No More Banking Secrecy
Information kept by ﬁnancial service institutions can now be accessed by the tax department. President Joko Widodo recently endorsed regulation in lieu of law number 1 year 2017. This regulation eliminates all banking secrecy clauses within Indonesian Law. There is a dual purpose for this law. Firstly, it allows the tax department to scrutinize all Indonesian accounts. Secondly, it is to ensure Indonesia’s timely participation in the Automatic Exchange of Information (AEOI) in 2018.
What does this mean for Indonesian taxpayers?
- All ﬁnancial service institutions (FSI) are required to provide information on accounts and account holders to the tax department both automatically and upon request.
- Indonesian Ministry of Finance announced in a press release dated 7 June 2017, that all personal accounts of balance greater than Rp.1.000.000.000 will be automatically reported.
- Information from all accounts, even those below Rp.1.000.000.000, may be requested by the tax department.
- Automatic data will be scrutinized by the tax department and irregularities found in taxpayer accounts may trigger tax audits.
- This data will be shared automatically to other jurisdictions participating in AEOI.
- Indonesia will receive ﬁnancial information from other jurisdictions participating in AEOI.
What Information will be provided by FSI to the tax department?
Indonesian FSI are required to provide the following:
- Identity of account holder;
- Account number;
- Identity of ﬁnancial institution;
- Account balance;
- Source of income.
What sanctions are in place to ensure information is provided to the tax department?
The regulation in lieu of law number 1 year 2017 (Perppu) forces all to comply with the requirements for AOEI. Article 7 states that FSI, their management and staﬀ who: do not report; do not identify clients; and do not provide proof when requested, will be subject to criminal charges which could result in 1 year imprisonment or a ﬁne of up to Rp.1.000.000.000. In addition, any person or institution found to be making false statements, tampering or withholding information within reports, will be subject to criminal charges which could result in 1 year imprisonment or a ﬁne of up to Rp.1.000.000.000.
Which Indonesian laws are aﬀected by the Perppu?
- Law number 16 year 2009 concerning the general provisions and procedures of taxation into law.
- Law number 10 year 1998 concerning banking.
- Law number 08 year 1995 concerning stock exchange.
- Law number 32 year 1997 concerning commodity futures trading.
- Law number 21 year 2008 concerning sharia banking.
How to prepare for the changes at hand?
The tax environment in Indonesia is changing. We advise all our clients to remain prudent in their business dealings and make accurate declarations for income and expenses.
Putranto Alliance offers the following services to help respond to the new regulations:
Guide Our in-house tax consultants and lawyers can provide guidance in the form of advisory on the new regulations.
Structure Within our alliance we have the capability to take action on the guidance we provide. This is in the form of restructuring of shares and land ownership with full local tax compliance.
Close Our alliance can offer in-house liquidator services with an expedited process to offtake shares from corporate book keeping.
What is the purpose of AEOI?
The Ministry of Finance states in its regulation, number 39/PMK.03/2017 regarding exchange of information based on international agreement, the following aims for Indonesia’s participation in AEOI:
- Prevent tax avoidance;
- Prevent tax evasion;
- Prevent abuse of tax treaties;
- Obtain information relevant for the fulfilment of taxpayer liabilities.
The Indonesian tax department will receive reciprocal data from all participating jurisdictions.
How AEOI works?