Taxes for Digital Nomads and Crypto Investors in Bali, Indonesia – 20th April 2022

 

Dicky Darmawi:

Okay, good. Good afternoon, ladies and gentlemen. I'm glad to see you online virtually here. We've done this a couple of times already. It's been two years with Derren. Yeah. So, we discuss digital nomads in Indonesia from the tax point of view of Indonesia's tax regulations. So I hope that after these discussions. It might be clearer for you to have business in Asia or to have friends who want to do business in Asia, you can refer them to us.

Derren Joseph:

All right. Wonderful. Okay, so we're going to jump right in. So again, we receive you if you send it via email. Yes, we got it. Sorry, I didn't get a chance to acknowledge everyone, but we got your emails. Definitely. But if it is if you have additional questions or you didn't get him, email it, type in the box below so let's go. Question number one, how does someone become a tax resident in Indonesia what triggers tax residents, Dickey.

Dicky Darmawi:

Yeah, and then you need your next race you then are defined as an individual who is an Indonesian citizen. Yeah, or a foreigner who recites in Indonesia. For more than 183 days within any 12 months, or the foreigner present in Indonesia during a tax year to reside in Indonesia.

Derren Joseph:

Okay. Gotcha. So just basically, I mean the 183-day rule I think people who are remote workers, then international investors are familiar with the 183-day rule. So, but in Indonesia, if I'm understanding you correctly right so if it is that you get a work permit in advance and then you all long stay permit, however, it is under the immigration rules because there are several visas, with which you can enter Indonesia, but if you come in with a residence visa including a work permit, your tax residence starts when you land. Correct. Am I correct in saying that correct?

Dicky Darmawi:

Yes correct

Derren Joseph:

Or and then otherwise like if you come in visa on arrival you come in as a tourist or whatever, then you have to do one at three days in a calendar year,

Dicky Darmawi:

Or after your month. One month you stay here and then you fall in love and you have the intention to stay here. yeah, you can register at the local tax office.

Derren Joseph:

Okay, wonderful. I know people like to talk about visa runs but we just make an acclaimed visa runs don't work, it may work from an integration perspective, potentially, but from a tax perspective which is what we talking about hit today, it does not work because the clock does not reset. After all, it's wanting two days within a calendar year. So the clock keeps ticking, as you leave and you enter again, it continues so. So, hope that helps, whoever asked that question. The next question is number two, how does this be a popular one. And we discussed this a lot, how does a foreign that in Indonesia so someone who's not an Indonesian citizen, how do they get to exclude the foreign income. When they attack residents in Indonesia, taking over.

Dicky Darmawi:

Okay, so there's a new regulation. We call it Omnibus law, published about last year, November last year so Indonesia has made a territorial income tax for expatriates. Okay, but it has certain limits, very limited. Okay. And the certain skills are only comprised of 25 types of professions. So it's very specific professions and mainly of the profession is, I will, I will read it for you, for example, chemists geologists biologists system analysts software developer. Mining supervisor. Process Control technicians air traffic safety electronic device technician electrical engineer, so it's very, kind of, not a finance guy, then going to do free, but it's very specific knowledge that the expatriate the foreigners can transfer the knowledge to the Indonesians. Yeah, that's the skills, the certain skills, and number two. Okay so, in 2016, you come to Indonesia for three years, then these exceptions for withholding income for overseas income exclusions on the left for one year

Derren Joseph:

Okay. Yeah.

Dicky Darmawi:

So there are only so certain skills, and it is not last forever. It is only four years since you first come to Indonesia.

Derren Joseph:

Right. And you know, I'm glad that you shedding some light on this because, you know, I've seen some people kind of misunderstand this online, and unfortunately this spread a perspective that may not technically be correct so this is good so it's very specific in terms of the professions that of course implicit in that you need to register, right so you need to register and probably your certifications or your credentials to be vetted, and then you will get permission to exclude the income that arises outside. So it is, it's not automatic.

Dicky Darmawi:

It's not.

Derren Joseph:

You know, you kind of assume I just land in Indonesia I just landed in Bali, so I'm going to enjoy this no you need to go through the steps properly.

Dicky Darmawi:

Yes.

Derren Joseph:

Thank you very much for clearing that up and moving on. Number three, when tax returns do, for those who are tax residents in Indonesia

Dicky Darmawi:

End March

Derren Joseph:

End of March, right? So, we're late, if somebody hasn't done it as Yeah, they're already late. So, are there so what if somebody is late, you know let's throw that out there so how, you know, they're like any, you can seek an extension like in some of the jurisdictions. Can you, is there like in some of the jurisdictions they'll be reasonable cause, where you can have like penalties and interest if you have a valid reason for being late. What can we do if we're late for individuals?

Dicky Darmawi:

No, no, there are no extensions. Yes, if you're late then you only got a chance for 1 million rupiahs and the penalty.

Derren Joseph:

Okay, and is there interest as well, or just a penalty.

Dicky Darmawi:

If you have underpayment. In case you're underpayment of income tax. Then there is a tax penalty of 1% per month.

Derren Joseph:

Okay, so penalties and interest. Okay, so the key point is you need to get this done as soon as possible. All right. Gotcha. So it's time for me to move on, we'll move on to Singapore to Thailand or whatever. How do they serve attacks residency in Indonesia, how do they let the tax office know, Hey, I'm on my way out?

