The DGT’s Explanation of the New Income Tax Regime for Foreign Workers

JAKARTA, DDTCNews – The government imposes a territorial system on the income of foreigners with special expertise of the resident tax subject status. With the implementation of this policy, foreigners with special expertise are expected to contribute to the Indonesian economy.

Director General of Taxes Suryo Utomo remarked that the policies outlined in the taxation cluster of the Job Creation Law do not imply that the government exempts foreigners with special expertise from Income Tax.

“We need to figure out how these foreign experts may participate in developing the Indonesian economy. Certain non-Indonesian citizen experts are subject to special provisions, but that does not imply they are not taxed,” stated Suryo in a Media Briefing, Monday (12/10/2020).

Through the amendment to the Income Tax Law under the Job Creation Law, foreigners with certain expertise residing in Indonesia more than 183 days a year are designated as resident tax subjects. Only income sourced from Indonesia, however, is subject to Income Tax.

The special treatment of foreigners with special expertise is only valid for 4 years. After 4 years, the income of foreigners with special expertise, both from Indonesia and from outside Indonesia, will be subject to Income Tax in Indonesia.

“For the first 4 years, only income sourced from Indonesia is subject to Indonesian taxes. After 4 years, it will be subject to the worldwide income system adopted by Indonesia,” said Suryo.

Under Article 4 paragraph (1a) of the Income Tax Law in the Job Creation Law, there is an exception from the provisions under Article 4 paragraph (1) concerning income constituting a taxable object for foreigners with certain expertise who have become resident tax subjects.

The provisions under Article 4 paragraph (1a) do not apply to foreigners who take advantage of tax treaties between Indonesia and partner countries. Further provisions on the criteria for expertise entitled to the treatment pursuant to Article 4 paragraph (1a) will be regulated through a Minister of Finance regulation (MoF). (kaw)