AEOI, or Automatic Exchange of Information, refers to the exchange of information between tax authorities in response to a request for administrative assistance. It involves the systematic and periodic transmission of “bulk” taxpayer information by the source country to the residence country concerning various categories of income (e.g., assets, dividends, interest). It can provide timely information on non-compliance if tax has been evaded on an investment return or underlying capital sum, even if tax administrations had no prior indicators of non-compliance. AEOI allows the tax authorities of the nation in which the taxpayer is registered to swiftly assess the Taxpayer’s Tax Return (SPT) to verify the accuracy of the declared offshore assets, liabilities and income.

According to the OECD, 113 countries, including Indonesia, have agreed to this framework of information exchange by 2022.However, the number of participating jurisdictions decrease in the 2023 lists as per Indonesia Director General of Tax (DGT). In the 2023 list, Liberia, Moldova, Morocco, and Uganda have been removed. On the other side, Thailand, has been added. There are currently 110 nations that have committed to the AEOI.

The Directorate General of Taxes (DGT) on 16 March 2023 issued regulation No. PER-1/PJ/2023 of technical
guidance on withholding tax on royalty received by individual taxpayers who adopt net income calculation norm.

Following are few key highlights.

1. Withholding Tax on Royalty

• Royalty paid, provided, or due to resident taxpayers or permanent establishments is subject to withholding tax article 23.
• Withholding tax rate for royalty is 15% of the “gross amount”.

2. Net income calculation norm for individual tax residents

• For individual tax residents who adopt net income calculation norm, the “gross amount” is set at 40% of the royalty. Therefore, net withholding tax of royalty to the said individual taxpayers is 6%.
• The individual taxpayers must provide the receipt of notification net income calculation norm to the withholder prior to payment.

3. Remittance and reporting of withholding tax

• The withholder must remit withholding tax to the government and report the withholding tax in the monthly unified tax return.
• The withholder is responsible to provide withholding tax slip to the individual taxpayers.

4. Tax Filing for Individual tax residents who earn royalty

• Royalty must be reported by individual taxpayers in Annual Income Tax Return, and withholding tax pertaining to the royalty can be credited in the Annual Income Tax Return.

On 26 October 2020, the Indonesian government issued Law No 10 of 2020 (“Law-10”) regarding stamp duty, which superseded the previous Law No 13 of 1985 (Law-13) and will be effective on 1 January 2021.

Major update on Law-10 is the imposition single tariff of IDR 10,000.

Stamp duty is imposed on documents to be used for civil nature and as evidence in the Court. While majority of documents remain the same with Law-13, there are new types of documents that are subject to stamp duty: securities transaction documents, including futures contract transaction document in any name or form; auction document in the form of auction summary excerpt, minute, copy, and auction summary grosse; and other document that will be further indicated through Government Regulation. Following documents are no longer subject to stamp duty: document stating money deposit in a bank, document containing bank account balance, and document issued by the central bank for the implementation of monetary policy. Related to “agreements”, Law-10 does no longer restrict whether the document is used as evidence or not.

Law-10 updates threshold for document stating sum of money that is subject to stamp duty, which is now increased to nominal value of more than IDR 5 million, compared to the previous IDR 250,000.

While taxable events for stamp duty under Law-13 are upon delivery, completion, or place of document being used, under Law-10, this provision is revised to be based on the process of the document, such as upon signature, completion, delivery, submission to the court, and place of usage. Each process provides reference to certain types of document that is dutiable.

Law-10 introduces new concept of “stamp duty collector”, which stipulates the party who has obligation to collect, remit, and report the stamp duty to tax office. When stamp duty collector does not fulfil its obligation on collection and remittance, tax office may issue tax assessment letter along with 100% administrative sanction of underpayment stamp duty. Besides, tax office may issue tax collection letter for late payment and reporting. Further provision regarding stamp duty collector will be specified through Minister of Finance Regulation.

Stamp duty may be remitted through stamp or tax payment slip. Further, Law-10 adds another type of stamp, i.e. electronic stamp which will have unique code and special identification, in addition to the current physical “sticky stamp” and other form of stamps (created with digital clamp machine, computerized system, printing technology, and other system or technology).

On 2 November 2020, the Indonesian Government issued Law No 11 of 2020 regarding Job Creation. In continuation of the last Vol 5, this publication addresses implication of the Law on Value Added Tax and General Tax Provision.