Dicky Darmawi:

Now, so let's assume this guy complies with tags ordinary poor annual income tax every year. And, and, in the middle of the year, they want to get out. Forever from Indonesia so they have, too, to send a letter to the tax office for report verification for the tax ID. And then the tax, the tax office will process those applications within a year, by doing a tax audit. So you will be taxed, but you. The foreigner always uses x consultant. because they already left the country. Yes, she left the country and get an exit permit only based on the exit permit only we file the applications for a vocation.

Derren Joseph:

Right. Okay. Okay, so it's not too dissimilar to Singapore where I'm based when you when you seek to exit you need. And they would initiate certain steps. So you can let you know you could settle whatever tax liabilities, you may or may not have. And you can leave on a good note so you'll have no problems if you ever tried to come in because we have had clients that unfortunately, didn't do things the right way. And, you know, in certain jurisdictions and they are not allowed to have a return. So, we do not advise anyone to burn any bridges, you never know what's gonna happen. So when you exit you need to exit in the right way. So I gotcha. Okay, next question. Okay, is there any communication between immigration authorities, the tax authorities, and Bali in Indonesia, do they talk to each other.

Dicky Darmawi:

In practice, I didn't see it yet, I didn't see it yet me. But not for a certain amount of facts you know if you have big amount of facts you then, for sure the tax office, send a formal letter to the immigration, so that you cannot leave the country.

Derren Joseph:

Yeah. Right, and so yeah I guess what you saying that if the amount is big, or if you're a high profile personality and we saw that a couple of years ago with a digital nomad from the US, a young lady who is based in Bali. And she was saying whatever she was saying online, with no judgment, she was doing whatever she was doing online, and it invited and attracted negative attention. And then, in that case, the immigration team did speak to the taxi. And, they thought that since she was earning money, even though is remote and it's online. The point is the economic activity was how Molly, and therefore she is in breach of whatever immigration rules, she was there on, and she was also in breach of the tax rules. But, yeah, so they do speak to each other when they need to. But ordinarily. Not exactly. Okay. Gotcha. Okay. Right. crypto is, of course, a super popular topic among you know the remote worker digital nomad international investor community so in Indonesia is crypto considered money or currency.

Dicky Darmawi:

Okay. So currently, just a couple of weeks ago, the Minister of Finance. marvelous a new regulation about goodbye asset. So we, I can say this crypto money No. Is this not a legal payment instrument in Indonesia.

Derren Joseph:

Right, so, so it's not. So in other words, is it like in other jurisdictions that we are familiar with like the UK in the US and Australia. Is it a commodity?

Dicky Darmawi:

Yes.

Derren Joseph:

Okay. Gotcha. So I guess those sorts of rules apply. And so, under what conditions, generally speaking with a transaction involved in crypto be taxable generally speaking?

Dicky Darmawi:

they regulate the transactions of the ripped-off selling buying. And then also mining.

Derren Joseph:

Okay. So as you mentioned mining How is the mining tax in Indonesia.

Dicky Darmawi:

I read the regulation is still unclear why the writer of the regulation, understands how the mining how they're stacking right

Derren Joseph:

Yeah. I understand how the process will be right but we got to be conservative, so if you, if you do mining, then, it's a big challenge you, you will be, you will become fashionable and the printers.

Derren Joseph:

Okay, so it's so it would attract blood VAT which is the indirect taxes sales taxes is called another jurisdiction. So it's VAT, as well as, as well as income tax so both direct and indirect in taxes. So, Yeah, I think we get the direct taxes because it's quite common in other jurisdictions that sticking in mining is taxes, you pay it as part of your income tax, or if you do it through a company is probably B Corp tax, but can you tell us a bit more about the VAT implication?

Dicky Darmawi:

So the rate, the rate for the VAT is quite low. It's only 1.1% of the value.

Derren Joseph:

Okay.

Dicky Darmawi:

It's quite low. And for the income tax is on, it's a final income tax, 0.1%, it is final it means is that it doesn't need to be some, some up with other income, its final 0.1%.

Derren Joseph:

Is it is there a threshold like in Singapore, for example, there's a threshold and if your income is below. If they will the incoming generators below such a threshold. It won't be subject to the equivalent of VAT in Singapore GST. So is that threshold in Indonesia,

Dicky Darmawi:

in general for capable and the panel, there is a threshold of 4.8 billion rupees.

Derren Joseph:

Okay, for a billion, so anything below that threshold no VAT?

Dicky Darmawi:

No VAT.

Derren Joseph:

Okay. Yeah.

Dicky Darmawi:

However, we do the training on bitcoins on whatever coins to the exchange years. Right.

Derren Joseph:

Yeah.

Dicky Darmawi:

So, the exchanges will charge us with the vat. And we'd hold these, the income final income tax from the sour. So I think it will be automatically charged to the customer to you.

Derren Joseph:

So that's assuming of course that the exchange is in Indonesia. Yeah, extends, not in Indonesia, they already stated the power of the tax rate is different. Twice destroys higher with VAD, and with the income taxes twice higher. Well, yeah, but the problem is how they going to tease the exchanges outside there right

Derren Joseph:

So that was, that was my question yeah

Dicky Darmawi:

Yeah, so they will like eCommerce, you know, e-commerce VAT collector. So, the tax office will will will will stay good by their discretion that OK Google, since you are Fallujah Indonesian so i. So, I, stipulated that you become the VAT collector and have to pay, and they will get the tax ID number.

