(LIVESTREAM) Taxes for Digital Nomads in Bali – 29th June 2021
So yeah, and I'm sure people would be typing questions as things go along. So, what I'm going to do now is switch on the livestream. You got to make sure everything's coming on. So, Twitter is on. Facebook is on. LinkedIn is on, and I'm waiting for YouTube, YouTube was taking a long time. YouTube is on as well.
Okay. So, we're looking good. Let's see the title, a couple of people in so we are already live, but there’s a couple of people in the waiting room, so what I'm going to do is open, disable the waiting room. So, everybody can just more or less come in.
Okay. Let's see. Gotcha. All right. Good. Okay. So, I'm just going to give them a minute or so to some others who may be trickling in, and those who are joining us on LinkedIn and Facebook and YouTube good evening. Good evening.
Okay. All right. So, this meeting is recorded. So as always, if you do not want your image to be captured, just leave your camera off. So, as we've always done with our livestream, well, since we started it a couple of years ago, I'll just run through a few slides just to kind of set the scene, but this is your forum. This is your opportunity to ask questions. So, some of you did send questions in advance. Thank you very much. I know those who are not on zoom, you can see, but we have a chat box on zoom where we have some questions.
Those who are on zoom, feel free to add your questions to the chat box below those that may be watching on Facebook or elsewhere, feel free again, to comment below, and I'll be toggling back and forth, and we'll have a look at your questions, and we'll jump into them there. So, without further ado, I will now share my screen and I will just quickly, we run through a presentation that I have for just for digital nomads or location independent entrepreneurs in general. Great.
All right. Right. So, okay, great. So welcome Dickie, Hannah and I are members of Moores Rowland Asia Pacific. I been sitting in Singapore since 2013 because I am Us qualified. I am legally required to say that nothing that I say here should be construed as advice. I may be a tax consultant, but I'm not your task consultant. So, you need, if you need advice about your specific and unique circumstances, which you would like to take action upon streamline, so people are talking. So, what I'm going to do is I'm going to mute everybody. Yes. Right. I strongly advise that you retain your own tax consultant, nothing we say here should be construed as encouraging you to pay less than your fait share of taxes in any jurisdiction in which you were exposed. This is entertainment or education, depending on your perspective, but this is not tax advice. All right. wonderful. And so, writing, I'm just going to run through some key messages, some key points. When you guys said it's a takeaway six and all, and then we'll jump into some Q and A and have some fun.
So, flag theory. I know that there are companies that called they've used the term flag theory and, and Singapore. And I believe that there's one in KL as well. But initially I believe the term was coined by a guy called Harry Schultz back in 1950s. But basically, it's about diversifying your lifestyle and not having your eggs in one basket. That's essentially what it is. So, where you have your citizenship may not necessarily be where your resident may not necessarily be where you have your bank, may not necessarily be where you've incorporated your company. So, it's about diversifying your situation as much as makes sense.
I mean, you're not diversifying for diversification’s sake. You know, I've seen people say, well, well, you know, the six flags, so I must find six flags or the seven flags. No, it's about what makes sense. You know, no one size fits all big news. So, this is funny, you know, a team and I have a lot of fun with this. When you go on to various groups, especially on Facebook, that people who are not qualified, no license, no professional liability insurance dispensing advice. I'm sure their heart is in the right place, but we see a lot of people getting in trouble. It is, it is a tricky thing, but your best bet is to retain a team that is exposed or has expertise or licenses in the jurisdictions in which you're exposed.
So, I mean, that's sounds pretty straightforward, but you know, there's an appetite out there for hacks and shortcuts, but you know, when you get free advice, you typically get what you pay for. So, I'm just going to call out a few like E-residency. For example, E-residency is not necessarily an immigration status, nor is it tax residency necessarily. And in the case of Estonia, where I see it most often use it's about a government portal for E like an e-government portal, where it makes doing business with the government easier. It's not necessarily about legal residence, that's something else.
And speaking of legal residents, I see a lot of people talking about taxes and consideration, consideration of taxes without much attention being paid to immigration rules. And in Bali in particular, that is as you're well aware, something that is very important. Some jurisdictions don't enforce immigration rules as aggressively as Bali does case in point in the Philippines, they're pretty relaxed, relatively speaking, relax about what you can and can't do so you can, you know, enter the Philippines and you can go to co-working spaces, and you can work, and you can do whatever. In Indonesia there they're pretty strict.
