Tax Amnesties as fiscal programmes are not something new. They have been conducted around the world when governments need a tax reform. In Indonesia, 72% of the government’s 2016 funding came from tax collection.
However, Indonesia has the following characteristics with regard to its taxation condition:
Taxpayers which are registered in the Directorate General of Tax’s (DGT’s) administrative system reached 30,044,103 taxpayers in 2015, including 2,472,632 corporate taxpayers, 5,239,385 non-employee (individual) taxpayers, and 22,332,086 employee (individual) taxpayers. According to BPS - Statistics Indonesia, the Indonesian population who are employed reached 93.72 million in 2013. This means that there are only 29.4% employee (individual) taxpayers and those having income in Indonesia who are registering themselves or registered by system as taxpayer.
There have been several tax amnesties or similar programmes in Indonesia, as follows:
The Sunset Policy 2008 was quite successful in obtaining additional tax collection amounting IDR 7.46 trillion ($560 million) and gaining 5.5 million new taxpayers. The success rates of the other programmes were not published.
The Tax Amnesty 2016 is different to the past policies. Discussion started in the last quarter of 2015, and the Tax Amnesty Law No. 11 Year 2016 was issued on July 1 2016.
The global economy is unstable and is slowing down, which causes Indonesia’s national economic growth to be slow as well. This can be seen from the decreasing tax revenue in recent years and the lack of domestic liquidity, which is highly necessary to improve Indonesian economic growth.
In order to support the success of national development, the Government does not solely depend on tax revenue, but also focuses on searching for new economic growth sources, which are opening new investment opportunities in Indonesia with overseas investment resources.
Automatic exchange of information (AEOI) will be implemented starting from 2018. Thus, the data of taxpayers’ overseas assets can be easily identified by the government. Banking laws will also be revised in terms of data transparency for tax purposes. As a result, taxpayers can no longer hide from the tax authority.
Before the information transparency era starts, the Government introduced a breakthrough policy in the form of the tax amnesty.
Overall, the purposes of Tax Amnesty 2016 are:
Tax amnesty policy will be followed by other policies, such as more strict tax enforcement and amendment to the General Taxation Provisions and Procedures Law, Income Tax Law, Value Added Tax Law, and other strategic policies in taxation and banking fields. Therefore, the tax amnesty may be the last opportunity.
The benefits gained by taxpayers participating in this programme are:
All taxpayers, both individual and corporate, have the rights to use the tax amnesty, except taxpayers who are under:
for any tax crimes.
Starting from the enactment of Law Number 11 of 2016 regarding the tax amnesty on July 1 2016 up to March 31 2017 which is divided into three periods. The redemption tariff is also different for those three periods.
Referring to the tax amnesty slogan (Declare - Redeem - Relieved) it is translated as follows:
With the upcoming changes to the Indonesian tax landscape, the incoming implementation of automatic exchange of information as well as plan to amendment tax laws, the tax amnesty programme is the focus of the Indonesian government. It is believed that the programme will accelerate the Indonesian economic growth and obtain accurate tax basis data, which will then increase the state tax revenue in both short term and long term.
The tax amnesty programme will provide an opportunity and lots of benefits for taxpayers in order to start good governance in tax area and eliminate any tax risks in the past.
The Indonesian government has become more focused on revamping the tax landscape in order to increase revenue by creating a business friendly environment. This has resulted in the government introducing a series of policies known as "economic packages", which include improving the ease of doing business, new tax incentives and tax holidays, reducing the holding time in ports, increasing non-taxable income for individual taxpayers and opening business lines previously closed to foreign investors, to attract more local and overseas investment.
Even though the economic packages have been successful, there is still a significant gap between tax revenue and expenditure, which led the tax authorities to generate more revenue through aggressive tax audits on corporate income taxes, withholding taxes, VAT and, in particular, transfer pricing.
