Disclaimer: All posts below are strictly based on what I know as far as I can remember on top of my head. Any amount, claims, theory, rumors you read below may or may not be correct, so do your own research before assuming what I said below are right.
In recent days, there has been an uprising of discussion among Indonesian who stays in Singapore about new tax regulations in Indonesia. The tax regulations itself is not new, it has been there since 2007, and year 2008 was meant to be the one full year where people learn about it.
Unfortunately, Indonesian who are residents in Singapore have just been briefed about this new tax regulations last week, a mere 5 weeks before it will take effect 1 Jan 2009. There has been lots of emails circulating, rumors, and tons of other unclear directions on what people should and should not do. I’ve done some checks, even visiting Tax Revenue Authority of Indonesia’s website, but alas, no clear information there too.
The whole aim of Indonesian in Singapore finding the information is to avoid double taxation. We are currently already paying tax in Singapore, and to pay tax to Indonesia again is well … odd, not to mention the crazy amount we need to pay.
Put it simply, people in Singapore who earns up to S$40,000 a year only hit 5% tax bracket. In Indonesia, 5% tax bracket only is only meant for those who earn about S$3,500 a year, less than $300 a month, how to live in Singapore like that? Then, what if you earn $40,000 a year? In Indonesia tax regulation, anyone earning more than roughly S$25,000 a year falls under the highest tax bracket, an astonishing 35%. Do I need to repeat that? A crazy 35% !!! Not that we, earning S$25,000 a year, are super-rich people here in Singapore.
Now you can see what makes Indonesian in Singapore crazy about this tax regulations, and why it’s best we should avoid it. It’s in the tax treaty between Singapore and Indonesia anyway. The method to avoid this double taxation has been described in emails around Indonesian here, without anyone have a firm answer on what need to be done. I know about “Certificate of Residence”, what else?
There will be a lot of people going back to Indonesia for Chinese New Year end of January 2009, and it seems like we no longer have free 4 times of fiscal tax. That means we probably have to pay S$200 of fiscal tax if we can’t provide the necessary proof that we are already paying tax here. There has been even rumors that amount could be raised 400% to S$1000.
Now, can you see the messy regulations we have? Couple that with only 5 weeks people generally have now (even much less for those who are going back soon in December, and coming back to Singapore by early January 2009) to settle for any necessary documents, don’t be surprised to see IRAS overwhelmed by requests for “Certificate of Residence”.
Now, I wonder how many people will change their citizenship because of this?
How about this one?
http://www.kanwilpajakkhusus.depkeu.go.id/treaty/Singapore.htm
Comment by byte — November 28, 2008 @ 10:09 am
You know, I think most of the people do not really mind if the 35% tax is really put to good use for the development of the country and the welfare of the people. But knowing and proven that 99.99% will be siphoned by those crooks, nah…
Seems like denouncing citizenship becomes a really attractive option if your info is true.
Comment by byte — November 28, 2008 @ 10:15 am
@byte: I think what we need more is a layman-term explanation, not those lawyer-speak lengthy document that will make people lost in it.
Comment by hendrikch — November 28, 2008 @ 11:20 pm
gua ga pernah liat yg bilang 35% tax… and didn’t find it anywhere too….
Yg paling certain cuman fiskal mo dinaekin unless register buat NPWP (http://www.pajak.go.id/index.php?view=article&catid=72&id=8146)
But then, after living in Indon for 18 years, dont we already know this kind of thing is expected (Sudden changes or rules?… short notificaiton of new regulation? … )
Comment by sen — November 29, 2008 @ 10:14 pm
@sen: check here: http://www.pajak.go.id/index.php?option=com_content&view=article&id=5006&Itemid=167
There, it mentioned for those who earn more than Rp.200million a year, the tax rate is 35%. Of course the bracket is staggered like Singapore.
More like we don’t know what to expect next hehe….
So, are you glad now that you’ve denounced your citizenship? :p
Comment by hendrikch — November 30, 2008 @ 12:18 am
Note: It only say the income tax for residents in Indonesia… It doesn’t say specifically on those working in foreign country, nor does it say that they are subjected to ‘Indonesian tax rate’..
It’s not the “glad-or-not-glad” about citizenship… it’s about “I don’t see Indonesia getting back on their feet in my lifetime”… Probably my grandson-granddaughter or “very-great-grandson” will be able to see Indonesia flourish in 2200…
Comment by sen — November 30, 2008 @ 1:00 pm
Hi Hendrik. All this is really confusing and upsetting indeed.
I am Indonesian and married to a foreigner, living in Singapore. My husband is the sole breadwinner of the family. Could you tell me how this new tax /NPWP regulation will affect me? Is there anyway I could get a NPWP then?
PS. We’ve got some asset in Indonesia and are paying annual tax on them.
Thanks for your help.
Comment by Ita — December 12, 2008 @ 9:00 am
@Ita: Hi Ita, If you’re already paying annual tax on properties, you should already be covered as that’s all the income you have from Indonesia.
As for your husband income, it shouldn’t be affected. I’m assuming you’re a housewife with no income for the family, so no need NPWP I think.
I’m not sure how fiscal will affect you though.
Note that all these are purely my guess, you should always contact the embassy or some authority to give you proper answers
Comment by hendrikch — December 12, 2008 @ 1:41 pm