So, if it is that you have found to be working, attending meetings, handing out cards and stuff like that. If you have port, you could be breached of the immigration legislation. So, something to keep in mind, different countries are different, right? Singapore is also pretty strict. Australia is pretty strict, but Thailand is kind of laid back. So, as the Philippines. So, you know, each jurisdiction is different and I've, you know, I've seen on many websites or in groups, discussions of jurisdictions like Portugal, Malta, BVI, whatever it's tax-free, tax-free Portugal.
Portugal is tax-freeish, but not really there’s a lot of exceptions. And there are lots of exceptions and it is very, very nuanced. What you would find is that when it comes to tax rules, there's a reason why tax legislation like in the US is 8 million words, right? That's federal, not even state and even talking about state. So as the reason why tax legislation tends to be tens of thousands, hundreds of thousands, millions of words. And when you see someone just summarizes it in a paragraph or so understand that means that a lot of the nuance could be lost. So, pay attention to the rules. And then there's another debate as to whether it's possible to keep continuously move around and pay no taxes.
Now I have seen it done. It is technically possible, but our perspective is that it comes back to bite you. And the reason why is that we can have it later on if you want is not just about taxes, but it's about banking. So, once you factor in banking rules, then you would perhaps recognize that being tax resident nowhere while it may be possible is not advisable, but we can take a deeper dive into that later on. When people talk about taxes, there's exhaustive conversations about direct taxes, so corporate taxes and personal taxes, but what it doesn't get that much attention will be indirect taxes.
So, for example, GST in Singapore, Europe sales and good sales and use taxes in the US. So especially people who run online businesses, indirect taxes is something that you should be paying attention to, regardless of where you are, even if you're running it from Bali, which well, when we get into the Q and A we'd see that running a business from Indonesia has a lot of responsibilities tied into it. But anyway, so that leads me to this point, actually. So, people under the mistaken impression that, you know, I incorporate a business in Singapore or BVI or Cayman or US LLC, and I'm going to run it from Bali because I like Bali.
Well, according to the rules, and not just Indonesia, but most countries that you'd be aware of, like even Singapore, Australia, New Zealand, you know, everywhere, as you could probably think of quickly, even if you incorporated another jurisdiction, the fact that you're running that company from Bali means that your place of effective management is Indonesia. And that's taxable in Indonesia, regardless of where it's incorporated. And we can get into it. We can take a deeper dive into that later on. If that's something you want to discuss and have something about nexus, of course, if you are US exposed, even though you do not live in the US, you still need to file and pay taxes in the US, so the US is in its own situation.
So, US exposed, you live in Bali. You need to consider Indonesia, but you also need to be considering the US responsibilities as well. For those who are in other developed countries, understand their fallback rules. So, it may mean that even though you do not raise, you're not resident back in Australia and New Zealand or UK, or whatever the case may be under certain circumstances, you may still be taxable there, and we can take a deeper dive into that, but it's something that you need to pay attention to and speak to an advisor.
So just being non-resident in those countries doesn't necessarily mean that you are not a tax resident, just because you're not physically there. And there are lots of rules around center of life and so on. So please keep that in mind. As well for those that live in the rest of the world, it may be simpler with other jurisdictions, but you should double check. But of course, there's always banking. Basically, once you're making money and you're moving stuff from account to account or whatever banks don't feel comfortable with people who are not tax resident anywhere. And we can get into that in detail in Q and A, but that's essentially why.
I mean there are other reasons as well, but that's like the number one reason for not electing to be tax resident nowhere. And we see regularly, unfortunately, clients who have made that mistake and they're paying for it. So, they are locked out of their home countries because they have not been, they didn't select a jurisdiction and they haven't been filing and paying taxes. So, there's no way to demonstrate that the money that they've earned is legitimate and they are locked out of their homes. And I can give you some examples about later on. Okay. And so, from what we have, I have just summarized very, very high level.
It's pretty clear that with all the jurisdictions and all the nuances, it's unrealistic to expect one human being to know everything. And I always say that if one person puts followed that they are an expert in everything, that's probably not sure if it's too good to be true, it usually is not. So, with that in mind, let's get to the fun part, which is taking a dive into your questions. As I mentioned, please put your questions in the chat boxes below, whether you are here on zoom or Facebook or anywhere else. And we'll go by, go through them one by one in the order in which they're received.
