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Trying to understand tax laws for remote workers

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  • Trying to understand tax laws for remote workers

    I am looking to relocate to Indonesia in the coming months and to stay on a spouse visa while working remotely for an American company. I used to live on a KITAS and tax laws were clear, but I am confused about the current tax laws for income earned overseas for someone on a spouse visa.

    I read at https://bali.com/guide-to-moving-and...-in-indonesia/ that:

    "Foreigners who are domestic tax subjects in Indonesia will only be taxed on the money they earn within the country, and not their global income, for four years. The omnibus legislation scheme recently altered the tax provisions to provide incentive for expats."

    But, conversely:

    "Non-residents are only required to pay personal income tax on income earned in Indonesia. However, since foreigners on spouse visas are not able to work in Indonesia without transitioning to a work KITAS, the foreigner does not have income to report on their taxes."

    I will require an NPWP, so I would like to do everything by-the-book. Does anyone have recommendations for a tax lawyer / specialist?

  • #2
    See below the Indonesian Law about that .

    There is a new Omnibus Law that revised many other Laws but , as far as I know , did not change anything in relation to this subject .

    So , i my view (but I am not a tax specialist) , by geting an one year KITAS you will be considere a Resident Taxpayer .


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


    LAW NUMBER 36 OF 2008 (Indonesian Income Tax Law) - not the official translation
    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 (one hundred and eighty-three) days within any 12 (twelve) months period, or an individual who has been residing 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, and an entity which ....
    b. Any 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, and any entity which ...

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

    ELUCIDATION OF LAW OF THE REPUBLIC INDONESIA NUMBER 7 OF 1983
    CONCERNING INCOME TAX
    AS LASTLY AMENDED BY LAW NUMBER 36 OF 2008

    Article 2
    ......................
    Principal differences between Resident and Nonresident Taxpayers are in
    the manner that they fulfill their tax obligation, among others are as follows:
    a. A Resident Taxpayer is taxed on his income derived from Indonesia and overseas, whereas a Non-Resident Taxpayer is taxed only on the income originating from sources in Indonesia;
    b. A Resident Taxpayer is taxed based on the net income with a general rate, whereas a Non-Resident Taxpayer is taxed based on the gross income with an appropriate rate; and
    c. A Resident Taxpayer is obliged to submit Annual Return as means for assessing his tax obligation in a taxable year, whereas a Non-Resident Taxpayer is not, because his tax obligation are fulfilled through withholding tax, which is final in nature.

    Comment


    • #3
      Originally posted by pakmamat View Post
      (1) ...stay on a spouse visa while working remotely for an American company...

      (2) ...The omnibus legislation scheme recently altered the tax provisions to provide incentive for expats."

      (3) ...However, since foreigners on spouse visas are not able to work in Indonesia without transitioning to a work KITAS, the foreigner does not have income to report on their taxes."

      (4) I will require an NPWP, so I would like to do everything by-the-book.

      (5) Does anyone have recommendations for a tax lawyer / specialist?

      (1) This is not a work situation allowed by the present Indonesian Laws .

      (2) See the Omnibus Law (related to this subject) below . A big change was expected , but as I see , no change .

      (3) With an one year Residence Permit/KITAS , working here or not , (theoretically) you are required to pay Indonesian tax over worldwide income .

      (4) Some foreigners without an official work here , did not succeed in doing that (but better try) .

      (5) Sorry , I don't know any .


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


      Indonesian Omnibus Law , Nov 2020 - not the official translation
      Article 111
      Several provisions ... concerning Income Tax ... are amended as follows:
      .....
      Article 2
      (1) Tax Subjects are:
      a. private person; and undivided inheritance as a unit to replace those who are entitled;
      b. agency/institution; and
      c. permanent establishment.
      (1a) A permanent establishment is a tax subject whose taxation treatment is equivalent to that of a corporate tax subject.
      (2) Tax Subjects are differentiated into Domestic Tax Subjects and Foreign Tax Subjects.

