Indonesia: Indonesia issues a draft Bill for national tax amnesty; plans to cut taxes
Indonesia is set to shore up national coffers by providing a tax amnesty, while headline income tax rates will also be slashed.
In order to repatriate Rp2,000 trillion ($147 billion) of offshore assets and improve tax compliance, the Indonesian tax authority plans to introduce a national tax amnesty programme which expects to secure Rp60 trillion in state revenue, as reported in the media.
The draft Bill providing for the tax amnesty is being finalised and expected to be effective on January 2016. Under the programme, every taxpayer (applicant) is entitled to apply for a National Tax Amnesty by submitting a Letter of Request for Amnesty, with the exception of any person or entity that is currently involved in a lawsuit process, or is undergoing tax criminal charges or other specific criminal charges. The target of the programme is to recapture the data of offshore assets obtained before the enactment of the Bill. Amnesty will be given once the full settlement of certain tax amount, which is calculated by multiplying the applicable rate with the reported asset value, is completed. The rates are 3%, 5% and 8% (depending on the time of reporting of the letter). To use the amnesty, the applicant must confer a power of attorney to the tax authority to allow it to access all of its accounts.
Once the amnesty is granted, any outstanding tax payable, tax administrative sanction, and tax criminal sanction which may be issued before the enactment of the law will be waived. The tax authority will not initiate collection in the form of a demand letter, examination of evidence, investigation or suit for criminal tax over any preceding tax obligation. Further, in cases where there is an ongoing initial evidence examination for a preceding tax obligation, such examination shall end. In addition, the applicant is also released from any criminal charge with regard to the acquisition of the asset, except for terrorism, drugs and human trafficking. If the tax authority finds there is still an unreported asset after the amnesty is given, such unreported asset or assets will be subject to the normal tax collection process.
In addition to the amnesty, the Ministry of Finance plans to reduce the income rax rate to be no higher than 20% (from 25% for corporate taxpayers and up to 30% for individual taxpayers). This measure will be undertaken after the amnesty is formally introduced.
Ali Budiardjo, Nugroho, Reksodiputro, Counsellors at Law