SPECIAL COVERAGE

THE IMPACT OF THE INDONESIAN TAX

AMNESTY PROGRAMME ON BUSINESSES

T
ax amnesty may be defined as a
limited-time opportunity given
by the government for a specific
group of taxpayers to pay a defined
amount, in exchange for forgiveness of
tax liability relating to a previous tax
period or periods and without fear of
criminal prosecution. Indonesia had
now launched another tax amnesty
programme following those launched
in 1964, 1984 and 2008. In one point
of view, it can be said that this is the
last chance for tax-dodgers to come
clean before Indonesia implement the
Automatic Exchange of Information
(AEOI) framework, which allow its
tax office to have greater access to its
citizens financial records in countries
like Singapore and Mauritius.
According to Bloomberg, Indonesia
is a country of 255 million people
has only about 900,000 taxpayers wealth reported to the Tax Amnesty Indonesian Taxation Analysis (CITA)
submitting a tax return in 2014. The Programme has reached Rp 1.291 said the program will hurt existing,
former Finance Minister, Bambang trillion (USD 99 million) from the compliant taxpayers the most, as they
Brodjonegoro estimated that there is target Rp 4000 trillion (USD 307.6)1. get no benefit whatsoever from it. He
around Rp 11,000 trillion in assets that also mention that the government offer
Indonesian taxpayers stashed abroad. Some parties within the country may discourage them from continuing
It is hoped that taxpayers will use this and abroad argue that Indonesias to comply with their tax obligation.
chance to decrease that number and current tax amnesty programme is
bring them back into the country as too generous and may even hamper Currently, there is an ongoing
much as possible. As written in the compliance in an economy already proceeding trying to challenge the
Tax Amnesty Law (Act No. 11 Year ranked as one of the Southeast Asias substance of the Tax Amnesty Law4. In
2016), the objective of the programme worst for collection2 . In the Bloomberg the Constitutional Court proceeding
can be delivered in three points. article titled Jokowi Amnesty Favors on the 20th of September, the new
First, to increase domestic liquidity, Tax Cheats and Punishes Taxpayers, Minister of Finance, Sri Mulyani, said
recovering the Indonesian Rupiah OECD Says, Philip Kerfs, the head there are still many taxpayers who have
exchange rate, a decrease in interest, of international cooperation in the not declared their wealth that they
and an increase in investment. Second, OECDs Centre for Tax Policy and kept inside and outside of the country,
to encourage tax reformation into a Administration said, This treatment and has not been taxed in Indonesia.
taxation system that has more fairness is likely to be substantially more She further states that according to a
and has more taxation data that is favourable than the tax treatment credible research institution, there is
valid, comprehensive and integrated. awarded to fully-compliant taxpayers still Rp 3.250 trillion (USD 250 million)
Third, to increase tax revenue, which that have declared the assets from which belongs to the extremely
in between many, will be used for the outset in an e-mail response to wealthy Indonesians stashed abroad.
expenses on infrastructure. Besides questions. The OECD argues that the Rp 2.600 trillion of that amount is in
these points within the law itself, the full dues should be paid to preserve Singapore and Rp 650 trillion of it is
incoming revenue is also hoped to the tax systems integrity3. Indonesian kept in the form of illiquid asset, more
contribute to the governments annual 2016 Tax Amnesty is too generous and specifically, real estate. Meanwhile, the
budget. On the 21st of September may hamper the collection of tax. The rest Rp 1.950 trillion is in the form of
2016, it is reported that the total executive director of the Centre for investable assets such as deposits and

