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Interview with iadvisors Angeline Suparto and Robin Chia
This month, 2 of our iadvisors; Miss Angeline Suparto of Angeline Suparto & Co. and Mr Robin Chia of Robin Chia & Co. share some tips on doing business in Indonesia. Miss Suparto will share on business law, while Mr. Chia will share on tax issues. What are some business laws Singaporean companies should take special note of, when doing business in Indonesia? Angeline Suparto: Singapore companies should take note of the following set of Indonesian laws and their respective implementing regulations: (a) Foreign Investment (b) Companies (c) Labour (d) Property (e) Franchise (f) Free Trade Zone (g) Import/Export (h) Competition (if applicable) as well as industry specific regulations e.g. mining, oil and gas, education etc. In the Indonesian context, the practices, procedures, guidelines and policies of the relevant government departments should also be taken note of. In addition, Singapore companies should note that under Law No. 24 of 2009, agreements with Indonesian counter-parties must be written in the Indonesian language, but they may also be written in English if such agreements involve non-Indonesian parties. However, Law No. 24 does not provide which language will prevail in the event of a conflict. It is expected that a further implementing regulation will be issued to clarify this, and other issues, raised by Law No. 24. Singapore court judgments are not enforceable in Indonesia. However, as both Singapore and Indonesia are parties to the 1958 New York Convention, thus, the Singapore arbitration awards are recognized and enforceable in Indonesia (subject to certain conditions). Describe the tax regime in Indonesia Robin Chia: The Indonesian income tax structure is based on a self assessment system and combines a series of withholding taxes on day to day business dealings with a broad-based value added tax on revenues. Tax residents of Indonesia are taxed on their worldwide income, irrespective of whether the income is remitted or not remitted to Indonesia with a credit for tax paid offshore. The main taxes in Indonesia are as follows, • State (national) taxes: include income tax, valued added tax, sales tax on luxury goods, stamp tax, property tax (on land and buildings). • Regional taxes: include development, motor vehicle, household, road, advertisement, and radio and television taxes. • Custom and Excise taxes: include export tax, import duty, and special taxes on tobacco, sugar, alcohol and gasoline. Indonesian income tax law applies to resident and non-resident taxpayers. For individual resident taxpayers tax rates:
Individuals earning Rp15.000.000 or less are not taxed and tax reliefs are also available based on marital status and number of dependents. Resident individuals including expatriates are being assessed on world-wide income basis. Benefits in kind provided by employers to employees are not taxable to individuals but are also non-deductible against corporate taxable income. Employers are also required to withhold income tax from employees and deposit each month with the State Treasury. Employers must prepare a consolidated annual tax return detailing each employee’s individual tax calculation. The employee should then file a separate personal return. Tax returns should be filed by 31 March of the year following the year of assessment. For corporate resident taxpayers tax rates:
These rates apply to foreign companies deemed to be Permanent Establishments. They are also subject to a withholding tax on the repatriation of after-tax profits. A foreign corporation with no permanent establishment is subject only to a final 20% withholding tax on certain types of income derived from Indonesian sources. Deductions allowed against income in the determination of taxable income are broadly defined as costs incurred in earning, collecting and maintaining income. These costs include depreciation, amortisation, lease payments, interest, royalties, service fees, employee remuneration, business insurance premiums, some inter-company charges, travel costs, and pension contributions to pension funds and must be approved by the Minister of Finance. There are no tax deductions for distributions of profits, provisions in a reserve fund, benefits in kind provided to employees, gifts not related to business activities and costs incurred for personal benefit. Look out for next month’s issue where we will continue providing tips from our two experts on doing business in Indonesia. The above are views represented by Angeline Suparto and Robin Chia. If you need expert market advice on doing business in Indonesia, do post Ms. Angeline Suparto, Mr. Robin Chia or any of our iadvisors your questions. | ||||||||||||||||