For personal/individual taxpayers, a number of specific provisions have been stipulated. Some, in fact, are quite beneficial. What are they? And are there any of them which need extra attention?
Simply saying, the series of new provisions for individual taxpayers is a direct outcome of the validation of the New Income Tax Law starting this 01 January 2009, not to mention the latest Law No. 28 Year 2007 concerning the General Tax Provisions and Procedure (KUP Law). The coming paragraphs will contain important issues related to the personal/individual taxation pursuant to the new provisions stipulated.
Obviously Sunset Policy
Individuals relatively can get more benefits from the sunset policy, in form of no risks of tax audits and interest sanction on the unpaid /underpaid tax as already applicable at the beginning of last year under the Article 37A of KUP Law. Under the Article, legal entities which are entitled to make benefits from the sunset policy are only those already registered at the Tax Office. Compared to corporate taxation, any individual, either having Taxpayer Identification Number (NPWP) or not yet, will obtain the same chance to get such a limited tax amnesty. Some of individuals, however, may miss this golden opportunity.
As an illustration, an individual has recently obtained NPWP last year (2008) but never filed any tax return of year 2007 and of any preceding years. To be able to make benefit of the sunset policy, this person should ideally fill the tax returns based on the actual condition and file them before 31 March 2009. If there is any underpaid tax based on the tax returns filed, the underpaid amount should firstly be settled before the tax return filing.
Another illustration, an individual has registered prior to 1 January 2008 but has not yet filed the revision of tax return of year 2006 and of the preceding years. She/he will miss the chance to enjoy the sunset policy if the revision of the 2006 tax return is filed after 28 February 2009. The same thing will happen if the revision of the tax return causes tax underpayment and the settlement of the underpayment is not made prior to the filing of the revision.
What’s Free Now
Tax Exemption for Indonesian Workers in Abroad
This is another brand new thing in the history of Indonesian taxation. Any Indonesian worker who has already been in abroad more than 183 days within a twelve month period finally feels very blissful. It is because especially for them, income received from abroad and has already been taxed abroad will no longer be taxed in Indonesia. This is stipulated in the regulation of Director General of Taxes Number PER-2/PJ./2009. Previously, even though a foreign tax authority has imposed tax, income of Indonesian workers in abroad would still be taxed in Indonesia.
Speaking of the above regulation, the consideration of the exemption is the fact that the said workers are categorized as Non Resident Tax Subjects. If they receive or acquire income from Indonesia, similar with other Non Resident Taxpayers, their income received from Indonesia will still be subject to tax based on the prevailing regulation. It is just that some matters are still in big question. For example, what does the part of the provision stating ” shall be imposed with tax under the prevailing regulation …” mean? Does it refer to Income Tax Article 26 at 20% from the gross amount as that of imposed on other Non Resident Taxpayers?
Another confusing matter is the treatment for a worker in abroad more than 183 days within a twelve month period and being present in more than one country. If she/he only receives income from work in abroad, can this worker also be categorized as those exempted from taxation in Indonesia? How if referring to the prevailing tax treaty, the taxation right is in Indonesia based on the permanent home or center of vital interest which tends to be in the hand of Indonesia?
The basic questions that appear are, what about the Indonesian workers in abroad who have owned NPWP and only receive income from their work in abroad? Do they have the right to revoke their NPWP so that they do not necessarily fulfill their tax obligations? What happen then when they still plan to return to Indonesia or even still have places of residence in Indonesia? Or, are they still required to own NPWP and file their tax returns in nil balance?
To answers the series of questions are absolutely not in the duty of the Indonesian workers out there. For those fulfilling the criteria, their main duty is to ensure that they keep the withholding tax slip of income received from abroad. If not, their income are still potential to be taxed in Indonesia.
Exemption of Exit Tax
Starting from 01 January 2009, every individual going abroad should allocate an extra budget for their traveling cost. Using air transportation to go abroad, each person should now pay IDR 2,5 million for every departure, and no longer IDR 1 million. Choosing to go abroad by sea transportation, the Exit Tax also increases from IDR500 thousand per departure into IDR 1 million.
In the middle of economic crisis and post fuel price boost, the increase of Exit Tax is not such a wonderful thing to be heard. What can be great news is that the individuals who own NPWP can be exempted from Exit Tax under the Regulation of Directorate General of Taxes Number PER-53/PJ./2008. In fact, it is not only Indonesia citizen taxpayers who enjoy this benefit, but also non Indonesian citizens with NPWP.
For Indonesian citizens, it simply requires the copies of NPWP card, passport, and family card. Speaking of family card, when the parent’s name is not the list, it also requires the copy of Statement of Complete Responsibility for Parent (Surat Pernyataan Menanggung Sepenuhnya Orang Tua). For Non Citizens, besides the copies of NPWP card and passports, they should submit the copy of Family Member certificate of Temporary Residents Immigrant (Surat Keterangan Susunan Keluarga Pendatang: SKSKP) or other documents showing the relative status issued by the authorized institution.