So, we have a few that were submitted by email. Thank you for that. Lets jump into the first question now. So I'm reading it for those who aren't on zoom. So, can't read it themselves, right? So, question one, I have a question in advance. The taxes are digital nomads webinar. I understand that if you stay more than 183 days per year in Indonesia, and you're considered a tax resident. So, Dicky, this is one for you. As someone who travels many countries for work, I come in and out of Indonesia regularly and brackets, they have a business 211 visa, I guess you would know where that is. And some years this means I may be more than 183 days in country. I would be happy to pay taxes there. To offsetting into UK taxes as UK and Indonesia have an agreement, but I don't have an NPWP number and can’t get one as I have no key task. I understand that you pay 20% flat rate if you don't have an NPWP, but there are no directions on how to submit this. If you have no NPWP. Now, before Dicky comes in, I'm going to introduce him, Dicky is the Head of Tax in Moores Rowland in Indonesia, for those who don't know Moores Rowland in Indonesia is the fourth largest accounting firm in Indonesia. Dicky runs a tax is in Indonesia. So, you're in good hands, Dicky over to you. You're on mute.
Yeah. Okay. So, the question is how to get NPWP. NPWP is an Indonesian tax ID without a key task. The answer is cannot. NPWP is issued based on key task. Okay. Second question, 20% flat rate. Okay. There is a 20% flat rate, but it is holding income tax. Withholding income tax withhold by a company who pay your services in Indonesia.
So, you cannot ask the foreigner who have no NPWP, you cannot pay by yourself. The income tax of 20%, the 20% is the withholding income tax rate for payment by Indonesian MPT to foreigner. Okay. If you have NPWP and you become Indonesian, domestic taxpayer, and the highest progressional rate right now currently is 30%.
Okay? So, in summary, this person is dipping in and out of Indonesia, but they on a calendar year, they're going to pass 183 days. So, they're going to be Indonesia tax residents, but they can't fulfill their obligations to Indonesia because they don't have an NPWP, which is a tax ID. And they cannot get a tax ID because they do not have a key task. So, they kind of stuck. So, the 20% withholding that they refer to, is if someone is paying them, like if they've given rendering a service in Indonesia, by law, that person who's handing over that cash is supposed to withhold 20% and send it to the tax authority. And that's the 20% withholding. So, the correct thing for this person to do is to get a key task and then get the NPWP and pay their taxes. Am I correct in saying that Dicky?
Okay. Perfectly. Alright. So, I'm going to scroll down to question two. And for those who, sorry, I was just messaging some people who just joined us on Facebook. Welcome. We're going through the questions that were submitted in advance on zoom. If you have questions, please put them in the boxes below Facebook or wherever you’re viewing us from. So, question two, quick question. I'm a German citizen living in Bali with a key task. So, this person does have a key task. Is that tax treaty between Indonesia and Germany? Dicky?
Yes. Yes, there is.
Okay. So, there is, so whoever that asked that question, you have an answer, but one point lead both Indonesia and Germany, and most developed countries, to be honest with you, recognize the principle of foreign tax credits. So, so you typically, you're not going to be taxed twice on the same income. Once you can demonstrate, you're in Indonesia, right? So, Indonesia you're working this or Indonesia typically we'll get frizz bites of the cherry. So, whatever it is you're doing in Bali, Indonesia takes its bite first. Now, if it is that you do have to file taxes back in Germany, for whatever reason, then you should be able to get credits on your tax liability, to Germany, using evidence that you have paid taxes already in Indonesia.
And the other way around, if you have German source income, for example, you have rental property, you have investments in Germany and you getting rental income. You're getting dividends, you're getting interest, whatever it is, German source income it's arising in Germany. So, Germany should tax it first, but you are based in Indonesia and your tax resonant in Indonesia, Indonesia, it's taxing you and your worldwide income. And, but Indonesia may be able to give you a credit for the taxes already paid in Germany on German source income once you can demonstrate that those taxes are paid. Dicky am I fair in saying that.
Okay, great. I'm moving on to question three. The fees for tax consultants can be high and I don't make much money. What should I do? That's a tricky one. Because as I mentioned before, what typically happens is that they go into a Yahoo group, sorry, not Yahoo. I'm mixing them up in Facebook groups, or some online forum. They ask a question, someone who may be well-intentioned, but not qualified. It gives them an answer. And you never know whether that person's situation really is similar to yours.