Derren Joseph:

Ok so in other words, any exchange. For example, lots of exchanges in Singapore, the US, or Australia whatever it is that they have. I guess people who are based in Indonesia are based in Bali, and they are actively doing stuff through the exchanges thing for them to do. Once they know I guess they have to figure out that their investors or whoever, our Indonesian tax residents Yeah, need to register with the tax office in Holland or a can.

Dicky Darmawi:

Yeah, a voluntary want to then they just send the letter. And that's always will review whether the transactions are quite big for Indonesian customer, then they will issue. You're the tax ID for the exchanger.

Derren Joseph:

Okay, understood. Understood. And like in the US writing us crypto-crypto so like Bitcoin to eat or Litecoin it does crypto-crypto transactions at taxable.
Is it the same in Indonesia crypto?

Dicky Darmawi:

Same, same is, is, we call it to swap here? They call it a swap. Then seller and buyer will have to pay the ad, and the seller will have to pay the final income tax.

Derren Joseph:

Wow. Okay. And generally speaking, there is there a distinction between capital gains taxes. And just like trading or ordinary income tax. When some jurisdictions like Singapore they're treated differently, or they're treated the same in Indonesia?

Dicky Darmawi:

Okay, differently. So capital gain, Max. So it depends on the asset.

Derren Joseph:

Okay,

Dickey Darmawi:

okay. So, if you are selling the shares from the stock exchange from Indonesia Stock Exchange. Yeah, it will they may want the tax off with the tax rate one is final income tax form from the amount of sell. Okay, so they don't care whether you gain or lose, you have to pay tax.

Derren Joseph:

But they're taxed at different rates.

Dicky Darmawi:

No single rate, 0.1%.

Derren Joseph:

Wow

Dicky Darmawi:

0.1% so I guess you unit you want to invest here is a very low tax, and it's final, but it is the same when you take it to us then to progress effects right.

Derren Joseph:

Right, yeah so okay so this is an important point. So, with single rates, it is no separate tax rate for capital gains and ordinary income. If you make money in crypto on to being tasked with you, your marginal tax rate whatever that may be.

Dicky Darmawi:

No. The Final is a flatbread means final is no need to do to combine it with your other income.

Derren Joseph:

Oh, wow. That is potentially quite attractive Right?

Dicky Darmawi:

Yeah.

Derren Joseph:

So, is it like the government is deliberately trying to encourage the whole crypto economy? Is it like the government is deliberately trying to encourage the whole crypto economy.

Dicky Darmawi:

Yeah, I think so, because it's going bigger and bigger and they don't pay a tax until now.

Derren Joseph:

That's enough. I'm going through another question that was submitted. All right, so the person is writing Hi there, first of all, thanks for taking the time. Yeah. Okay, so my question is about the concrete structure that I've been using while a resident of the UAE. So this person was in the United Arab Emirates. No, he or she is saying I'm in Bali. And I'm I like Bali, everybody likes Bali, of course, and they want to remain there permanently. So again, someone has moved from the United Arab Emirates to Bali, and they like Canada so they have a structure where they're 100%, the owner of a US LLC. And they run an IT consulting business through this LLC, and the bank. The clients so that the, I guess the banking is in the United States. Their clients are in Singapore in the UK. And they talked about that when they were in the United Arab Emirates, they will no tax returns which is. Yeah. So, just provide context. Once you are in the UAE, you will need, you only pay taxes and stuff if you do business domestically, then you need to register for bat and whatever. But if you just do international business like this person is correct and no taxes at all. So, anyway, this person is in Bali running a business and LLC in the US clients in the UK in Singapore, and they're considering getting an investor Kesa teaches us a C-314 for in Indonesia is a non-executive shareholder, and PTP me. So the question is, after all of that, given that structure, what are the options to optimize tax liability in Indonesia. Is it possible, okay? But what struck me is that this person is a consultant right so chances are it is a, like a single-member LLC as we see in US terms. So the point is that management and controls those two tasks of management control have been exercised in Indonesia. So, this is, this company should be taxable in Indonesia. In the first place, so, you know, I'm glad that this person is, you know, thinking of doing the right thing which is registering for teachers and whatever. So you correct this person is correct, you need to register a business in Indonesia because it's you running a business from Indonesia. You get your PTP my setup. And then I guess you can be an employee of that PTP ma so you pay taxes whatever is left inside whooping corporate taxes so so so yeah I think this person is on the right path, what do you say about that Dicky?

Dicky Darmawi:

Yeah, so dividends night now dividends. You are individuals and you get dividends from the company. It might be zero percent back upon dividends, if the dividends you invest in again to the companies or you buy bonds in Indonesia, or you buy shares on the stock exchange. So, if you invest again in Indonesia, then will be zero percent tax.

Derren Joseph:

Right, so so this is good so this is a good planning opportunity right so in terms of legitimate task planning. If it is the profits are reinvested into Indonesia, you can relieve yourself of, you know, the dividend taxes. Oh, is it relief was deferred so at some point in time?

Dicky Darmawi:

Not the profit Derren, it's dividends.

Derren Joseph:

Okay.Yeah, okay. So okay, right so so okay let me just make sure I got this right. So this person's going to be in a key test so they need to pay themselves a salary. Yeah, right. And that's salary will be taxable income tax, and then they have a company that PGPMA will pay the corporate taxes.

Dicky Darmawi:

Yeah, right.

Derren Joseph:

So then, ordinarily when they pull the dividends out. Yeah, that will be taxable as well.

Dicky Darmawi:

Yeah, but they can avail themselves of a planning opportunity. Yeah.