VALUE ADDED TAX

Key changes in the VAT Law are:

1. Definition of taxable goods delivery now excludes delivery of taxable goods under consignment.
2. Definition of non-taxable goods delivery is now including transfer of taxable goods for the purpose of equity contribution for paid up capital if both transferor and transferee are registered as VAT-able entrepreneurs.
3. Product from coal mining is now subject to VAT.
4. VAT-able entrepreneur can now credit all input VAT upon consumption of taxable goods and/or services prior to initial delivery of taxable goods and/or services (previously VAT credit available for capital goods only), provided that VAT credit requirements are met.
5. If VAT-able entrepreneur in pre-operating phase does not perform delivery of taxable goods and/or services within three years since initial VAT credit, the input VAT that has been credited shall be adjusted. The three-years period may be extended for some business sectors. This provision is also applicable for business liquidation, revocation of VAT-able entrepreneur status, or having its VAT-able entrepreneur status revoked ex-officio, within three years since initial VAT credit.
6. VAT-able entrepreneur in pre-operating phase can no longer apply for monthly VAT refund.
7. Entrepreneur can now credit its input VAT before having registered as VAT-able entrepreneur, by up to 80% of the output VAT that should be collected.
8. Input VAT which are not reported in VAT return but voluntary disclosed and/or discovered in tax audit process can be credited by VAT-able entrepreneur, provided that the input VAT meets requirements of creditable input VAT.
9. Input VAT which are assessed under tax assessment letter can be credited by VAT-able entrepreneur by the amount as stated in the tax assessment letter, provided that the tax assessment has already been paid and no further legal action being pursued.
10. Retailer VAT-able entrepreneur can prepare tax invoice without stating the identity of the buyer and the name and signature upon delivery of taxable goods and/or services to end-customers (subject to further Minister of Finance Regulation).

GENERAL TAX PROVISION

Key changes in the GTP Law are:

1. Interest penalty is now capped at 24 months, maximum, which is calculated based on the monthly interest rate determined by the Minister of Finance, taking into account premiums which vary upon different conditions which resulting the interest penalty. Part of a month is considered as one full month. The calculation of interest penalty along with its applicability are as follow:
   • Benchmark interest rate divided by 1qq2:
     • Late payment of tax underpayment based on tax underpayment assessment letter, additional tax underpayment assessment letter, amendment decision letter, objection decision letter, appeal decision letter, or judicial review decision letter.
     • Late payment of tax underpayment based on tax installment or tax deferral.
     • Late payment of tax underpayment based on the difference of tax payable on the extended tax annual income tax return and the final annual income tax return.
   • Benchmark interest rate plus 5%, and divided by 12:
     • Tax underpayment as the result of amendment of annual tax return.
     • Tax underpayment as the result of amendment of monthly tax return.
     • Late payment of tax payable based on monthly tax return.
     • Late payment of tax payable based on annual income tax return.
     • Tax underpayment as stated on tax collection letter for current year income tax; or tax collection letter issued in regard to typo or miscalculation based on evaluation from tax office.
   • Benchmark interest rate plus 10%, and divided by 12:
     • Tax underpayment as the result of disclosure of incorrect statement in the tax return during tax audit.
   • Benchmark interest rate plus 15%, and divided by 12
     • Tax underpayment based on tax assessment letter as the result of tax audit.
     • Tax underpayment based on tax assessment letter as the result of being given VAT-able entrepreneur status ex-officio.
     • Tax underpayment based on tax assessment letter as the result of late repayment of uncreditable input VAT by VAT-able entrepreneur prior to its operation.
   • In case of VAT audit (with reference to Article 13(1) point a and c), only the highest amount of administrative sanction shall be charged, i.e. between interest and increase.
   • VAT-able entrepreneur who does not issue tax invoice or late in issuing tax invoice and does not fill the tax invoice in accordance with complete requirements is subject to administrative sanction in the form of fines at a rate of 1% of VAT base (reduced from current 2%).
   • The interest reward is calculated based on the monthly benchmark interest rate determined by the Minister of Finance, and divided by 12, with maximum period of 24 months. Part of a month is considered as one full month. This provision is applicable to:
     • Refund of tax overpayment.
     • Late issuance of tax overpayment assessment letter.
     • Tax overpayment assessment letter pertaining to certain condition of preliminary investigation audit (does not proceed to tax investigation, or continued to tax investigation but does not proceed to tax criminal prosecution, or continued to tax investigation and tax criminal prosecution but the court’s decision disregards the prosecution).
2. Taxpayer who neglects in submission of tax return or submit tax return with incorrect or incomplete information is subject to fine by at least one time of the amount of tax payable or maximum two time of the amount of tax payable, or imprisonment by at least three months or maximum one year, disregarding whether it is the first time or not (previous 200% fine for first time taxpayer doing such negligence has been revoked). Previous provision regarding 48% interest penalty on tax assessment letter and additional tax assessment letter for taxpayer committing tax crime after five years statute of limitation has been revoked.
3. Previous provision of 150% fine pertaining to voluntary disclosure for taxpayer already subject to preliminary investigation audit is now reduced to 100%.
4. Previous provision of four times fine on tax underpayment pertaining to termination of tax crime investigation for the benefit of state revenue is now reduced to three times, only if the taxpayer has paid the amount of tax underpayment.