"Every year, the Directorate General of Taxes (DGT) normally issues a tax audit strategy to underline certain business sectors that will be targeted for a tax audit. For the financial year of 2016, the DGT has not issued any guidance on the tax audit strategy so it is not clear which industry will be targeted by the DGT," said Ponti Partogi of Hadiputranto, Hadinoto & Partners.
"However, it seems the foreign companies that conduct significant transactions with their affiliates overseas will still be targets of tax audits," he continued. "Oil and gas companies also still become targets of tax audits. With the burden of tax collection that keeps increasing, some clients have a view that the tax auditor tends to force a correction with no strong legal basis."
In addition, Indonesia's parliament has approved a tax amnesty law which is expected to add billions of dollars to tax revenues, by encouraging the repatriation of Indonesian funds parked overseas and, in the long run, spur economic growth. The amnesty aims to expand the tax base, promote capital and asset repatriations, increase the number of taxpayers, increase compliance and draw additional tax revenues.
"The tax amnesty programme is considered as an important step before the government conducts an aggressive approach in law enforcements," said Wahyu Nuryanto of MUC Consulting. "Increasing data and information support from many institutions such as private and public sector entities to the DGT, and implementation of automatic exchange of information regarding financial data of taxpayers among tax authorities in the world using common reporting standard, makes the tax amnesty program become an important step to improve tax base, future tax revenue and voluntary compliances."
"The tax amnesty will be a very good opportunity for taxpayers which haven't reported their income and assets correctly in the past, as it is hard to escape due to increasing data and information available for the tax authorities and those which do not participate in tax amnesty might be captured and face very high penalty in the end," he added.
Purwantono, Suherman, Surja Consult
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GNV Consulting Services is widely recognized as one of the leading tax and customs consulting firms in Indonesia. The firm was established in 2010 by experienced professionals who previously held Partner/Director position in Big Four consulting firms. The key personnel of the firm are Hartiadi B Santoso, Ahdianto, Rahadianto Sudewo and Charles S Oetomo.
The firm's personnel comprise individuals with professional certification/licenses as tax and customs consultants and Tax Court attorneys.
The firm has served a broad range of multinational companies, including manufacturing, mining companies, banking and financing services, trading services and constructions services. The firm also has recorded many successful in representing clients in the Indonesian Tax Court.
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Other locations: Surabaya and Balikpapan
|Corporate Income Tax||25%||A|
|Capital Gains Tax||0%|
|Branch profits tax rate (additional tax)||20%|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||15%||20%||B|
A This rate also applies to Indonesian permanent establishments of foreign companies.
B A final withholding tax at a rate of 20% is imposed on payments to non-residents. Tax treaties may reduce the tax rate. Certain dividends paid to residents are exempt from tax if prescribed conditions are satisfied. If the exemption does not apply, a 15% withholding tax applies on dividends paid to tax resident companies and a 10% final withholding tax applies to dividends paid to tax resident individuals. A 15% withholding tax is imposed on interest paid by non-financial institutions to residents. Interest paid by banks on bank deposits to residents is subject to a final withholding tax of 20%.
C This is a final withholding tax imposed on gross rent from land or buildings.
D This tax is considered a prepayment of income tax. It is imposed on the gross amount paid to residents. An increase of 100% of the normal withholding tax rate is imposed on taxpayers subject to this withholding tax that do not possess a Tax Identification Number.
E This tax is considered a final tax. The applicable tax rate depends on the type of service provided and the “qualification” of the construction companies. The “qualification” is issued by the authorities with respect to the business scale of a construction company (that is, small, medium or large).
F This is a final tax imposed on the gross amount paid to non-residents. The withholding tax rate on certain types of income may be reduced under double tax treaties.
G This is a final tax imposed on the net after-tax profits of a permanent establishment. The rate may be reduced under double tax treaties. The tax applies regardless of whether the income is remitted. An exemption may apply if the profits are reinvested in Indonesia.
H The carryforward is 5 to 10 years. Losses incurred by taxpayers engaged in certain businesses or incurred in certain areas may be carried forward for up to 10 years.