Derren Joseph:

Yes, they can invest that in certain like bonds and certain instruments

Dicky Darmawi:

Yeah, partially also can okay and okay so the question would be, when they eventually liquidate that investment so they redeemed the bonds or whatever.

Dicky Darmawi:

Okay, so it has to hope there for three years.

Derren Joseph:

Okay, so there's a minimum holding period for three

Dicky Darmawi:

Yeah, yeah.

Derren Joseph:

And then after three is it tax-free?

Dicky Darmawi:

Yes, it's the next free

Derren Joseph:

Fantastic so that's a great tax planning opportunity. So whoever wrote that question among Chloe's name you know who you want a. I hope that helps. I hope that helps. And if you want to operationalize that you feel free to reach out to Dicky directly.

Dicky Darmawi:

I'll be happy to help.

Derren Joseph:

Alright, next question so someone is asking, here in zoom. Can you confirm that the final income tax on a crypto transaction sold through an Indonesian exchange is the same rate as a sale of a share in a listed company, namely point 1% of the sale Dicky?

Dicky Darmawi:

sold through an Indonesian exchange. Okay. Yeah. I can confirm if the exchange has made the systems withhold the final income tax. Hmm. Okay, so it is not us, the seller to pay directly to the back office, hey I have sold into crypto no issue with the holder will be the exchanger do at home.

Derren Joseph:

Okay, so So this person needs to, you know, touch base with the actual exchange of crypto exchange and make sure that they are doing the right thing and they're going to be fine.

Dicky Darmawi:

Yeah.

Derren Joseph:

Gotcha, gotcha. Okay,

Dicky Darmawi:

this regulation. Yeah, this regulation will become effective on May 1 Yeah.

Derren Joseph:

Okay, so not yet.

Dicky Darmawi:

Okay

Derren Joseph:

yeah. So I mean me is soon but in the end, they interrupt. If they sell in the interim, what should they do before May 1 of all.

Dicky Darmawi:

It's self-assessment. So, yeah, maybe to clarify this self. Yeah, you shouldn't need to declare and pay capital gains tax them. So if you in you treated as a capital gain, then the tax rate will be progressive.

Derren Joseph:

Okay. Gotcha. Okay, James hopes that answers your question. Moving on. Okay somebody's asking. Okay, in terms of tracking the trade so this is assuming that it's not an Indonesian crypto exchange. If it's one of the others outside. And assuming of course that they didn't register with Indonesia so there's no withholding. So then when this person is self-reporting. Do they need to track every buy and sell can they use averages can they use average or do they use FIFO or life or hateful last infrared stuff first in first out highest interest? How do they track, what's the right thing to do.

Dicky Darmawi:

Okay, currently it is still unclear. They not, they did not regulate, So detail like that. Yeah, even I still imagine how this 0.2% for the, for the overseas exchanger, how they can wait hold this 0.2%. Right. So because the offers these exchanges have to wait until they get approval to get a tax ID from Indonesia, that's an office, so they may be. They might as well do it hold the 0.2%. Otherwise, how they can hope, right.So it's still unclear now.

Derren Joseph:

Okay, so things are still unclear, but depending on what jurisdiction the person is asking I also be exposed. I guess you didn't you also need to be conscious of what the rules are there. And, you know, and to see, make sure that you know when they do their taxes that then I'm going to be taxed twice because you know if there are problems that so Indonesia, generally they recognize foreign tax credits correct. So if it's being taxed somewhere.
Right. But to avail yourself of those foreign tax credits. How do you do that, how do you? Is it just filling out a form self-assessment, what do you need to show evidence, it was paid like a bank transfer or something that evidence is that attacks were paid.

Dicky Darmawi:

Yeah, for form submissions of the annual income tax return. We just need to fill in the form.

Derren Joseph:

Okay, so no proof just fill in the form, okay,

Dicky Darmawi:

But you have to keep the proof. If one day, that is asked you.

Derren Joseph:

Right. Okay, That's interesting. That's good to know. Okay. Right. And people are asking about staking and stuff like that so again we saying just to repeat what you said earlier the rules are just as yet unclear on that. But, you know, taking a conservative position you making money, you have an income. So then you know the conservative right thing to do is declare it right and pay taxes on it. Okay. Right, and someone is asking, as well yeah if it isn't. We've asked you again you've answered this question already if you use an exchange in Singapore. Yeah, again, the process is the same as that exchange in Singapore. if they have Indonesian clients they should have registered with Indonesia during the right thing, otherwise, you would need to know self-assessment, you need to declare it yourself. once you tax residents in Indonesia. Ordinarily, you're going to pay taxes on your worldwide income. Okay. All right. Great. Any other questions from you guys back here in zoom land, and the questions will have answered all of your questions here today. Okay, great. I think that's all the questions for today. That's great. So Dickie if someone wants to reach out to your team either the satellite office in Bali or the main office in Jakarta, what's the best way to find you guys.

Dicky Darmawi:

You can search my name or www.moores-rowland.com/ Yeah, there's in the chatbox there is my LinkedIn.

Derren Joseph:

Yeah. Okay, so you can, so you can reach out, to Dickie directly, he's available, he's reachable on LinkedIn, so Dicky Darmawi so you can do a search for him on LinkedIn, you can message him directly. Otherwise, you can go to Israel and mean Indonesia website, which is more as I think it's more natural and calm. Yes, right. Okay, so it's www.moores-rowland.com/ that's the main website, and you can use the contact form. you know the right member of the team will get back to you. If you have any questions. Otherwise, should you know taxing can reach us on our website, we do this, we do live streams every week where we answer questions about doing taxes the right way when you're working internationally.