The Omnibus Law of Job Creation, enacted on 2 November 2020, introduced new measure on exclusion of foreign-sourced income for qualified tax resident expatriates. Further implementing regulation was recently issued, Minister of Finance Regulation (MoF) No. 18/PMK.03/2021 (“MoF 18”), as summarized below.

Tax resident expatriates may exclude foreign-sourced income in their Indonesia tax return under following conditions:
a. Qualify for certain expertise; and
b. Applicable for a period of 4 years since initial tax resident registration.

Income that is paid outside Indonesia in relation to an employment, services, or activities carried out in Indonesia, is particularly considered Indonesia-sourced of Indonesia, hence still taxable. Further, if expatriate elects for tax treaty relief, the exclusion is not be applicable.

Certain Expertise

Qualified expatriates with certain expertise include:
a. Foreign workers occupying certain positions, and
b. Foreign researchers

Further criteria for certain expertise are as follow:
a. foreign nationality;
b. having expertise in science, technology, and/or mathematics, which is proven by relevant:
1. certificate of expertise which is issued by institution appointed by Indonesia or their country of origin;
2. education certificate; and/or
3. minimum working experience of 5 years.

Following are certain positions that may get exclusion on foreign-sourced of income:

Administrative Requirement

To apply the exclusion, qualified expatriates shall submit a request to the Director General of Taxes (DGT), electronically or via courier. Within 10 working days, DGT shall issue approval or rejection letter on the request.

If the request is approved, the expatriate shall report only Indonesian-sourced income in the tax return.

Expatriates who qualify for certain expertise that have been subject to Indonesian tax before the enactment of this regulation may be taxed only upon its Indonesian-sourced income as long as the 4-years period has not been exceeded, while they are still required to submit a request for exclusion as per above.

The Director General of Taxes (DGT) on 25 June 2020
issued an implementing regulation on digital VAT,
i.e. DGT Regulation No. PER-12/PJ/2020.

Following are few key highlights of the implementing regulation.

1. Appointment of VAT Collector
   • The VAT collection mechanism shall be initiated with appointment of foreign digital provider as “VAT Collector” by the DGT. The VAT collection process shall be started at the following month upon the appointment.
   • The thresholds for appointment are as follow:
     • Transaction value with Indonesian customers exceeds IDR 600 million a year or IDR 50 million a month; and/or
     • Number of traffic of accessor in Indonesia exceeds 12,000 a year or 1,000 a month.
   • The DGT may revoke VAT collector appointment if certain threshold is not met, or upon DGT’s consideration. The revocation will be effective on the following month after the date of the revocation.
   • VAT collector will be given identification number for administration purpose. This includes Tax Registration Letter (Surat Keterangan Terdaftar) and Tax Identification Number Card (Kartu Nomor Identitas Perpajakan).
   • VAT collector needs to activate the account and update data through online application system as provided by the DGT before VAT Collector status is effective.
2. VAT Collection
   • The VAT rate is 10% of the amount paid by customers.
   • The collection is performed upon payment by customers.
   • For direct transaction from foreign seller/service provider to Indonesian customers, the VAT is collected by the foreign provider.
   • For transaction through e-commerce, the VAT collection is performed by e-commerce operator which: (i) is appointed as VAT collector, and (ii) issues commercial invoice, billing, order receipt, or other relevant document.
   • VAT collector shall issue VAT collection slip that could be in the form of commercial invoice, billing, order receipt, or other relevant document which mentions payment and VAT collection (may be separated from tax base or as part of payment). The said document is made in accordance with digital provider’s business.
   • If customer wants to credit its purchase VAT, the VAT collection slip must specify the name and Tax Identification Number (TIN).
   • VAT collection slip is regarded as VAT invoice equivalent as long as it specifies the name and TIN of the customer or the customer’s registered email at the DGT.
3. VAT Payment
   • The collected VAT is payable by the end of the following month. The payment is settled electronically through billing code to the state treasury account or by using other procedure as determined by the DGT.
   • The payment may be settled in Rupiah (using Minister of Finance rate at the date of payment), USD, or other currency as determined by the DGT.
4. VAT Reporting
   • VAT collector must submit report of VAT collection quarterly, by the end of the following month after the quarter ended, [quarterly being: Jan – March, April -June, July – Sept, Oct – Dec]. The report shall at least cover: number of customers, amount of payment by customers excluding VAT, amount of VAT collection, and amount of VAT settlement, for each tax period. This reporting requirement is mandatory even if the amount of VAT collection is nil. The report can be amended if there is finding on tax underpayment. The report shall also include compensation of VAT overpayment, if applicable.
   • Upon request by the DGT, VAT collector must submit detail of VAT collection for 1 (one) year period. The report shall at least cover: number and date of VAT collection slip; amount of payment excluding VAT for each slip; amount of VAT collection for each slip; name and TIN of customer (if any); phone number, email, or other customer identity.
   • The report may be prepared in English and/or Bahasa Indonesia, and to be submitted electronically. Upon submission, VAT collector will be given tax submission receipt.