The Omnibus Law of Job Creation, enacted on 2 November 2020, introduced new measure on exclusion of foreign-sourced income for qualified tax resident expatriates. Further implementing regulation was recently issued, Minister of Finance Regulation (MoF) No. 18/PMK.03/2021 (“MoF 18”), as summarized below.

Tax resident expatriates may exclude foreign-sourced income in their Indonesia tax return under following conditions:
a. Qualify for certain expertise; and
b. Applicable for a period of 4 years since initial tax resident registration.

Income that is paid outside Indonesia in relation to an employment, services, or activities carried out in Indonesia, is particularly considered Indonesia-sourced of Indonesia, hence still taxable. Further, if expatriate elects for tax treaty relief, the exclusion is not be applicable.

Certain Expertise

Qualified expatriates with certain expertise include:
a. Foreign workers occupying certain positions, and
b. Foreign researchers

Further criteria for certain expertise are as follow:
a. foreign nationality;
b. having expertise in science, technology, and/or mathematics, which is proven by relevant:
1. certificate of expertise which is issued by institution appointed by Indonesia or their country of origin;
2. education certificate; and/or
3. minimum working experience of 5 years.

Following are certain positions that may get exclusion on foreign-sourced of income:

Administrative Requirement

To apply the exclusion, qualified expatriates shall submit a request to the Director General of Taxes (DGT), electronically or via courier. Within 10 working days, DGT shall issue approval or rejection letter on the request.

If the request is approved, the expatriate shall report only Indonesian-sourced income in the tax return.

Expatriates who qualify for certain expertise that have been subject to Indonesian tax before the enactment of this regulation may be taxed only upon its Indonesian-sourced income as long as the 4-years period has not been exceeded, while they are still required to submit a request for exclusion as per above.