Dicky Darmawi:

Okay, good. Good afternoon, ladies and gentlemen. I'm glad to see you online virtually here. We've done this a couple of times already. It's been two years with Derren. Yeah. So, we discuss digital nomads in Indonesia from the tax point of view of Indonesia's tax regulations. So I hope that after these discussions. It might be clearer for you to have business in Asia or to have friends who want to do business in Asia, you can refer them to us.

Derren Joseph:

All right. Wonderful. Okay, so we're going to jump right in. So again, we receive you if you send it via email. Yes, we got it. Sorry, I didn't get a chance to acknowledge everyone, but we got your emails. Definitely. But if it is if you have additional questions or you didn't get him, email it, type in the box below so let's go. Question number one, how does someone become a tax resident in Indonesia what triggers tax residents, Dickey.

Dicky Darmawi:

Yeah, and then you need your next race you then are defined as an individual who is an Indonesian citizen. Yeah, or a foreigner who recites in Indonesia. For more than 183 days within any 12 months, or the foreigner present in Indonesia during a tax year to reside in Indonesia.

Derren Joseph:

Okay. Gotcha. So just basically, I mean the 183-day rule I think people who are remote workers, then international investors are familiar with the 183-day rule. So, but in Indonesia, if I'm understanding you correctly right so if it is that you get a work permit in advance and then you all long stay permit, however, it is under the immigration rules because there are several visas, with which you can enter Indonesia, but if you come in with a residence visa including a work permit, your tax residence starts when you land. Correct. Am I correct in saying that correct?

Dicky Darmawi:

Yes correct

Derren Joseph:

Or and then otherwise like if you come in visa on arrival you come in as a tourist or whatever, then you have to do one at three days in a calendar year.

Dicky Darmawi:

Or after your month. One month you stay here and then you fall in love and you have the intention to stay here. yeah, you can register at the local tax office.

Derren Joseph:

Okay, wonderful. I know people like to talk about visa runs but we just make an acclaimed visa runs don't work, it may work from an integration perspective, potentially, but from a tax perspective which is what we talking about hit today, it does not work because the clock does not reset. After all, it's wanting two days within a calendar year. So the clock keeps ticking, as you leave and you enter again, it continues so. So, hope that helps, whoever asked that question. The next question is number two, how does this be a popular one. And we discussed this a lot, how does a foreign that in Indonesia so someone who's not an Indonesian citizen, how do they get to exclude the foreign income. When they attack residents in Indonesia, taking over.

Dicky Darmawi:

Okay, so there's a new regulation. We call it Omnibus law, published about last year, November last year so Indonesia has made a territorial income tax for expatriates. Okay, but it has certain limits, very limited. Okay. And the certain skills are only comprised of 25 types of professions. So it's very specific professions and mainly of the profession is, I will, I will read it for you, for example, chemists geologists biologists system analysts software developer. Mining supervisor. Process Control technicians air traffic safety electronic device technician electrical engineer, so it's very, kind of, not a finance guy, then going to do free, but it's very specific knowledge that the expatriate the foreigners can transfer the knowledge to the Indonesians. Yeah, that's the skills, the certain skills, and number two. Okay so, in 2016, you come to Indonesia for three years, then these exceptions for withholding income for overseas income exclusions on the left for one year

Derren Joseph:

Okay. Yeah.

Dicky Darmawi:

So there are only so certain skills, and it is not last forever. It is only four years since you first come to Indonesia.

Derren Joseph:

Right. And you know, I'm glad that you shedding some light on this because, you know, I've seen some people kind of misunderstand this online, and unfortunately this spread a perspective that may not technically be correct so this is good so it's very specific in terms of the professions that of course implicit in that you need to register, right so you need to register and probably your certifications or your credentials to be vetted, and then you will get permission to exclude the income that arises outside. So it is, it's not automatic,

Dicky Darmawi:

It's not.

Derren Joseph:

You know, you kind of assume I just land in Indonesia I just landed in Bali, so I'm going to enjoy this no you need to go through the steps properly.

Dicky Darmawi:

Yes.

Derren Joseph:

Thank you very much for clearing that up and moving on. Number three, when tax returns do, for those who are tax residents in Indonesia

Dicky Darmawi:

End March,

Derren Joseph:

End of March, right. So, we're late, if somebody hasn't done it as Yeah, they're already late. So, are there so what if somebody is late, you know let's throw that out there so how, you know, they're like any, you can seek an extension like in some of the jurisdictions. Can you, is there like in some of the jurisdictions they'll be reasonable cause, where you can have like penalties and interest if you have a valid reason for being late. What can we do if we're late for individuals?

Dicky Darmawi:

No, no, there are no extensions. Yes, if you're late then you only got a chance for 1 million rupiahs and the penalty.

Derren Joseph:

Okay, and is there interest as well, or just a penalty.

Dicky Darmawi:

If you have underpayment. In case you're underpayment of income tax. Then there is a tax penalty of 1% per month.

Derren Joseph:

Okay, so penalties and interest. Okay, so the key point is you need to get this done as soon as possible. All right. Gotcha. So it's time for me to move on, we'll move on to Singapore to Thailand or whatever. How do they serve attacks residency in Indonesia, how do they let the tax office know, Hey, I'm on my way out?