And whether you provided enough information for them to arrive at the advice or the conclusion that they're offering you. At the end of the day, regardless of who tells you what, you are ultimately responsible. You have an obligation under the laws of Bali of Indonesia and whatever other jurisdictions you may be exposed to. You can blame no one, but yourself, if something were to go sideways. So, what I suggest is that you educate yourself, you can buy books on, you know, we've written a book. If you check HTJ.tax, we have books that are available on Amazon.
And if you have like Kindle or whatever, it's going to be free or close to free anyway, you can check online blogs from people who are qualified to give those perspectives, rather than someone who may be well-intentioned or is trying to be a YouTube influencer or a Facebook influencer or an Instagram influencer. I wouldn't give the fates of my business over to someone whose ambition is to be an influencer, even though they may be well-intentioned. So, in short, you need to do some research. You need to invest the time. If you don't have money, invest the time, do your reading, buy some books, download some articles from accredited sources and educate yourself because ultimately, you're responsible for what happens. I hope that helps.
Number four, I need to optimize my tax position. How do I work with you and your team? Well, people approach us in different ways, right? And generally speaking, I put them into two buckets, there are those who come with specific questions. So, like, this is what I do. This is the nature of my business. I need help with my Indonesian taxes, or I need help with declaring foreign income on my Indonesian tax return or Indonesia and coming to the US tax return or whatever. They're very specific questions. And we can quote for either the advisory and or the compliance, actually helping them with Indonesia tax returns, which will be Dicky and his team or other jurisdictions, either myself or one of our colleagues in another country. If it is a country that we have an office in Australia, New Zealand, Malaysia, some people have Hong Kong, Hong Kong companies were pretty popular with people in Bali up to a few years ago. So, we can help you with the returns that we can help you with the advisory. Now, the other bucket is when someone has a business that it's still in its infancy, or it's just starting out and they need help structuring it.
So, for that, we approach it in one of two ways, some people have like a pitch deck, and they send that in. We read it and they, they evaluated, and they highlight what their concerns are. And we would propose a structure given what they have put in writing to us. Alternatively, we just have zoom consults for which we charge it's not free. And then we have a back and forth, we have a conversation, and some people prefer that at it, as it helps them clarify their thoughts, because it's not necessarily a business that is properly documented and everything is in writing. So those are the two categories where people have specific questions, that's one thing, and those who have an idea, and they just need help structuring it out. And that’s another type of engagement. So, that's how we work. You can message any of us directly or because Hannah had reached out to you. So, you have Hannah's email. You can email us so you can check my website HTJ.tax, or you can check Dicky’s websites, which is mooresrowland.com. Is it right? And you can reach out to any one of us and start the conversation. We will talk to each other. So, it will get to the right person eventually.
Question five, Dicky this is another one for you. There's an unverified rumor going around Bali that the new law and I guess the talking well, the omnibus law I'm guessing means that foreign is only taxed on Indonesia, source income. Only none of their foreign income is tax. Is this true? Or is this fake news? Dicky?
Okay. It is true but there is only for 25 professions, mostly engineering in the science area. And that’s number one requirements, only those 25 professions. And then number two, it's only last for four years since you enter Indonesia for the first time. So, if you already enter Indonesia and work in Indonesia, since 2001, for example, then it cannot be used anymore. It's already past more than four years.
So, it's very, very precise in terms of duration. And it's also very precise in terms of those professions. Now, how do you ever, what sort of evidence, like you said, one of them is an engineer, for example, like, how do I prove if I were an engineer and I wanted to avail myself of this tax planning opportunity, what proof do I need to present of my qualifications?
So, number one, they required you to provide the certifications that you are the engineer specialists, and then you have to register the documents when you are applying for the working permit in Indonesia.
Okay. So, it needs to be credited. And this registration, is it like, let say I qualified in Australia. Let say I’m an aussie engineer qualified in Australia. Do I need to get it that from the university of Sydney or whatever? Do I need to get it certified by the Indonesian embassy in Australia first? Or is it, do I just pull up my certificate and the tax office here in Bali or in Jakarta, we'll be able to certify it. Do you know?
Okay. Until now there is no clear regulation technically for that. So, but make sure that you are applying for that, for this, in what you call it these incentives here, this facility back's facility, when you register at first, before you come to Indonesia to work.
