Tax & Accounting

Understanding Tax Treatment of Representative Offices in Indonesia

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By: Winnindo Business Consult
Editor: Dustin Daugherty

Recent years have seen numerous high-profile cases by the Indonesia tax authority against prominent foreign tech firms. Most notable of these cases is that of Google, which allegedly used an Indonesian RO to carry out its in-country business activities, but shifted all taxable profit to an offshore entity in Singapore. However, Google’s case is not uncommon. In fact, many investors also do the same thing and invoice clients from offshore entities, presenting themselves and their businesses to legal issues.

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Although previously this tax avoidance strategy may have been low-risk, the recent crackdown by the tax authorities demonstrates how essential it is that investors, even those using ROs in the country, take measures to ensure full tax compliance. Thus, to avoid the fate of Google and others, it is essential for companies operating ROs in Indonesia to have a strong grasp of tax regulations. Further, given the complexity of such regulations, investors are encouraged to seek the assistance of professional services experts of tax officials to avoid costly oversights.

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Regulatory Update: Updated Income Tax Allowances in Indonesia Extend Incentives to New Business Lines

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By Winnindo Business Consult
Editor: Mourme Taruna Halim and Samuel Glickstein

In April of 2015, the Indonesian government released a revised regulation on income tax allowances titled Government Regulation (PP) No. 18 / 2015 on Income Tax Allowance for Investment in Certain Business Fields and/or Regions. The regulation updates and revises the previously applied Regulation No. 52 / 2011 on income tax allowances and has been in effect since May of 2015.

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Eligibility for incentives

Broadly speaking, the measures introduced set out to increase investment by providing a tax allowance for corporate taxpayers. To qualify, investors must have been shown to establish new investments or expand their businesses in Indonesia. Allowances under the regulation will now extend to the following sectors:

  • Food and beverages
  • Petrochemicals (such as crude palm oil and crude palm oil kernel processing)
  • Textiles
  • Coal mining and natural oil processing
  • General Mining Operations
  • Renewal energy power plants
  • Pharmaceutical (modern and traditional) industry
  • Agriculture
  • Marine and fishing industry
  • Livestock
  • Forestry
  • Tourism

Regulation No.18/2015 also includes certain maritime sectors , such as the shipyard and seaport industry, which consists of shipping manufacturing, shipping equipment, shipping supplies and spare parts, and cargo loading and handling services.

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Financial Services Update: Registration and Supervision of Actuaries, Public Accountants, and Appraisers in Indonesia

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By Agus Sugih Hart, Winnindo Business Consult
Editor: Samuel Glickstein

financial-services-indonesiaOn December 21, 2015, the Indonesia Financial Services Authority (Otoritas Jasa Keuangan/OJK) published Regulation No. 38/POJK.05/2015 titled “Registration and Supervision of Actuaries, Certified Public Accountants, and Appraisers to Provide Services for the Non-Banking Financial Industry in Indonesia”. According to this regulation, actuaries, public accountants, and appraisers must register with OJK as non-banking financial industry (IKNB) service providers before they can conduct services for non-banking financial institutions (LJKNB). The term LJKNB includes insurance companies, pension funds, leasing companies, and other non-banking financial institutions (including Sharia law-based financial institutions).

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Indonesia Financial Accounting Standard (IFAS) 70 in Support of Tax Amnesty Program

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By: Mourme Taruna Halim

As a supporting action of the Institute of Indonesian Chartered Accountants (Ikatan Akuntan Indonesia / IAI) for Indonesia’s Tax Amnesty program, the Financial Accounting Standard Board (Dewan Standar Akuntansi Keuangan / DSAK) has released Indonesia Financial Accounting No. 70 concerning Accounting for Tax Amnesty Assets & Liabilities. This standard provides guidance for entity preparing financial reports in the wake of the recently applied Tax Amnesty Law. This standard also provides guidance for entities hoping to avoid financial accounting misstatements in the future under the amnesty program.

Indonesia’s Tax Amnesty: A Quick Background

Indonesia has had a Tax Amnesty program in place since July of 2016, which will run until March 2017. The general purpose of this program is to increase tax revenue of the current year, improve tax compliance in the future, and increase overseas fund repatriation. To participate in the Amnesty, Indonesia taxpayers are required to declare any additional assets and liabilities (domestic and overseas) which has not been reported in the last annual tax filing (2015 being the cut-off year). As a penalty, those declaring assets under the amnesty will be required to pay a percentage of the net assets declared (depending on the location and time during which these assets are declared) which can range from 2 to 10 percent. Defined by the authorities as redemption money, penalties have been touted as a means of increasing government revenue.

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