Dicky Darmawi:

Now, so let's assume this guy complies with tags ordinary poor annual income tax every year. And, and, in the middle of the year, they want to get out. Forever from Indonesia so they have, too, to send a letter to the tax office for report verification for the tax ID. And then the tax, the tax office will process those applications within a year, by doing a tax audit. So you will be taxed, but you. The foreigner always uses x consultant. because they already left the country. Yes, she left the country and get an exit permit only based on the exit permit only we file the applications for a vocation.

Derren Joseph:

Right. Okay. Okay, so it's not too dissimilar to Singapore where I'm based when you when you seek to exit you need. And they would initiate certain steps. So you can let you know you could settle whatever tax liabilities, you may or may not have. And you can leave on a good note so you'll have no problems if you ever tried to come in because we have had clients that unfortunately, didn't do things the right way. And, you know, in certain jurisdictions and they are not allowed to have a return. So, we do not advise anyone to burn any bridges, you never know what's gonna happen. So when you exit you need to exit in the right way. So I gotcha. Okay, next question. Okay, is there any communication between immigration authorities, the tax authorities, and Bali in Indonesia, do they talk to each other.

Dicky Darmawi:

In practice, I didn't see it yet, I didn't see it yet me. But not for a certain amount of facts you know if you have big amount of facts you then, for sure the tax office, send a formal letter to the immigration, so that you cannot leave the country.

Derren Joseph:

Yeah. Right, and so yeah I guess what you saying that if the amount is big, or if you're a high profile personality and we saw that a couple of years ago with a digital nomad from the US, a young lady who is based in Bali. And she was saying whatever she was saying online, with no judgment, she was doing whatever she was doing online, and it invited and attracted negative attention. And then, in that case, the immigration team did speak to the taxi. And, they thought that since she was earning money, even though is remote and it's online. The point is the economic activity was how Molly, and therefore she is in breach of whatever immigration rules, she was there on, and she was also in breach of the tax rules. But, yeah, so they do speak to each other when they need to. But ordinarily. Not exactly. Okay. Gotcha. Okay. Right. crypto is, of course, a super popular topic among you know the remote worker digital nomad international investor community so in Indonesia is crypto considered money or currency.

Dicky Darmawi:

Okay. So currently, just a couple of weeks ago, the Minister of Finance. marvelous a new regulation about goodbye asset. So we, I can say this crypto money No. Is this not a legal payment instrument in Indonesia.

Derren Joseph:

Right, so, so it's not. So in other words, is it like in other jurisdictions that we are familiar with like the UK in the US and Australia. Is it a commodity?

Dicky Darmawi:

Yes.

Derren Joseph:

Okay. Gotcha. So I guess those sorts of rules apply. And so, under what conditions, generally speaking with a transaction involved in crypto be taxable generally speaking?

Dicky Darmawi:

They regulate the transactions of the ripped-off selling buying. And then also mining.

Derren Joseph:

Okay. So as you mentioned mining How is the mining tax in Indonesia.

Dicky Darmawi:

I read the regulation is still unclear why the writer of the regulation, understands how the mining how they're stacking right

Derren Joseph:

I understand how the process will be right but we got to be conservative, so if you, if you do mining, then, it's a big challenge you, you will be, you will become fashionable and the printers. Okay, so it's so it would attract VAT which is the indirect taxes sales taxes is called another jurisdiction. So it's VAT, as well as, as well as income tax so both direct and indirect in taxes. So, Yeah, I think we get the direct taxes because it's quite common in other jurisdictions that sticking in mining is taxes, you pay it as part of your income tax, or if you do it through a company is probably B Corp tax, but can you tell us a bit more about the VAT implication?

Dicky Darmawi:

So the rate, the rate for the VAT is quite low. It's only 1.1% of the value.

Derren Joseph:

Okay.

Dicky Darmawi:

It's quite low. And for the income tax is on, it's a final income tax, 0.1%, it is final it means is that it doesn't need to be some, some up with other income, its final 0.1%.

Derren Joseph:

Is it is there a threshold like in Singapore, for example, there's a threshold and if your income is below. If they will the incoming generators below such a threshold. It won't be subject to the equivalent of VAT in Singapore GST. So is that threshold in Indonesia.

Dicky Darmawi:

in general for capable and the panel, there is a threshold of 4.8 billion rupees.

Derren Joseph:

Okay, for a billion, so anything below that threshold no VAT?

Dicky Darmawi:

No VAT.

Derren Joseph:

Okay. Yeah.

Dicky Darmawi:

However, we do the training on bitcoins on whatever coins to the exchange years. Right.

Derren Joseph:

Yeah.

Dicky Darmawi:

So, the exchanges will charge us with the vat. And we'd hold these, the income final income tax from the sour. So I think it will be automatically charged to the customer to you.

Derren Joseph:

So that's assuming of course that the exchange is in Indonesia. Yeah, extends, not in Indonesia, they already stated the power of the tax rate is different. Twice destroys higher with VAD, and with the income taxes twice higher. Well, yeah, but the problem is how they going to tease the exchanges outside there right

Derren Joseph:

So that was, that was my question yeah

Dicky Darmawi:

Yeah, so they will like eCommerce, you know, e-commerce VAT collector. So, the tax office will will will will stay good by their discretion that OK Google, since you are Indonesian, I, stipulated that you become the VAT collector and have to pay, and they will get the tax ID number.

Derren Joseph:

Ok so in other words, any exchange. For example, lots of exchanges in Singapore, the US, or Australia whatever it is that they have. I guess people who are based in Indonesia are based in Bali, and they are actively doing stuff through the exchanges thing for them to do. Once they know I guess they have to figure out that their investors or whoever, our Indonesian tax residents Yeah, need to register with the tax office in Holland or a can.