      (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:
      1. a place to live;
      2. main activity center;
      3. a place to practice habits;
      4. tax subject status; and / or
      5. other certain requirements which further provisions regarding the requirements are regulated in the Regulation of the Minister of Finance; and
      d. an agency/institution that is not established and is not domiciled in Indonesia that carries out business or carries out activities through a permanent establishment in Indonesia or which can receive or earn income from Indonesia not from running a business or carrying out activities through a permanent establishment in Indonesia.
      (5) The permanent establishment is ...
      (6) The Director General of Taxes shall determine the residence of an individual or the domicile of the agency/instituttion according to the actual situation.

      Article 4
      (1) The Tax Object is income, namely any additional economic capacity received or obtained by the Taxpayer, ...


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

      Omnibus Law Explanation :

      [Article 111
      ...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...]


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


      https://www.livinginindonesiaforum.o...lobal-taxation (about tax)

      https://www.livinginindonesiaforum.o...an-i-live-here [how an ex-Indonesian can work - similar to how a holder of KITAS/KITAP (sponsored by Indonesian spouse) can work]

      http://www.livinginindonesiaforum.or...ependent-KITAS (work at home)

      http://www.livinginindonesiaforum.or...king-and-taxes (work at home)

      http://www.livinginindonesiaforum.or...Legally-!(work at home , see post no.10)

      Comment


      • #4
        Originally posted by marcus View Post


        (1) This is not a work situation allowed by the present Indonesian Laws .
        As far as I understand the law, that does not seem to be correct. The law forbids those on dependent non-working visas from working for Indonesian companies or for businesses with operations in Indonesia, but it has no restrictions on fully remote work / telecommuting with foreign companies that have no operations inside Indonesia.

        According to the guide from Thomson Reuters Practical Law, which was written by lawyers from Indonesia's largest immigration law firm, in Indonesia, "Dependants are allowed to undertake the following: Telecommuting, as long as the dependant does not work and/or receive salary or other remuneration inside Indonesia."

        The criteria for being classified as 'working in Indonesia' per immigration regulations, according to the authors, is:
        1. Receiving any income (salary or remuneration) from Indonesian company/employer;
        2. The activities are related with Indonesian companies (your employer has clients in Indonesia and you support your employer for the projects in Indonesia).

        Comment


        • #5
          Originally posted by pakmamat View Post
          (a) As far as I understand the law, that does not seem to be correct. The law forbids those on dependent non-working visas from working for Indonesian companies or for businesses with operations in Indonesia, but it has no restrictions on fully remote work...

          (b) According to the guide from Thomson Reuters Practical Law, which was written by lawyers from Indonesia's largest immigration law firm, in Indonesia, "Dependants are allowed to undertake the following: Telecommuting, as long as the dependant does not work and/or receive salary or other remuneration inside Indonesia."

          (c) The criteria for being classified as 'working in Indonesia' per immigration regulations, according to the authors, is:
          1. Receiving any income (salary or remuneration) from Indonesian company/employer;
          2. The activities are related with Indonesian companies (your employer has clients in Indonesia and you support your employer for the projects in Indonesia).
          Sorry for the late response (I did not notice your post before) .

          (a) I will be glad to discuss any part of any Law , so please tell me which Law and Article number , because I know : relatively well the Indonesian Immigration Law (UU no.6 Year 2011) and a little less the Indonesian Manpower Law (UU no.13 Year 3003) , but didn't see anything like that .

          (b) Does Thomson Reuters mentions the related article of a specific Law or Regulation ? I can only easily believe in what are in the Laws/Regulations .

          (c) I guess these 2 items may be written in an official Immigration document , and if so , these 2 items refer to what is considered "legal work" allowed to be done with a Work Residence Permit (Work KITAS/KITAP) .
          Work by itself is ruled by the Indonesian Manpower Law (UU no.13 Year 2003) and its many Regulations .

          "Dependent" KITAS does not allow to work in Indonesia .

          Just now Indonesia is finishing the rules for an already approved idea of the "Second Home" Visa/KITAS/KITAP which will cover this area of foreigners working remotely but only for 5 years KITAS/KITAP (see details here : https://www.livinginindonesiaforum.o...soon-available) .

          Comment

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