Some Go Up, Some Go Down
Income Tax Article 21 Tariff Discrimination
What considered to be a breakthrough is the higher tax applied to an employee who does not own NPWP. A tax surcharge of 20% will be imposed to such employee starting from 01 January 2009 following to the validation of the Article 21 of Law No. 36 Year 2008. Thus, if a worker/employee with no NPWP receives income up to IDR50 million, by calculating the 20% surcharge from the tariff of Article 17 of Income Tax Law, she/he will be subject to Income Tax Article at the effective tariff of 6%. The exemption of this tariff discrimination is only applied for objects of Final Income Tax Article 21, as stipulated in the Regulation of Finance Minister Number 252/PMK.03/2008.
Undoubtedly, self registration for NPWP is the only legal and realistic way to avoid the higher tax, unless if receiving remuneration in form of benefits in kind and privileges which are not tax objects becomes a brand new trend. There is no better time than this very moment to do so! In fact, the higher Income Tax Article 21 already imposed for the previous period before having NPWP can be included in the calculation of Income Tax Article 21 due for the next periods after having it.
Increase of Non Taxable Income
Pursuant to the validation of Income Tax Law since 01 January 2009, Non Taxable Income (Penghasilan Tidak Kena Pajak: PTKP) for the taxpayer only is now IDR15,840,000, where it was only IDR13,200,000. The increase of PTKP is also applied for the marital status and every family member by blood and by marriage within a straight line including adopted children in total of a maximum of 3 (three) persons, who are fully dependants to the related taxpayer. PTKP for every dependant now is IDR 1,320,000, with the increase of IDR 1,200,000 from the previous allowable amount.
Following to the increase of PTKP for the taxpayer only, there is also an increase of PTKP for taxpayers whose wife income accumulatively reported in their tax return, which also becomes IDR 15,840,000 from IDR 13,200,000.
Increase of Non Taxable Income Portion for Non Permanent Employee
Non permanent employees also own deduction namely Non Taxable Income Portion (BPTKP). Similar to permanent employees with their increased PTKP, these non permanent employees also enjoy an increase of their BPTKP from IDR 110,000 into IDR 150,000. This has become effective since 01 January 2009 under the Finance Minister Regulation No.254/PMK.03/2008.
However, under the same regulation, the increased BPTKP amount is not applicable for employees having gross income more than IDR 1,320,000 in a month or having monthly income.
Increase of Occupational Expense and Pension Fund
Up to tax year 2008, the Finance Minister Decree No.521/KMK.04/1998 regulated that every permanent employee had the right to gain deductible expense in form of occupational expense at 5% from the gross income or at the maximum allowable amount of IDR 108,000 per month or IDR 1,296,000 per year.
Starting tax year 2009, the Decree has no longer been effective pursuant to the validation of Finance Minister Regulation No.250/PMK.03/2008. The occupational expense is still 5% from the gross income but the maximum allowable amount is increased into IDR 500,000 per month or IDR 6,000,000 per year.
In line with that, the retired persons also obtain a quite significant increase to their deductions namely pension expense. The expense is still 5% from the gross income also, but the maximum allowable amount is changed from IDR 36,000 per month or IDR 432,00 per year into IDR 200,000 per month or IDR 2,400,000 per year.
Decrease of Article 17 Tariff
In the New Income Tax Law, the tax tariffs for individual and corporate taxpayers in the Article 17 are changed both in the percentage and in the bracket of income. In certain brackets, the tariffs remain the same. The lowest tariff for individual taxpayers is still 5% but the lowest income bracket is now IDR50 million, exactly twice the previous amount.
Meanwhile, the highest tariff is reduced into 30% from 35%, where the income bracket is increased into IDR 500 million. Overall, the most significant tariff reduction is given to individual taxpayers with income ranging from IDR 200 million to IDR 250 million, where the tariff of 35% becomes only 25% applied to them. Unfortunately, not all of the taxpayers enjoy the reduction. Individual taxpayers with income IDR 25 million and less do not feel any difference at all.
Lastly, the issues discussed above are some of the huge number of others regulated in the provisions specifically concerning individual taxation. Some provisions have clearly shown the benefits that can be gained by the individual taxpayers, while others may need more technical regulations to justify that.
After all, it may be concluded that the new Income Tax Law is definitely a part of the Government efforts that deserve the appreciation and the support, particularly from the current and future individual taxpayers. The Government has tried to give extra attention to individual taxation, why not us too? It is for our strategy to be able to get the benefits for ourselves as individual taxpayers. Perhaps, it is very personal.
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