Dicky Darmawi:

Yeah, a voluntary want to then they just send the letter. And that's always will review whether the transactions are quite big for Indonesian customer, then they will issue. You're the tax ID for the exchanger.

Derren Joseph:

Okay, understood. Understood. And like in the US writing us crypto-crypto so like Bitcoin to eat or Litecoin it does crypto-crypto transactions at taxable.
Is it the same in Indonesia crypto?

Dicky Darmawi:

Same, same is, is, we call it to swap here? They call it a swap. Then seller and buyer will have to pay the ad, and the seller will have to pay the final income tax.

Derren Joseph:

Wow. Okay. And generally speaking, there is there a distinction between capital gains taxes. And just like trading or ordinary income tax. When some jurisdictions like Singapore they're treated differently, or they're treated the same in Indonesia?

Dicky Darmawi:

Okay, differently. So capital gain, Max. So it depends on the asset.

Derren Joseph:

Okay,

Dickey Darmawi:

Okay. So, if you are selling the shares from the stock exchange from Indonesia Stock Exchange. Yeah, it will they may want the tax off with the tax rate one is final income tax form from the amount of sell. Okay, so they don't care whether you gain or lose, you have to pay tax.

Derren Joseph:

But they're taxed at different rates.

Dicky Darmawi:

No single rate, 0.1%.

Derren Joseph:

Wow:0.1% so I guess you unit you want to invest here is a very low tax, and it's final, but it is the same when you take it to us then to progress effects right. Right, yeah so okay so this is an important point. So, with single rates, it is no separate tax rate for capital gains and ordinary income. If you make money in crypto on to being tasked with you, your marginal tax rate whatever that may be.

Dicky Darmawi:

No. The Final is a flatbread means final is no need to do to combine it with your other income.

Derren Joseph:

Oh, wow. That is potentially quite attractive Right?

Dicky Darmawi:

Yeah.

Derren Joseph:

So, is it like the government is deliberately trying to encourage the whole crypto economy? Is it like the government is deliberately trying to encourage the whole crypto economy.

Dicky Darmawi:

Yeah, I think so, because it's going bigger and bigger and they don't pay a tax until now.

Derren Joseph:

That's enough. I'm going through another question that was submitted. All right, so the person is writing Hi there, first of all, thanks for taking the time. Yeah. Okay, so my question is about the concrete structure that I've been using while a resident of the UAE. So this person was in the United Arab Emirates. No, he or she is saying I'm in Bali. And I'm I like Bali, everybody likes Bali, of course, and they want to remain there permanently. So again, someone has moved from the United Arab Emirates to Bali, and they like Canada so they have a structure where they're 100%, the owner of a US LLC. And they run an IT consulting business through this LLC, and the bank. The clients so that the, I guess the banking is in the United States. Their clients are in Singapore in the UK. And they talked about that when they were in the United Arab Emirates, they will no tax returns which is. Yeah. So, just provide context. Once you are in the UAE, you will need, you only pay taxes and stuff if you do business domestically, then you need to register for bat and whatever. But if you just do international business like this person is correct and no taxes at all. So, anyway, this person is in Bali running a business and LLC in the US clients in the UK in Singapore, and they're considering getting an investor Kesa teaches us a C-314 for in Indonesia is a non-executive shareholder, and PTP me. So the question is, after all of that, given that structure, what are the options to optimize tax liability in Indonesia. Is it possible, okay? But what struck me is that this person is a consultant right so chances are it is a, like a single-member LLC as we see in US terms. So the point is that management and controls those two tasks of management control have been exercised in Indonesia. So, this is, this company should be taxable in Indonesia. In the first place, so, you know, I'm glad that this person is, you know, thinking of doing the right thing which is registering for teachers and whatever. So you correct this person is correct, you need to register a business in Indonesia because it's you running a business from Indonesia. You get your PTP my setup. And then I guess you can be an employee of that PTP ma so you pay taxes whatever is left inside whooping corporate taxes so so so yeah I think this person is on the right path, what do you say about that Dicky?

Dicky Darmawi:

Yeah, so dividends night now dividends. You are individuals and you get dividends from the company. It might be zero percent back upon dividends, if the dividends you invest in again to the companies or you buy bonds in Indonesia, or you buy shares on the stock exchange. So, if you invest again in Indonesia, then will be zero percent tax.

Derren Joseph:

Right, so so this is good so this is a good planning opportunity right so in terms of legitimate task planning. If it is the profits are reinvested into Indonesia, you can relieve yourself of, you know, the dividend taxes. Oh, is it relief was deferred so at some point in time?

Dicky Darmawi:

Not the profit Derren, it's dividends.

Derren Joseph:

Okay.Yeah, okay. So okay, right so so okay let me just make sure I got this right. So this person's going to be in a key test so they need to pay themselves a salary. Yeah, right. And that's salary will be taxable income tax, and then they have a company that PGPMA will pay the corporate taxes.

Dicky Darmawi:

Yeah, right.

Derren Joseph:

So then, ordinarily when they pull the dividends out. Yeah, that will be taxable as well.

Dicky Darmawi:

Yeah, but they can avail themselves of a planning opportunity.

Derren Joseph:

Yes, they can invest that in certain like bonds and certain instruments

Dicky Darmawi:

Yeah, partially also can okay and okay so the question would be, when they eventually liquidate that investment so they redeemed the bonds or whatever.