The tax practice of Danny Darussalam Tax Centre (DDTC) is headed by managing partner Darussalam, who is one of the founders of the firm. His main focus is in tax planning and international taxation. The tax practice has five partners and more than 80 other tax experts. The firm added 10 new tax specialists during the last year.
The firm delivers a range of taxation services: advisory, tax planning, submission of tax return, public advocacy, application of tax incentives, training and publication, policy considerations, audit defence, litigation and drafting legal agreement. Since the end of 2015, the tax department has also offered premiere tax controversy services which primarily handles extraordinary cases.
The firm provided tax appeal litigation services concerning non-imputation of royalty payments on brands and other intellectual properties into customs value of imported goods for a tobacco manufacturing company. DDTC was appointed as company's tax attorneys for tax appeal for financial year 2012 to financial year 2014. The appointment only happened after the appeal letter prepared by the previous firm, which had lost its cases, had been submitted. DDTC was to replace the previous firm and the tax court judges allowed the appeals based on the 4th argumentation proposed by the firm.
One client commented: "They have robust knowledge and updates on regulation supported by a strong research team."
Deloitte's tax practice in Indonesia has 10 partners, each with their individual concentration. They are supported by 35 experienced directors, senior managers and managers, as well as 137 other fee earners.
Under Melisa Himawan's leadership, the tax team has continued to grow both in staff size and revenue. Effective from June 1 2016, Himawan assumed the leadership of business tax service, the biggest service line that contributes more than half of her tax practice's revenue, from senior partner Roy David Kiantiong.
As one of the Big 4 firms, Deloitte Indonesia provides almost every tax service necessary for clients including multinationals, private and state owned enterprises, and likely high net wealth individuals. The firm has services specifically for private companies for matters such as initial public offerings (IPOs), expansion or succession to a family member.
The firm is particularly strong in the energy and resources, financial services, life science and healthcare, public sector and automotive industries.
One client said: "We have been working together with them for more than five years. Since they have knowledge about our business, we expect them to give us continuous support and advice from their professional point of view."
Santoso Goentoro is head of tax practice at EY in Indonesia. The firm provides the full spectrum of tax and accounting related services as one of the renowned Big 4 firms. The firm's corporate services leader is Henry Tambingon.
Goentoro's tax team supports clients from all industries with a wide range of domestic and international tax services, but is particularly strong in the automotive and transportation, consumer products and retail, financial services, government and public sector, life sciences, mining and metals, private equity and health sectors.
The tax practice at Hadiputranto, Hadinoto & Partners has two partners and seven tax experts and is led by Ponti Partogi. Partogi has a legal and accounting background and his strength lies in domestic and international tax planning involving inbound and outbound investment, corporate and debt restructuring and tax litigation.
The firm has maintained a good relationship with the local tax authorities and, as a member firm of Baker & McKenzie, has a substantial international network and able to support international clients in various jurisdictions, ensuring broad knowledge on a wide variety of laws and regulations affecting cross border tax transactions and activities.
One client said: "We have been a client of HHP [Hadiputranto, Hadinoto & Partners] Indonesia for many years now. The coverage of tax services delivered by HHP, however, mostly in the area of tax litigations with the DGT at the tax court."
Abraham Pierre is head of tax at KPMG in Indonesia and is also in charge of the firm's international tax planning, inbound and outbound investments and transactional offerings. He is supported by a team of partners and professionals with wide ranges of abilities which encompass assistance in tax controversy and litigation, M&A, global mobility services, financial services and indirect tax.
The firm added three partners and two directors in the past 12 months, including Anita Priyantin in February 2016 from EY and former tax court judge Tongo Aritonang in May 2015.
The firm's client base is diverse, but it is particularly strong in energy and natural resources, working in areas such as mining and oil and gas, power plant, plantations, industrial manufacturing etc.
