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Income Tax For Foreign Retirees ?

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  • Income Tax For Foreign Retirees ?

    Hello Everybody,

    I am new to this forum and request kindly some practical advise from members ( retirees ) who live actually already some time in Indonesia.

    I intend to retire with my wife in Bali.

    My problem"" is the tax-issue. I receive different and confusing advise and response.
    My ?ncome"comes only from dividends which we receive from our investments abroad ( I have NO government pension or similar )..
    If I get a KITAS retirement visa, do I need to pay the Indonesian Personal income Tax ????
    The agent tells me "No"; but various websites tell me ""Yes".
    >>> Once you get a retirement KITAS or a dependent KITAS you become a resident in Indonesia. Therefore you must report your global income in Indonesia. Alike to Indonesians, a foreigner on retirement visa must also pay the Indonesian Personal Income Tax.

    Can somebody kindly tell me what is actually , practical applicable ?

    For any response I will be really greatful

    Best regards

    Wilfried


  • #2
    Originally posted by Wilfried View Post
    ...If I get a KITAS retirement visa, do I need to pay the Indonesian Personal income Tax ???? ...Wilfried

    Hi Wilfried , sorry I just notice your question now .

    Regarding the tax :

    Theoretically yes , the Indonesian Law states you would be taxed on your global income , but in practice , for foreigners not working in Indonesia , in more than 12 years in this Forum I never heard of anybody who paid the Indonesian income tax .

    My view on why is that this looks like to be the real policy of the Indonesian Tax Office because :
    - I already asked 3 tax officers from different Tax Offices and all told me I don't need to report my abroad income (by the way I am also with a Retirement e-ITAS/KITAS) , the Tax office even has denied to give a tax number (without which you cannot pay tax) to resident foreigners not working in Indonesia , according to few other people experience .
    - recently the Indonesian Government is thinking to revise the Law , to not require global taxation as it is now (see below) .

    And even if the Indonesian Government doesn't change the Law and start to require foreigners not working here to comply with the global income rule , the present Indonesian Tax Law does not apply double taxation , so what you pay in the income origin country is credited when you pay the Indonesian income tax .


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


    From https://www.thejakartapost.com/news/...ostviewed&pg=/ (Nov 2019)
    The Jakarta Post
    Title : Indonesia plans sweeping tax reforms for 'expatriate' income, dividends, penalties
    By : Adrian Wail Akhlas

    [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


    • #3
      I just checked the new Law - UU no.11 Tahun 2020 (approved in 02 Nov 2020) which includes revision of the Tax Law . From what I saw , that change proposed by Indonesian Finance Minister Sri Mulyani Indrawati (see post no.2 bove) was not accepted .

      This is how the related part of the Law is explained :

      Explanation of Article 111 , which changed the Tax Law Article 2 :

      [...Domestic Individual Tax Subjects become taxpayers if you have received or earned income the amount of which exceeds the Non-Taxable Income...
      Foreign Tax Subjects, both individuals and entities, also become taxpayers because they receive and / or earn income originating from Indonesia or receive and/or obtain income originating from Indonesia through a permanent establishment in Indonesia...
      a. Domestic Taxpayers are taxed on income either received or obtained from Indonesia or outside Indonesia, while Foreign Taxpayers are taxed only on income originating from income sources in Indonesia;
      b. Domestic Taxpayers are taxed based on net income at a general rate, while Foreign Taxpayers are taxed based on gross income with a commensurate tax rate...]


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


      UU no.11 Tahun 2020 / Law no.11 Year 2020

      Article 111
      ...................
      (3) The Domestic Tax Subjects are:
      a. private persons, whether they are Indonesian citizens or foreign nationals who:
      1. reside in Indonesia;
      2. has been in Indonesia for more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months; or
      3. in a tax year, are residing in Indonesia and have the intention to reside in Indonesia;
      b. an agency/institution that is established or domiciled in Indonesia, ..
      c. the undivided inheritance as a unit replacing those who are entitled.

      (4) The Foreign Tax Subjects are:
      a. an individual who does not reside in Indonesia;
      b. foreign citizens who are in Indonesia for not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months;
      c. Indonesian citizens who are outside Indonesia for more than 183 (one hundred and eighty three) days within 12 (twelve) months and meet the following requirements: ...

      Comment


      • #4
        Hi Marcus,

        Thank you very much for your reply.

        This helped me a lot for making up my ""?nner voice"" and gaining more personal confidence to retire in Bali.

        I would highly appreciate if you could still keep me informed if you get any news about the planned tax reforms.

        Thank you so much again

        Best regards

        Wilfried

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