HOW TO DEFINE INDIVIDUAL EXPAT AS RESIDENT OF INDONESIA

In today's world, it's more and more common to relocate people from one country to another.  Become part of a new and exciting community, opportunities to travel, learn new skills and gain valuable experience are among the reason why people working abroad.

When you come to Indonesia with an intention to work and reside in Indonesia with a valid work permit and stay permit would be generally regarded as Tax Resident of Indonesia from the date of arrival.Till this point.you might be confused with it, as your Income tax regulation in your country treats you the same.

If So, who is entitled to impose the taxes?

Well, this is an issue I have been passionate about.  Frankly, due to this case  I enrolled my self to have further Tax Course focusing on International Taxation., therefore, I am very keen on discussing about this issue of personal income tax which highlight on the changes of individual's status from Foreign  ( Non Resident) Tax Subject to Domestic ( Resident) Tax Subject.

Let's find out the definition of Resident Tax ;

Resident tax payers are defined as :

• an individual presenting in Indonesia for more than 183 days in any 12-month period
• an individual presenting in Indonesia during a tax year and have the intention of residing in Indonesia

As written above, an expatriate is regarded as resident from the date of arrival until the date of final departure from Indonesia. and reciprocal, An Indonesian national is considered resident from birth unless he/she leaves Indonesian permanently. An Indonesian national working overseas for more than 183 days in a 12-month period is also considered as non-resident. He/She will only be taxed on his/her Indonesian-source income, provided that he/she has paid income tax on his/her offshore employment earnings and she/he has official proof of overseas residence (i.e. employment pass, stamped passport, overseas residency cards, certifications from Indonesian Embassy, etc.)

please be noted;

183-day limit is a time test to determine an individual’s status as an individual tax resident subject or Non Tax resident subject. The time  test  applies to countries which do not have a Tax treaty between the origin country with Indonesia. If there is a tax treaty, the time test will be based on the tax treaty, for example,the  time test between  Indonesia and the United States is 120 days instead of 183 days.

An individual who is present in Indonesia for tax purposes is required to file an individual tax return if he/she obtains income which exceeds the personal deduction threshold .  However, in order to file a tax return, an individual must obtain NPWP ( a tax identification number)

Main personal relief – The personal deduction income threshold;

Description	IDR
Tax payer	24,300,000
Spouse	2,025,000
Each dependant max 3	2,025,000
Occupational expenses ( 5%of gross income, max IDR 500,000/month	6,000,000
Employee contribution to BPJS Ketenagakerjaan**	Full amount

** This is part of worker security program which is applied to expat based on new regulation 2014, it will be further explained on another page

Tax surcharge of 20% will be applied o the earnings of an employee who does not have NPWP while earning income above the personal deduction threshold

The changes of individual's status from Foreign  ( Non Resident) Tax Subject to Domestic ( Resident) Tax Subject.

Individual Non Tax Resident usually will get their salary withheld by the employer, which is classified as  Final income Tax article 26 (PPH 26) . However, the final withholding tax can become NO FINAL, interms of foreign tax subject turned into a domestic tax subject. Meaning that PPH 26 which has been withheld can be credited with personal income tax payable at the end of the year.

Next, if the status has been changed An individual is no longer withheld PPH 26, He/She will be subject to Withholding PPH 21 (Local individual Tax).

Conclusion, the status can be changed as it has already met the time test.

I hope you find this article helpful, please contact me if more explanation is needed

Cheers

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