The Indonesian government has officially stated that The Second Tax Amnesty program will run for 6 months, from 1 January to 30 June in 2022. The first program was conducted in 2016. If you run a business in Indonesia and have unreported assets, you may be eligible to join this program and get tax leniency. This article aims to provide insight regarding the second Indonesian tax amnesty program, to be launched in 2022.
What is Tax Amnesty?
According to the latest version of the bill, tax amnesty is an opportunity for taxpayers to disclose incomplete or unreported income in their previous tax periods without having to face prosecution by the tax court or pay the regular tax penalty.
During this time, taxpayers only need to pay a one-time special tax in exchange for a government pardon on their tax debt. The Second Tax Amnesty program will be named as Voluntary Disclosure Program in 2022.
The provisions of Tax Amnesty are regulated in Law no. 11 of 2016 concerning Tax Amnesty. The whole program is also regulated under the Harmonisation of Tax Regulation that has been officially announced on the 7 of October 2021.
Why does the Government Need Tax Amnesty?
The government is aware of the existence of tax-dodgers, the ones who have not and are reluctant to report their taxes. One of the reasons is because many find it difficult to calculate the income tax. By doing the tax amnesty program, the officials hope that tax revenue will increase, taxpayers’ compliance rate will improve and pull more offshore assets back into the country.
So, the main benefit of this program is the removal of the late tax payment penalty. Tax Amnesty also can be found in countries like Belgia, Canada, Australia, Germany, Italy, Greece, Russia, South Africa, the US, and Spain.
The Scheme of Second Tax Amnesty Program
The program will run for 6 months and have two policies with different amounts of final special tax accordingly.
1st Policy
The first policy is eligible for individual or corporate taxpayers. One can disclose their current net assets that have not been reported in the 2016’ Tax Amnesty Program by paying the following amount of special tax:
– 11% of assets stashed abroad
– 8% of repatriated assets stashed abroad and domestic assets
– 6% of repatriated assets stashed abroad and domestic assets that invested in the form of state securities (or Surat Berharga Negara), downstream, or renewable energy.
For example, you are a taxpayer in the 2016’ tax amnesty program and you still have one house as an unreported physical asset in Indonesia. The house value was IDR 2 billion and was obtained legally before 31 December 2015. Since the house is a physical asset, you only need to disclose it to the Directorate General of Taxation (or Direktorat Jenderal Pajak). Therefore, instead of paying a huge amount of tax penalty, you only need to pay 8% from IDR 2 billion which is IDR 160 million.
2nd Policy
The second policy is directed toward individual taxpayers. One can disclose any assets collected between 2016 and 2020 that were unreported in the 2020’ Annual Notification Letter (or Surat Pemberitahuan Tahunan– SPT) by paying the following amount of special tax:
– 18% of assets stashed abroad
– 14% of repatriated assets stashed abroad and domestic assets
– 12% of repatriated assets stashed abroad and domestic assets that invested in the form of state securities (or Surat Berharga Negara), downstream, or renewable energy.
Let’s say, you have two houses and one bank account in Indonesia. All of the assets were collected from 2016 until 2020. You have reported the houses in the 2020’ Annual Notification Letter. However, you forget to report IDR 1 billion that is stored in your bank account. Since the bank account is considered a state securities investment (or Surat Berharga Negara), you only need to pay IDR 120 million, which is 12% from 1 billion.
Conclusion
By introducing the second tax amnesty program, the Indonesian government hopes the taxpayer compliance rate will increase naturally. If you run a business in the country and have any unreported assets, enrolling on this program will free you from the huge amount of tax payment penalty. It will also ensure your day to day business operations run without future distraction.
If you have any questions regarding personal income tax or any tax-related issues in Indonesia, feel free to ask your questions by filling the form below or contact us directly at anita@permitindo.com or via our live chat service. Our team will reach you after.
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