroad where the taxation is lower than in Indonesia ?

                Comment


                • #9
                  Originally posted by marcus View Post


                  Are you thinking to come to Indonesia to work & having also other taxable income abroad where the taxation is lower than in Indonesia ?
                  No, I am retired and living in Thailand now so I live off of my pension (and my rental income from property in the USA) and my concern is the current tax situation with regards to my rental income (and pension).

                  Comment


                  • #10
                    Originally posted by Lanang Tuwek View Post
                    .. I am retired and living in Thailand now so I live off of my pension (and my rental income from property in the USA) and my concern is the current tax situation ...

                    Did you read already the Tax Treaty between Indonesia and your country (for example , if you are an US citizen , pension from government does not pay Indonesian tax) ?

                    Anyway , in more than 10 years in this Forum I never saw any non-working member pay Indonesian tax . According to what some members have told us , the Indonesian Tax Offices have even denied the issuance of the Indonesian Tax number (NPWP) for foreigners not working (you cannot pay Indonesian tax without a NPWP) . From what I understand from the Indonesian Tax officers behavior , this worldwide taxation in the Indonesian Law is to cover foreigners working in Indonesia and receiving part of their salary in their home countries .

                    Comment


                    • #11
                      Originally posted by marcus View Post


                      Did you read already the Tax Treaty between Indonesia and your country (for example , if you are an US citizen , pension from government does not pay Indonesian tax) ?

                      Anyway , in more than 10 years in this Forum I never saw any non-working member pay Indonesian tax . According to what some members have told us , the Indonesian Tax Offices have even denied the issuance of the Indonesian Tax number (NPWP) for foreigners not working (you cannot pay Indonesian tax without a NPWP) . From what I understand from the Indonesian Tax officers behavior , this worldwide taxation in the Indonesian Law is to cover foreigners working in Indonesia and receiving part of their salary in their home countries .

                      Thank you Marcus, I am aware of and have read the tax treaty between R.I. and the USA but I was still sceptical.. This is good news - thanks again!!

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