Indonesia: Tax amnesty implementation regulations

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Indonesia: Tax amnesty implementation regulations

Karyadi-Freddy
puspita.jpg

Freddy
Karyadi

Luna
Puspita

To implement the Tax Amnesty Law, the Indonesian government has issued various regulations, procedures and plans.

This includes regulations, such as the Implementation of Tax Amnesty Law, procedures for assets repatriation into Indonesia, the banks appointed to receive such assets, investment products in the capital market fields in relation to the tax amnesty, and examining the policy to support the implementation of the Tax Amnesty Law. In addition, the government plans to issue another regulation in relation to special purpose vehicles.

Ministry of Finance Regulation No 118/PMK.03/2016 on the Implementation of Tax Amnesty Law (MoF Regulation No. 118/2016) states the general procedure for the tax amnesty application and the calculation for redemption payment. In order to apply for tax amnesty, taxpayers must disclose their assets in a statement letter and pay the redemption payment.

In the event that taxpayers intend to repatriate assets back to Indonesia, the taxpayer would have to invest any funds relating to the repatriated assets within three years after the funds have been received by an appointed bank. The investment can be conducted through several instruments, as follows:

1) Within the financial markets, as regulated under MoF Regulation No. 123/PMK.08/2016 on the amendment of MoF Regulation No. 119/PMK.08/2016 on the Procedures for Asset Repatriation into Indonesia and Placement in Investment Instruments; or

2) Outside of the financial markets, as regulated under MoF Regulation No. 122/PMK.08/2016 on the Procedures for the Transfer of Taxpayer's Property into the Territory of the Republic of Indonesia and Placement of Foreign Investment Outside of the Financial Markets In Relation to the Tax Amnesty.

Under option 1 above, repatriated assets can be invested in the following vehicles:

  • Indonesian State Commercial Papers (Surat Berharga Negara);

  • State-owned company bonds;

  • State-owned financing company bonds;

  • Financial investment products organised by receiving banks;

  • Private company bonds that are traded under the supervision of the Financial Services Authority;

  • Investment in infrastructure projects funded through public-private partnership schemes;

  • Investment in real sector based on government priorities; and/pro

  • Other types of investment allowed by the prevailing regulations.

Under option 2 above, repatriated assets can be invested in the following vehicles:

  • Infrastructure projects through cooperation between the government and a business entity;

  • Investment in the real sector based on government priorities;

  • Investment in the form of property investment;

  • Investment in a company domiciled in Indonesia;

  • Investment in the form of bar gold; and/or

  • Other types of investment allowed by the prevailing regulations.

To support the tax amnesty scheme, the Directorate General of Tax has issued Instruction No. INS-03/PJ/2016 on the Examination Policy to Support the Implementation of the Tax Amnesty Law, which stipulates that tax officials will not issue any investigation or warrant a new audit unless for the examination of over payments of tax, or matters relating to the services provided to the taxpayer.

Separately, the government has reduced the income tax for the transfer of real property from 5% to 2.5%. President Joko Widodo also unveiled plans to decrease the corporate income tax from 25% to 17%.

Freddy Karyadi (fkaryadi@abnrlaw.com) and Luna Puspita (lpuspita@abnrlaw.com), Jakarta

Ali Budiardjo, Nugroho, Reksodiputro, Law Offices

Tel: +62 21 250 5125

Website: www.abnrlaw.com

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