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Indonesia has just completed its first phase of the tax amnesty program on 30 September 2016. From July up until recently, the Government issued a series of regulations on the tax amnesty program. These regulations provide the forgiveness of taxes, taxation administrative and criminal sanctions regarding assets that have not been declared by a taxpayer, by way of declaring the assets and paying the relevant prescribed penalty/uang tebusan. Taxpayers that have participated in the tax amnesty program but meeting the conditions for not participating in the new tax amnesty regulation are entitled to withdraw their declarations.
It is important to note that despite of the Tax Amnesty Law provides for forgiveness under the Indonesian tax law, the Law does not forgive the breaches of other laws and regulations relevant to the particular assets. In the most recent amendment to tax amnesty regulation, it explicitly states that criminal offenses such as, among others, narcotics, terrorism and human trafficking, will still be subject to criminal punishments under the relevant laws and regulations.
Declared onshore assets and offshore assets that have been repatriated may only be transferred to certain appointed banks (Recipient Banks) and may only be invested through certain appointed Gateways (consisting of banks, investment managers and brokers). These repatriated assets must be kept in Indonesia for at least 3 (three) years.
The declaration includes onshore and offshore assets that are owned by the taxpayer through SPV. An interesting point to note here is that, now, a taxpayer with an SPV, subject to the definition of SPV as regulated, may choose whether to unwind such SPV structure or keep the structure to obtain tax amnesty on the assets held by such SPV. Such choice will have a different impact on the penalty imposed.
Other issues that concern the taxpayers are data confidentiality, and the on-going judicial review in the Constitutional Court on the Tax Amnesty Law which, if the Court declares that the Tax Amnesty Law to be null and void, will render the provisions of the Tax Amnesty Law (including on data protection) to be unenforceable.
Another debatable topic that will be discussed in the attached e-bulletin is money-laundering issue that closely connected with tax evasion element in tax amnesty. As the element itself has been forgiven under the Tax Amnesty Law, it will not trigger Indonesia Anti-money Laundering Law. That said, would the action of Indonesian taxpayer withdrawing funds (for the purpose of tax amnesty) from offshore bank account trigger the application of Anti-money Laundering Law under the relevant jurisdiction?
Please find our further discussion on the Tax Amnesty issues in the attached e-bulletin