30 / 3rd ISSUE July - September 2016


Tax Amnesty
stocks. These nominal, she said, has not
been added with those that are in Hong
Kong, Macau, Luxembourg, Swiss, and
other tax havens including Panama.
According to Sri Mulyani, this is one
of the reason why the tax revenue in
Indonesia has not reached its optimal
capacity, and it is no wonder that the
Indonesian tax ratio is low compared
to other countries of the same income.
Thus it is why there is the tax amnesty
programme to increase this ratio,
she added. It is hoped that through
this programme, there will be an
intensification and extensification of
tax resulting in a higher tax revenue.
Sri Mulyani pleas that the panel of
judges in the Constitutional Court
rejects the request for judicial review
of the Tax Amnesty Law.
Other than critics and probable
judicial review, the tax amnesty
programme faced a different hurdle
when a rumour arises in the middle
of September, alleging that banks
in Singapore are sharing with local
police the names of clients that joins
the tax amnesty programme. Three
banking sources told the Reuters that
the Singapores Commercial Affairs
Department told banks last year that
they must file a Suspicious Transaction
Report (STR) whenever a client takes
part in a tax amnesty scheme. It is
said that initially the banks resist to
do so as they worry they might lose
clients, the sources said. The Monetary
Authority of Singapore (MAS), which
is the countrys central bank reinforce
the message again when Indonesia
launched a tax amnesty. There have
also been reports that some banks have
filed STRs, and clients should not be
informed about the filling. Sri Mulyani
had made contact with Singapore
and made a direct confirmation with
Tarman Shamugaratnam, the Deputy
Prime Minister of Singapore, that the
Singaporean government through
the Monetary Authority of Singapore
(MAS) supports the Indonesian
Amnesty Programme. The Ministry
of Finance of Indonesia further states
that the MAS had also urged the banks
in Singapore to support their clients
that are using their rights to join the
Indonesian Tax Amnesty Programme.
The large cash flow to Indonesia due
to the 2016 Tax Amnesty Programme
will definitely effect the economy and
businesses in Indonesia. The Financial
Service Authority (OJK) had also
warned that such a sudden massive
SPECIAL COVERAGE
liquidity coming into the country could
strain the local banking sector, further
reducing its profitability. As written in
the Jakarta Globe article Tax Amnesty:
What is it and Why Does it Matter?,
the chairman of OJK, Muliaman D.
Hadad, argued the failure to distribute
the repatriated funds into productive
assets will result in an increase in the
cost of funds. This is expected to result
with banks piling up liabilities without
return and will soon increase the cost
of funds. It is also said that too much
liquidity in the banking sector may also
lead to reckless loan disbursement and
push inflation higher in the long run.
The most probable time we will feel
the full impact of the tax amnesty
programme is after it ends on the
coming March 2017. There is a plan
for expanding and developing the
infrastructure in Indonesia by using a
portion of the tax revenue generated
from the Tax Amnesty Programme.
Businesses may have better access to
isolated and new areas in the country.
However, besides those already
mentioned in the previous paragraphs,
some of the probable effects that
businesses in Indonesia might feel in
the future are the increase in the value
of properties and less profit in sales.
31 / INA MAGAZINE
 SPECIAL COVERAGE
The Tax Amnesty Law requires the
reported money and assets to stay
within the country for at least 3
years. If they decide to report their
wealth while keeping it abroad,
according to the law the ransom
money is twice as much5. With
their money trapped for such a
lengthy duration of time, people
are most likely to invest their
money on properties and lands. If
this do happen, then we know that
a skyrocketing increase in the price
of property will soon follow due to
the high demand while having a
scarcity of land. Businesses will find
themselves competing to buy lands
and properties with these people,
or even buying those lands and
properties after with an increased
price from these people. In short,
people will find themselves facing
a harder situation in buying lands
and properties for their businesses
and themselves.
Nobody likes the idea that they
have to give a portion of their
income to the government when
they know they can actually use
such portion on something else.
However, as law abiding and
obedient taxpayers, we know
32 / 3rd ISSUE July - September 2016
we should pay our taxes for reasons
such as the sake of developing the
countrys infrastructure, education,
healthcare, and in the functioning of
the government. Due to compliance
with the tax law that binds taxpayers,
people may start to save more money
so that they can have enough while
still doing their tax obligation. In other
words, people will be spending less.
This prediction is also shared by Sri
Mulyani. If this does happen, the pace
of the national economic growth will
be slower than expected as household
spending is one of the factors that
majorly contribute to a countrys
economic growth.
In the present time, the effect we
feel the most from this programme
is the dizyness of understanding and
complying with the Tax Amnesty law.
We will only know for sure what are the
impacts that businesses will get later
on in the future. As bleak as the short
run might seem, let us hope that this
Tax Amnesty programme will bring
more positive than negative impact
to businesses in the long run. Note,
further clarification and information
in regards to the Indonesian Tax
Amnesty programme can be found
in the Peraturan Pemerintah No. 11/
PJ/2016 which is also known as the
2016 Regulation, which is set out by
the government to help taxpayers
understand the 2016 Tax Amnesty
Program.
JESSLYN TANMALANO
(Legal Intern of INA)
Footnotes:
1
Yoga Sukmana, Melesat Lagi, Dana Tax
Amnesty yang Dilaporkan ke Negara Rp
1.291 Triliun, Kompas.com, September
21st, 2016, accessed on September 22nd,
2016, http://bisniskeuangan.kompas.com/
read/2016/09/21/205300326/melesat.
lagi.dana.tax.amnesty.yang.dilaporkan.
ke.negara.rp.1.291.triliun
2
Karlis Salna, Jokowi Amnesty Favors
Tax Cheats and Punishes Payers, OECD
Says, Bloomberg, August 19th, 2016,
accessed on September 15th, 2016,
h t t p : / / w w w. b l o o m b e r g . c o m / n e w s /
articles/2016-08-19/jokowi-amnesty-
favors-tax-cheats-and-punishes-payers-
oecd-says
3
ibid.
4
Amirullah, Sri Mulyani Sebut Rp 2.600
Triliun Uang WNI di Singapura, Tempo.
co, September 20th, 2016, accessed on
September 22nd, 2016, https://m.tempo.
co/read/news/2016/09/20/090805856/
sri-mulyani-sebut-rp-2-600-triliun-uang-wni-
di-singapura,

