Preferential Treatment under the New Regulation

Foreigners and Indonesian nationals are under Regulation 202/2017 entitled to certain preferential income tax treatments, under the following conditions:

  1. They are employees of international organizations; and/or
  2. They are subject to international law

These treatments are stipulated under each individual tax treaty between Indonesia and foreign countries. The Regulation 202/2017 acknowledges that these preferential income tax treatments will remain in place until the expiry of the related tax treaties.

The preferential income tax treatment can only be implemented if the following conditions are met:

  1. The tax treaties must comply with Law number 20 of 2000 concerning International Treaties;
  2. There is no reservation or declaration on provisions of Income Tax treatment in such tax treaty; and
  3. The tax treaty has been ratified / approved. Please note that in certain cases this latter condition is not required.

Foreigners or Indonesian nationals who received salary from any international organization can be exempted from the income tax provisions as regulated under the Indonesian Tax Law, if such organization has an international agreement with the Indonesian government which explicitly regulates the exemption of income taxes on salary and other remunerations.

Tax Treaties between Countries and Organizations

Indonesia has already entered into tax treaties with the following countries:

  1. Australia
  2. Canada
  3. India
  4. United Kingdom
  5. Japan
  6. New Zealand
  7. The Netherlands
  8. Russia
  9. Germany
  10. France
  11. Poland
  12. United States of America (USAID)
  13. Switzerland
  14. Italy
  15. Belgium
  16. Denmark
  17. South Korea
  18. Finland
  19. Malaysia
  20. Singapore
  21. People’s Republic of China
  22. Vietnam
  23. Thailand
  24. Mexico
  25. Saudi Arabia
  26. Iran
  27. Pakistan
  28. Philippine
  29. Egypt/RPA
  30. Austria

Besides the agreements listed above, Indonesia has also entered into several partnerships with a number of international organizations, such as international development and investment banks.

This column is provided by PNB Law Firm Jakarta