Indonesia’s road to 2018 and the AEOI
Indonesia's plans to exchange tax information with tax authorities worldwide from September 2018 could push taxpayers to repatriate their assets.
Nina Cornelia Santoso
Following Indonesia's signing of the Convention on Mutual Administrative Assistance in Tax Matters (MCAA) on the automatic exchange of financial account information (AEOI) in 2011, the country is expected to undertake the first information exchange by September 2018. As a consequence, the Indonesian tax authority will receive taxation information of Indonesian citizens who have placed their assets in the partner countries/signatory countries to the MCAA, and vice versa. The AEOI is anticipated to persuade Indonesian citizens to repatriate their assets.
In preparation for 2018, the Indonesian government has developed and enacted several domestic regulations. The Ministry of Finance (MoF) issued MoF Regulation No. 60/PMK.03/2014, as amended by No. 125/PMK.010/2015, concerning procedures of exchange of information, which stipulates general matters relating to the AEOI, including the types of exchange of information. Separately, the Financial Services Authority (locally known as Otoritas Jasa Keuangan, or OJK) issued OJK Regulation No. 25/POJK.03/2015 concerning the submission of information on foreign customers relating to taxation to partner countries or partner jurisdictions (OJK Regulation No. 25/2015), which requires financial institutions to submit reports of taxation information of foreign banking customers to the Indonesian tax authority. To date, several financial institutions have started implementing these rules in relation to their customers.
To further implement the AEOI and the OJK Regulation No. 25/2015, a Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-undang) and an OJK circular letter are being prepared. The OJK circular letter will regulate the procedures of due diligence of foreign banking customers and is likely to be issued in April 2017. In addition, an electronic system application known as the "Disclosure of Bank Secrecy Request Application" (Aplikasi Usulan Buka Rahasia Bank, or Akasia) has been prepared, which will work with a system application prepared by OJK known as the "Disclosure of Bank Secrecy Application" (Aplikasi Buka Rahasia Bank, or Akrab). OJK has also prepared a reporting system called the "Foreign Customer Submission System" (Sistem Pelaporan Nasabah Asing, or SiPINA). Collectively, these systems will coordinate data disclosure requests and reporting between the Indonesian tax authority, the MoF, and the OJK. With all these preparations, Indonesia intends be fully prepared and to comply with all requirements of the AEOI, so that all partner countries/signatory countries to the MCAA will be willing to cooperate with Indonesia. This includes Singapore, which has previously refused to exchange financial information with Indonesia.
Despite this, it is also important to note that the Indonesian tax authority will only have automatic access to taxation information of foreign citizens. Access to taxation information of Indonesian taxpayers is only available in the event that such taxpayers are undergoing a tax investigation, collection, or objection. The granting of access must also be based on a written request from the MoF to the OJK.
On a separate occasion, the tax authority revealed its plan to revise the controlled foreign companies (CFC) rules by enlarging the definition of a CFC (to capture passive income other than dividends and to lower the ownership percentage in an offshore entity) and include trust structures and indirect control in the revised regulation.
Ali Budiardjo, Nugroho, Reksodiputro, Law Offices
Tel: +62 21 250 5125