TBI Must Provide You With Written Tax Reports (They Will Love This One!)

I should probably add some information regarding taxes, too, since that is a rather vital part of the hiring and working process.

If you are resident in Indonesia for more than 160 days (for most nationals), or intend or are working, you must have an NPWP (tax number). Your employer normally applies for this as part of your visa process.

The controlling law is Art. 23 of Tax Law 2008. The EMPLOYER is required to withhold tax from your compensation and pay the taxes to the Tax Office every month. Income tax is levied in a stair-step formula based on your annual total income. The highest rate is 30% for incomes of Rp.500 million and up, and goes down to 0% for Rp. 50 million per year or less. Each employee is allowed to claim a personal exemption when filing.

The employee is obligated to file and pay any additional tax on worldwide income, but for Indonesia-sourced income, your employer should have paid the Art. 23 tax monthly during the year. The employer is required to give you an official tax reporting form no later than mid-February and the filing deadline is March 31. You must file your tax report at the tax office where you are assigned. For most expats, this will be either Big Tax Office I or II (yes, that’s the real name – translated of course). When you file, you will sit with a tax officer who will check the completeness of the filing and give you a receipt. You MUST have this receipt if there is ever any question about your taxes.

I find it useful to negotiate contracts based on after-tax income, rather than total. If you agree to Rp.9 million a month without stipulating the after-tax part, then you need to deduct about 25% off the top to find your take-home pay.

If your employer is not deducting and filing your tax on a MONTHLY basis, they can be in serious trouble with the Tax Office. Furthermore, since you are ultimately responsible, you will find yourself paying large sums of money and going through lengthy and baffling tax court proceedings. And since all the proceedings are conducted in Bahasa Indonesia, you will want qualified, specialized local representation (think Big Bux).

Finally, if/when you terminate your contract and you intend to leave the country permanently, you need to cancel your NPWP. This is a roughly 6-week long process in which you WILL BE AUDITED for all past tax liabilities, including worldwide income. There are a handful of exceptions to the worldwide income, including inheritance and pre-existing cash accounts, etc.

You can find tax forms online by googling “formulir pajak 2012″, and there is no electronic filing at this time. The filing must be taken in person to the tax office and you must receive a receipt which should be kept in perpetuity (even though the law says 5 years), as long as you have an NPWP.

Expats do have an option for a flat rate tax of 20%, but this only applies with certain conditions that usually don’t apply to teacher-level salaries or the teaching profession in general.

Your employer is required to give you a tax statement for the preceding year no later than mid-February (e.g. – right now). Check it closely, as this will show any income, amenities (airfare, accommodations, etc.), awards, or bonuses paid by the employer. If they are claiming you received a bonus but you did not, it will show up quite clearly on this form.

If your employer is not reporting and paying your Art. 23 income tax or doesn’t provide you with a tax statement each February, report it IMMEDIATELY to your tax office. This will stave off a lot of headache and expense. If you do not have an NPWP, get one IMMEDIATELY by filing at your tax office. It takes about two to three weeks to receive the NPWP card.

If you are married to an Indonesian citizen, the entire family should have a single NPWP number in the name of the MALE head of household. The last 3 digits of the NPWP will show how many dependents are included on the account. It is possible for a husband and wife to have separate NPWP, but you will end up paying a good bit more in taxes filing separately. Each taxpayer and dependent are allowed an exemption from the total income amount and the tax form has a formula for calculating the amount. If you have a refund due to you, you must claim it in a separate process and YOU WILL BE AUDITED for the year in which the refund is due.

If your employer is performing the Art. 23 tax withholding properly, and you do not have other qualifying income (rental income, interest payments, etc.), then you should have a zero balance each year on your filing. Make sure you get a stamped, official receipt every time you file your taxes and keep it for as long as you have an NPWP!

This is not legal advice and you should seek the council of qualified tax professionals if you have any questions.

If your employer has not met any of these requirements, you must report it to the tax office immediately to cover your tail. Otherwise, you are on your own. Sometimes, individuals can get ‘rewards’ for blowing the whistle on tax dodgers and employers who willfully do not perform their obligations.

4 thoughts on “TBI Must Provide You With Written Tax Reports (They Will Love This One!)

  1. Addional note on NPWP cancellation:

    Until you FILE to cancel your NPWP, you will continue to be liable for Indonesian tax on worldwide income. After filing, the Tax Office must give you a Decision Letter within a defined period of time (six months, I think, but may be one year). If you have not received a DL by the deadline, you can assume the NPWP is cancelled.

    If you return to Indonesia to work/reside after cancelling your NPWP, it can be reactivated rather easily by application. This applies to both Indo nationals and expats by the way.

    A note on visas:

    The KITAS is only an extended stay visa. It is NOT A WORK VISA. The work visa is called an IMTA and must be obtained at the same time as the KITAS.

    If you are married to an Indonesian national, you can now apply for a 10-year KITAP. Be aware that the KITAP does not yet include IMTA. That part of the deal is still under discussion and no rulings have been released by the Ministry at this time.

    If you have a KITAS or KITAP, it DOES NOT MEAN YOU HAVE A WORK VISA. The IMTA is a separate process and document.

    Also, if you intend to travel outside the country while on leave, ask for a multiple entry/exit stamp. This will save you the $25 port fee everytime you return to Indonesia.

  2. Disclosure/Disclaimer:

    I work for a global firm among whose primary functions are Indonesian tax law and expat relocation issues. I have both read and translated (unofficially) the PPh tax laws as they apply to individuals and companies. I am a linguistics and marketing professional fluent in Indonesian and by no means a tax or law professional or practitioner. The comments I have made can easily be verified by anyone reading the laws freely available online. I cannot and do not offer specific advice concerning your personal situation.

    If you need professional assistance, please seek counsel from qualified professionals.

    Thank you and good luck!

  3. A couple more comments and then I’ll give it a rest.

    If your employer provides you with a KITAS and IMTA, there is an implied contract for the term of the visas. In the absence of any VALID formal written contract, the laws of Indonesia apply without exception or waiver.

    Also, in Indonesia, the parliament creates laws that are signed by the president and enacted by the various ministries via the issuance of regulations and decisions. When reading Indonesian laws, be sure to also read the various enacting regulations and decisions that go with it.

    Sampai jumpa!

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