Okay. So, it must be done in home country. I cannot wait until I arrived. So, if I'm in Bali, no, I cannot do it from Bali. I need to do it from outside?
I think you can. I think you can but just make sure that, because there is administrative work after you get the letter of certification, then you have to inform the tax office that you can get this facility.
Okay. All right. Understood. Understood. Thank you.
We have another question. So, I'm to read it now for those are not in this platform. I have been in Indonesia for two to three years on and off. I'm a UK citizen with no ties to the UK. I have key task. So, this person has a key task until recently I have not been making any profit investing in crypto or foreign exchange but have started to make a profit recently. What is my liability in Bali, Dicky?
Then you have to pay income tax from your source income in Indonesia and also worldwide income.
Yeah. So, they need to, you know, engage a tax professional, complete the tax returns and the calculations on the form would then allow them to calculate what the liability is. But as you pointed out, it's on the worldwide income, right? Including crypto, including foreign exchange, even though it's in a crypto, it's being in a crypto exchange in Singapore, Australia, where else? It's still taxable in Indonesia.
It's self-assessment right.
Self-assessment and also the asset declarations. So, if they still have bank accounts in the UK, they need to declare it's not going to be tax, right? But they need to declare their bank accounts in the UK. They need to declare their rental properties back then everything needs to be declared in that tax return, right?
That's what the laws say.
And they said that had been some, just looking at the question again, instead of there've been an Indonesia on and off. So, if they, when they're off, they're not in Indonesia, they back in the UK. I know you say you have no ties, which leads to with the center of life test. But there's also the statutory residents’ test on the HMRC website, which you should go through. And it takes you question by question, like your number of days and whatever. And at the end of it, it'll give you know, judgment as to whether you are UK tax resident. So, it's not just about sense of life. It's about counting your days in the UK as well. And if you haven't been in the UK, where have you been, and wherever else you have been, if you've been there for more than a certain number of days, you may not have the equivalent of a key tasks in those places. But if you've been there for a certain number of days, you may have tax residency and you may have a tax exposure there as well. So, you should not just look at Indonesia, but have a second look at the UK and anywhere else you have been tax resident.
Any other questions? So, I'm just going to have him have a look, Facebook. Nope. Oops. Yes. One comment. Okay. Someone is asking, would you be able to share the deck from the beginning of the presentation? We'd be curious to check out some of the links from there. Yes. The entire presentation will be on our website, HTJ.tax, as well as on Facebook in our Facebook page, as well as LinkedIn and anywhere else, we're going to put in on a lot of podcast platforms, wherever you get your favorite podcasts, apple plays SoundCloud, Amazon, you know, we kind of put it everywhere. So yes.
Someone else's asking another question about previous or other Facebook lives. Yes, the other Facebook are there. The live streams are also on those platforms, not just this one. Okay. Good. All right. So that is it for that. Do we have any more questions? I was going to be a quick one today.
Okay. All right. So that looks like it's, that’s it for today. Nope. Someone else is typing. Ah, okay. So, we have three more questions. So, I'll just read them and do it in which I see them here. At what level of income does it make financial sense to engage your company services? That’s a good question. I see somebody like that question. So, there's no real income threshold. If you contact us and you identify what your situation is, we can give you a quote and you know, what, what may be okay for one person may not be okay for another person. So just contact us, explaining the situation we quote, and you can decide whether or not you want to proceed from there. If that makes sense. So, there's, there's, there's no threshold really. It's just, some people consider us affordable than some people on because we were not unlicensed and a professional team without any insurance or any sort of accreditation or whatever. Those with lower overheads who did not have to study anything, obviously they would have a lower fee structure because their costs would be different. So yeah. So, everyone is different. Right.
Next question. Would you be able to share the deck? Okay. Yeah. Okay. I responded to that one already. I have to leave early. Will this be saved? Yes, it will be saved on HTJ.tax, on Facebook, YouTube, SoundCloud, wherever you get your favorite podcasts, it will be saved there in a couple of days. So, okay. Any more questions or is that it? Okay it seems as if it's it.
We have, all right, let me just check one more. Okay. Checking YouTube. Okay. That’s it. Thank you very much for your time, those who joined us today. Dicky thanks for sharing your expertise and for demystifying taxes for digital nomads in Bali. My name is Derren. Thank you on behalf of Moores Rowland, and we will see you again next time. Bye.