Tax Amnesty How will it affect you?
July 2016
About MAZARS
Mazars is an international,
integrated and independent
organization, with 17,000
professionals in 77 countries
worldwide, specializing in audit,
accountancy, tax, legal and
advisory services.
Mazars in Indonesia, in response
to the ever growing demands from
national and multinational
companies, also provides audit,
accountancy, tax and advisory
services.
SPECIAL COVERAGE
The Indonesian parliament passed the tax amnesty (TA)
bill into Law No. 11 Year 2016 on 28 June 2016 with
enactment on 1 July 2016.
The law extends an olive branch to Indonesian taxpayers
holding undeclared assets, by accepting a certain amount
of redemption money in exchange for waivers of all tax
liabilities and exemption/termination of tax audit,
preliminary tax investigation and tax crime investigation
for the open fiscal years up to 2015.
The program is expected to result in USD 303 billion of
declared assets and to bring in USD 75 billion of
repatriated assets and USD 12 billion of tax revenue
collection.
The key notes are enumerated below.
33 / INA MAGAZINE
 SPECIAL COVERAGE

Why tax amnesty?

Indonesia is set to end its bank secrecy policy starting 2018 through the Automatic Exchange of
Information (AEOI). The AEOI provides the exchange of non-resident financial account
information with the tax authorities in the account holders country of residence, thus enabling
the discovery of formerly undetected tax evasion. As new information will be brought to light by
AEOI, the tax amnesty is introduced to assist non-compliant taxpayers to increase their voluntary
disclosures of concealed assets to anticipate the transparency in the coming AEOI era.
The tax amnesty provides relief in the areas of income tax, value added tax, and sales tax on
luxury goods. It provides the following incentives to taxpayers for the open years up to FY2015:
Lower rate of redemption compared to the normal tax rate.
Waiver of potential tax liabilities, tax penalties and tax criminal charges.
Waiver of tax administration sanctions including interest and penalties.
Exemption from tax audit, preliminary tax investigation, and tax crime investigation.
Termination of deferred tax audit, preliminary tax investigation and tax crime
investigation.
Exemption from income tax due to transfer of rights of land/building and shares.
The DGT provides confidentiality whereby the data/information released in the Assets
Declaration Letter for Tax Amnesty (Surat Pernyataan Harta untuk Pengampunan Pajak - SPHPP)
as well as in the attachments filed to the Indonesian Tax Authorities (ITA) cannot not be used
as the basis for inquiry, investigation and/or criminal prosecution against the applicant.