Dicky Darmawi:

Okay, so it has to hope there for three years.

Derren Joseph:

Okay, so there's a minimum holding period for three

Dicky Darmawi:

Yeah, yeah.

Derren Joseph:

And then after three is it tax-free?

Dicky Darmawi:

Yes, it's the next free

Derren Joseph:

Fantastic so that's a great tax planning opportunity. So whoever wrote that question among Chloe's name you know who you want a. I hope that helps. I hope that helps. And if you want to operationalize that you feel free to reach out to Dicky directly.

Dicky Darmawi:

I'll be happy to help.

Derren Joseph:

Alright, next question so someone is asking, here in zoom. Can you confirm that the final income tax on a crypto transaction sold through an Indonesian exchange is the same rate as a sale of a share in a listed company, namely point 1% of the sale Dicky?

Dicky Darmawi:

Sold through an Indonesian exchange. Okay. Yeah. I can confirm if the exchange has made the systems withhold the final income tax. Hmm. Okay, so it is not us, the seller to pay directly to the back office, hey I have sold into crypto no issue with the holder will be the exchanger do at home.

Derren Joseph:

Okay, so So this person needs to, you know, touch base with the actual exchange of crypto exchange and make sure that they are doing the right thing and they're going to be fine.

Dicky Darmawi:

Yeah.

Derren Joseph:

Gotcha, gotcha. Okay,

Dicky Darmawi:

This regulation. Yeah, this regulation will become effective on May 1 Yeah.

Derren Joseph:

Okay, so not yet.

Dicky Darmawi:

Okay

Derren Joseph:

Yeah. So I mean me is soon but in the end, they interrupt. If they sell in the interim, what should they do before May 1 of all.

Dicky Darmawi:

It's self-assessment. So, yeah, maybe to clarify this self. Yeah, you shouldn't need to declare and pay capital gains tax them. So if you in you treated as a capital gain, then the tax rate will be progressive.

Derren Joseph:

Okay. Gotcha. Okay, James hopes that answers your question. Moving on. Okay somebody's asking. Okay, in terms of tracking the trade so this is assuming that it's not an Indonesian crypto exchange. If it's one of the others outside. And assuming of course that they didn't register with Indonesia so there's no withholding. So then when this person is self-reporting. Do they need to track every buy and sell can they use averages can they use average or do they use FIFO or life or hateful last infrared stuff first in first out highest interest? How do they track, what's the right thing to do.

Dicky Darmawi:

Okay, currently it is still unclear. They not, they did not regulate, So detail like that. Yeah, even I still imagine how this 0.2% for the, for the overseas exchanger, how they can wait hold this 0.2%. Right. So because the offers these exchanges have to wait until they get approval to get a tax ID from Indonesia, that's an office, so they may be. They might as well do it hold the 0.2%. Otherwise, how they can hope, right.So it's still unclear now.

Derren Joseph:

Okay, so things are still unclear, but depending on what jurisdiction the person is asking I also be exposed. I guess you didn't you also need to be conscious of what the rules are there. And, you know, and to see, make sure that you know when they do their taxes that then I'm going to be taxed twice because you know if there are problems that so Indonesia, generally they recognize foreign tax credits correct. So if it's being taxed somewhere. Right. But to avail yourself of those foreign tax credits. How do you do that, how do you? Is it just filling out a form self-assessment, what do you need to show evidence, it was paid like a bank transfer or something that evidence is that attacks were paid.

Dicky Darmawi:

Yeah, for form submissions of the annual income tax return. We just need to fill in the form.

Derren Joseph:

Okay, so no proof just fill in the form, okay,

Dicky Darmawi:

But you have to keep the proof. If one day, that is asked you.

Derren Joseph:

Right. Okay, That's interesting. That's good to know. Okay. Right. And people are asking about staking and stuff like that so again we saying just to repeat what you said earlier the rules are just as yet unclear on that. But, you know, taking a conservative position you making money, you have an income. So then you know the conservative right thing to do is declare it right and pay taxes on it. Okay. Right, and someone is asking, as well yeah if it isn't. We've asked you again you've answered this question already if you use an exchange in Singapore. Yeah, again, the process is the same as that exchange in Singapore. if they have Indonesian clients they should have registered with Indonesia during the right thing, otherwise, you would need to know self-assessment, you need to declare it yourself. once you tax residents in Indonesia. Ordinarily, you're going to pay taxes on your worldwide income. Okay. All right. Great. Any other questions from you guys back here in zoom land, and the questions will have answered all of your questions here today. Okay, great. I think that's all the questions for today. That's great. So Dickie if someone wants to reach out to your team either the satellite office in Bali or the main office in Jakarta, what's the best way to find you guys.

Dicky Darmawi:

You can search my name or www.moores-rowland.com, there's in the chatbox there is my LinkedIn.

Derren Joseph:

Yeah. Okay, so you can, so you can reach out, to Dickie directly, he's available, he's reachable on LinkedIn, so Dicky Darmawi so you can do a search for him on LinkedIn, you can message him directly. Otherwise, you can go to Israel and mean Indonesia website, which is more as I think it's more natural and calm. Yes, right. Okay, so it's www.moores-rowland.com/ that's the main website, and you can use the contact form. you know the right member of the team will get back to you. If you have any questions. Otherwise, should you know taxing can reach us on our website, we do this, we do live streams every week where we answer questions about doing taxes the right way when you're working internationally.

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