This content is from: Local Insights

2011 tax policies

Freddy KaryadiOene Marseille

In 2011, the Indonesian Tax Office will be more aggressive in conducting tax audits to examine the fulfilment of tax obligations. In this regard, the Directorate General of Taxes has issued Circular Letter No 29/PJ/2011 (SE-29) dated April 4 2011 regarding the tax audit strategy and plan for 2011.

This year, the Tax Office will mainly focus on increasing tax audits on individual and corporate taxpayers within certain industries including oil and gas, mining, telecommunications, and construction. Transfer pricing audits will also be focussed especially on taxpayers registered in the Large Taxpayers Regional Tax Office, the Special Jakarta Regional Tax Office, and the Middle Tax Office throughout Indonesia.

Meanwhile, the Indonesian government has signed exchange of tax information agreements with Guernsey and Jersey. A country having a tax treaty or exchange of tax information agreement with Indonesia and not applying bank secrecy will be not considered as a tax haven if their income tax rate is not lower than 50% of the Indonesian income tax rate. In the past, Indonesia has blacklisted countries which are deemed as tax havens under its Controlled Foreign Corporate rule. To be considered as not being a tax haven country will be important not only to avoid the applicability of the CFC rules but also for the effect on inbound investment since the 2008 anti-tax avoidance rule which targets indirect sales of Indonesian companies' shares (similar to the Vodafone case in India) can be mitigated if the jurisdiction in which a company whose shares are transferred is not a tax haven.

Oene Marseille and Freddy Karyadi

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