The tax team advised a holding company in respect of its tax compliances and Indonesian tax audit process. The firm provided a litigation guidance as an end to end process starting the tax audit process until the latest process of tax dispute. The comprehensive litigation guidance includes study cases, preparing proper argumentation, rules, procedures, requirements and Indonesian tax environment. Through the team's assistance, more than $100 million dispute value was mitigated.
MUC Consulting consists of six partners and 95 other fee earners in its tax department and Sugianto leads the practice. The team is able to provide various tax and customs services including tax planning, tax review, tax audit assistance, tax advisory, tax return preparation, tax dispute resolution, tax administration, standard operational procedure designing, customised tax training and international taxation.
The firm's clients comes from different sectors in the market, which includes agriculture, automotive manufacturing, banking and financial institutions, chemical and pharmaceutical, construction, electronics, textiles and so on. Its clientele includes global operating companies like BMW, LG, Syngenta, JP Morgan and more.
MUC Consulting provided tax advisory on assets restructuring for a manufacturing company and resulted in tax savings amounting $15 million. The partner in charge was Sugianto.
Prijohandojo Kristanto, chairman of PB Taxand, Taxand Indonesia, has 36 years of experience in Indonesian and international taxation including international tax planning, M&A and investment structuring. Hariansyah is the managing partner leading the firm's tax practice together with 10 operating tax partners and 140 other tax professionals who have a wide variety of tax service capabilities.
The firm is able to provide practical tax advisory services from tax planning and transaction advisory to tax controversy issues. The firm also offers tax compliance service for individuals, and transfer pricing related services.
The firm's clients come from many different industries but the firm's top markets include real estate, pharmaceuticals, automotive, insurance, construction, manufacturing as well as retail.
Ay Tjhing Phan is head of both tax and transfer pricing practice of PwC Indonesia. The tax team consists of nine partners, four technical advisers and one project adviser who represents the tax team with support from over 100 professionals comprising of accountants, lawyers, and finance specialists who have long-term experience as public accountants, officers in private corporates, Indonesian tax offices and tax judges.
The team's collective experiences and skills help the firm provide a wide range of services with full understanding of clients' concerns and needs. The services include tax advisory, tax compliance, tax dispute resolution, transfer pricing, indirect tax, M&A, investments, payroll, as well as Asian tax and advisory webcast series.
The tax team at PwC is organised into specialised industry sectors of energy, utilities and mining, financial services, consumer and industrial product and services, technology, communication and entertainment, and capital projects and infrastructure.
SF Consulting's tax practice has four partners and over 100 tax specialists split into divisions of tax, customs, transfer pricing and business process. The practice is led by Sri Wahyuni Sujono, a managing partner who has more than two decades of experience in tax advisory, particularly in tax litigations, transfer pricing, tax planning and tax restructuring dealing exclusively with multinationals.
The tax services that the firm provides include tax compliance and advisory, international tax, transaction support like tax due diligence and merger and acquisitions, and dispute resolution.
The firm has expertise in various sorts of industries including banking and financial services, insurance, IT and telecommunications, real estate, hotel and tourism, transportation and logistics.
In February 2016, Enseval, one of the biggest distributors in the pharmaceutical industry, won a VAT dispute concerning Batam Island, which is a free trade zone area, through tax advisory support by the firm.
Graham Garven leads the tax practice at VDB Loi, which consists of four partners and nine professionals. The team has strengthened by hiring three new partners: Hendharto Oetomo, Olina Rizki Arizal, and Rusmadi.
Garven has more than 20 years of experience in advising multinationals with a mix of taxation skills related to Indonesian and cross border transactions, M&A, transfer pricing, dispute resolution. He has extensive experience in dealing with financial services, fast-moving consumer goods, and airlines industries.
Garven worked on a business structuring for Venture Consulting. This required a sound appreciation of the legal and tax implications of splitting of business functions and expenses between business partners; coordination of legal and tax advice and the presentation of options for structuring, including mechanisms for remuneration; compliance with the Indonesian legal requirements specific to the structure; and structuring of the contractual arrangements between the business partners in a tax efficient manner ensuring control over inventory and payments received.