Income tax procedures simplified

Income tax procedures simplified

JAKARTA (JP): The directorate general of taxes has expedited the procedures for foreigners to obtain lower income tax rates by reducing the documents they have to submit to the tax office.

"Beginning early this month, foreigners applying for lower income tax rates are required to submit only their original certificate of residence to their employers and a copy of the certificate to the local tax office," Director General of Taxation Fuad Bawazier said in a circular received yesterday.

He said that foreigners who earn an income in Indonesia are subject to a final income tax rate of 20 percent. However, foreigners whose home countries have double taxation agreements with Indonesia may obtain a lower income tax rate or even tax exemption contingent upon the provisions of the double taxation accords.

Previously, foreigners applying for income tax exemption or lower income tax rates were required to submit many documents, including a certificate of tax free facility, a certificate of tax rates and certificate of residence.

There are 31 countries that have signed double taxation agreements with Indonesia but the agreements stipulate different income tax rates.

Fuad pointed out that a certificate of residence has to be signed by a respectable party in the home country of a foreigner or an authorized representative.

The director general's directive stipulates that a certificate of residence would be the basis for a employer to determine a foreigner's tax on income derived in Indonesia.

Fuad pointed out that foreign banks or financial institutions clearly mentioned in the double taxation agreements are not required to submit certificates of residence. But other banks and foreign institutions have to submit such a certificate. (13)