Who is eligible for TA?

All Indonesian taxpayers, both individuals and entities, including those who yet possess tax
identification number (NPWP), are entitled to apply for the tax amnesty, but not including the
following:

those under investigation whose cases are declared complete by Prosecutor;

those undergoing judicial proceedings; or
those under tax criminal charges.
The following qualifications need to be satisfied:
Have a tax identification number (NPWP).
Settle the redemption money.
Settle the outstanding tax liabilities.
Settle the tax liabilities due to preliminary tax investigation and/or tax crime
investigation.
File the latest annual income tax return.
Revoke all requests for tax dispute proceedings.

34 / 3rd ISSUE July - September 2016

 SPECIAL COVERAGE

Redemption money
Tax amnesty is granted on the assets declared in the SPHPP which had not been declared in the
latest annual income tax return.
The amount of redemption money varies depending on the period of declaration and is
computed on the net asset value which comprises the undeclared assets less liabilities
associated with the undeclared assets.

Redemption money = rate of redemption money x Net Assets Value

The deductibility of the liabilities is capped at 75% for corporate entities and 50% for individuals,
of the relevant additional assets value.

The value of the additional assets is determined as follows:

Assets in form of cash = nominal value

Assets other than cash = fair value as at 31 Dec 2015

The rates of redemption money are divided further into declaration of onshore and/or offshore
assets and repatriation of offshore assets. A lower redemption rate is provided to small and
medium entrepreneurs (SME) with revenues not exceeding IDR 4.8 billion per annum, not
including employees and professionals.

July to October January -

September December March
2016 2016 2017
Declaration of onshore assets
2% 3% 5%
assets are retained in Indonesia for at least 3
years
Declaration of offshore assets
2% 3% 5%
assets are repatriated and invested in Indonesia
by 31 Dec 2016 or 31 March 2017 depending on
the redemption rate used, for at least 3 years.
Declaration of offshore assets
4% 6% 10%
without repatriation to Indonesia
SME with revenue not exceeding IDR 4.8 billion p.a.:
Total assets <= IDR 10 billion 0.5%
Total assets > IDR 10 billion 2%

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 SPECIAL COVERAGE

How TA works and time line

To participate in the program, taxpayers are required to file the SPHPP and the relevant
attachments to the Minister of Finance through the respective tax office. The SPHPP contains
information of taxpayers identity, assets, liabilities, net assets value, and computation of the
redemption money.
There are 10 forms issued by the DGT to accommodate the information/data that needs to be
filed to the ITA, as follows:
Form A - SPHPP
Form B Declaration letter - Repatriation and investment of additional assets
Form C Declaration letter Additional assets are retained in Indonesia
Form D List of assets and liabilities
Form E Declaration letter Revocation of requests for tax dispute proceedings
Form F Declaration letter (for SME) - Monthly turnover in FY2015
Form H Request letter Tax liabilities due to preliminary tax investigation or tax crime
investigation
Form I Request letter Revocation of requests for other tax disputes
Form L Report of repatriation and investment realisation
Form M - Report of placement of additional assets within Indonesia

Applicants of tax amnesty are given opportunity to submit their SPHPP up to three times within
the time frame of the program, i.e. until 31 March 2017. Any overpayment resulting due to the
subsequent submission of SPHPP and/or revision by the ITA is refundable after being offset
against any outstanding tax liabilities.

