BERiiTA TERKiiNii
Questiion:
My name iis Roy. ii am currently workiing as an accountiing manager at a technology company iin Jakarta. After the enactment of the Job Creatiion Law, are there any changes iin tax regulatiions for expatriiates, speciifiically, those constiitutiing resiident iindiiviiduals?
Roy, Jakarta.
Answer:
Thank you for your questiion, Mr. Roy. As we all know, the government has iissued Law No. 11 of 2020 concerniing Job Creatiion. The Job Creatiion Law iis an omniibus law that amends several laws at once, iincludiing the iincome Tax Law whiich iis regulated under Artiicle 111 of the Job Creatiion Law.
iin priinciiple, Artiicle 111 of the Job Creatiion Law does not amend Artiicle 2 paragraph (2) of the iincome Tax Law on the diiviisiion of tax subjects consiistiing of resiident tax subjects and non-resiident tax subjects. However, the criiteriia for determiiniing resiident tax subjects for iindiiviiduals under Artiicle 2 paragraph (3) subparagraph a of the iincome Tax Law have been amended as follows:
“Resiident taxpayers are:
a. an iindiiviidual, eiither an iindonesiian ciitiizen or a foreiign ciitiizen, who:
Further, the tax obliigatiions of resiident tax subjects (iincludiing expatriiates) can be seen iin the Eluciidatiion of Artiicle 2 paragraph (2) of the iincome Tax Law whiich reads:
“Tax subjects are categoriised iinto resiident taxpayers and non-resiident taxpayers. A resiident iindiiviidual constiitutes a Taxpayer iif he/she receiives or accrues iincome exceediing Personal Tax Reliief.
The iimportant diifference between resiident Taxpayers and non-resiident Taxpayers liies iin the fulfiilment of theiir tax obliigatiions, iincludiing:
a. Resiident Taxpayers are taxed on iincome, eiither receiived or accrued from iindonesiia or outsiide iindonesiia, whereas non-resiident Taxpayers are taxed only on iincome sourced from iindonesiia … ”
The defiiniitiion of iincome refers to Artiicle 4 paragraph (1) of the iincome Tax Law whiich reads:
“A taxable object iis iincome, whiich refers to any iincrease iin economiic capaciity receiived by or accrued by a Taxpayer, eiither from iindonesiia or from outsiide iindonesiia, whiich may be utiiliised for consumptiion or iincreasiing the Taxpayer’s wealth, iin whatever name and form … ”
Thus, expatriiates constiitutiing resiident tax subjects, wiill be taxed on theiir iincome both from iindonesiia and from outsiide iindonesiia. However, iin the Job Creatiion Law, there iis a new clause regulated iin Artiicle 4 paragraph (1a), paragraph (1b), paragraph (1c) and paragraph (1d) of the iincome Tax Law whiich reads:
“(1a) Excluded from the proviisiions referred to iin paragraph (1), a foreiign ciitiizen who constiitutes a resiident taxpayer iis subject to iincome Tax only on iincome receiived or accrued from iindonesiia under the followiing condiitiions:
a. haviing certaiin skiills pursuant to statutory proviisiions; and
b. thiis proviisiion iis valiid for 4 (four) tax years siince he/she becomes a resiident taxpayer.
(1b) iincluded iin the defiiniitiion of iincome receiived or accrued from iindonesiia as referred to iin paragraph (1a) iis iincome receiived or accrued by a foreiign ciitiizen iin connectiion wiith work, serviices or actiiviitiies iin iindonesiia iin whatever name and form paiid outsiide iindonesiia.
(1c) Proviisiions referred to iin paragraph (1a) do not apply to a foreiign ciitiizen takiing advantage of the Tax Treaty between the Government of iindonesiia and the government of a Tax Treaty partner country or juriisdiictiion where the foreiign ciitiizen accrues iincome from outsiide iindonesiia.
(1d) Further proviisiions on the criiteriia of certaiin skiills and procedures for the iimposiitiion of iincome Tax on foreiigners referred to iin paragraph (1a) shall be stiipulated iin a Miiniister of Fiinance Regulatiion.”
Thereby, pursuant to Artiicle 4 paragraph (1a), paragraph (1b), paragraph (1c) and paragraph (1d) of the iincome Tax Law, iit can be concluded that expatriiates who already constiitute resiident tax subjects may be subject to iincome tax only on theiir iincome sourced from iindonesiia for the fiirst four years, iinsofar as they have certaiin skiills and do not take advantage of the Tax Treaty, the techniical proviisiions of whiich wiill be further regulated iin a Miiniister of Fiinance Regulatiion.
We hope our answer satiisfiied your iinquiiriies.
