Exclusion of foreign-sourced income for qualified tax resident expatriates
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:
ISCO/KBJI | Position | ISCO /KBJI | Position | |
2113 | Chemist | 2153 | Telecommunication Engineer | |
2114 | Geologists and Geophysicists | 2163 | Product and Apparel Designer | |
2131 | Biologists, Botanists, Zoologists and the relevant others | 2164 | City Planning and Traffic | |
2133 | Environmental Protection Expert | 2166 | Graphic and Multimedia Designer | |
2141 | Industrial and Production Engineer | 2310 | Lecturer at the University | |
2142 | Civil Engineer | 2511 | Systems Analyst | |
2143 | Environmental Engineer | 2512 | Software Developer | |
2144 | Mechanical Engineer | 2513 | Web and Multimedia Developer | |
2145 | Chemical Engineer | 2514 | Application Programming | |
2146 | Mining Engineer, Metallurgy, and the relevant others | 3121 | Mining Supervisor | |
2149 | Engineer and the relevant others | 3139 | Process Control Technician and the relevant others | |
2151 | Electrical Engineer | 3155 | Air Traffic Safety Electronic Device Technician | |
2152 | Electronic Engineer |
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.
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This publication is intended for general information only and should not be interpreted as substitute to any of our professional advices. All of information contained in this publication refers to the featured regulation as per the date of this publication.
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