Stage Remarks

Assessment by taxpayer
Undeclared assets Taxpayer assesses whether there are undeclared
assets in the FY2015 annual income tax return and collects relevant
supporting documents.
Offshore assets whether to repatriate and invest in Indonesia.
Redemption money to compute the redemption money.
Annual income tax return of FY2015 whether has been filed to the
ITA.
Fair value determine the fair value of assets other than cash.
On-going tax disputes - Revoke requests for all tax dispute
proceedings.
Administrative review liaise with the respective tax office for the
computation and administrative purpose.

Settle the redemption Settle the redemption money and outstanding tax liabilities (the
principal amount) prior to the filing of SPHPP and the attachments to

36 / 3rd ISSUE July - September 2016

 SPECIAL COVERAGE

Stage Remarks
money and outstanding the tax office.
tax liabilities

File the SPHPP and the
attachments to tax office
File the SPHPP and the relevant attachments to the respective tax
office by the end of the relevant period i.e. 30 September 2016, 31
December 2016 and/or 31 March 2017. Upon the filing, the tax
office will issue a receipt letter (Tanda Terima) on the same day.

Issuance of tax amnesty

approval letter (Surat The regional tax office will issue SKPP within 10 days upon the
Keterangan Pengampunan receipt of the SPHPP.
Pajak SKPP)

Repatriation and
investment of offshore
assets
Upon receiving the SKPP, the taxpayer needs to open a special bank
account at one of the government appointed gateways for the
purpose of repatriation.
Repatriation and investment of offshore assets to Indonesia need to
be settled at the latest by 31 December 2016 (for those using the
redemption rate of period I and II) or 31 March 2017 (for those using
the rate of period III).

Transfer of land/building
and shares
In order to enjoy the exemption of income tax due to the transfer of
rights of land/building and shares, the relevant documents are to be
available by 31 December 2017.
The DGT will issue an income tax exemption letter within 5 days
from the lodgement of request for tax exemption by the taxpayer.

Gateways for the repatriation of offshore assets are banks, investment managers, and securities
companies appointed by the Minister of Finance. Options of instruments are as follows:
state securities
state-owned bonds
bonds of state-owned financial institutions
financial instruments in the nominated banks
private bonds under the supervision of the Financial Services Authority
infrastructure investment under private/public cooperation scheme
Investment in the real sector based on government priority
other forms of investment
The realization and the position of the investment will be closely monitored by the government
through the semi-annual reports submitted by the gateways and taxpayers.
Failure to repatriate, invest or retain assets in Indonesia would result in the additional assets
declared in the SPHPP as confirmed by the SKPP being treated as income in 2016 subject to the
prevailing tax rate and sanctions. The redemption money settled is creditable and the tax

37 / INA MAGAZINE
 SPECIAL COVERAGE

amnesty incentives remain in this case.

Restrictions
As the trade-off for the benefits of TA, taxpayers need to be aware of the following restrictions
for the open years up to FY2015:
No utilization of the fiscal loss carried forward
No compensation of tax overpayment
No request for tax refund
No amendment of tax returns
Offshore assets repatriated to Indonesia are to be invested in certain instruments under certain
gateways determined by the government and cannot be withdrawn within three years from the
repatriation to Indonesia. Similarly, onshore declared assets must be retained within Indonesia
for at least three years from the issuance of the SKPP.
The additional assets declared in the SPHPP cannot be amortized or depreciated for tax
purposes.
Under reported assets declared in the SPHPP and later discovered by the ITA would be subject to
the imposition of the normal tax rate on the short amount plus a 200% tax penalty.

Not participating in the TA?

For those who do not apply for the tax amnesty, the statute of limitations is extended to cover
the 30 years from 1 January 1985 to 31 December 2015; the tax authorities can issue
assessments for this period up to three years from the enactment of the tax amnesty law.

The content of this newsletter is only for general guidance on matters of interest and is not meant
as advice. The implementation and impact of laws/regulations can vary widely based on the
specific facts involved. Readers are advised to consult their tax advisors before making any
business decisions.

CONTACT

Julia Yang
Phone+62 21 2902 6677
E-mailjulia.yang@mazars.id
Please visit our website for more information www.mazars.id

38 / 3rd ISSUE July - September 2016