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Tax Amnesty or the Voluntary Disclosure Program for Taxpayers is a government initiative previously introduced in 2015. Recently, it has become a topic of public discussion that the government plans to reintroduce this initiative through the Second Phase of the Tax Amnesty Program.

Before delving deeper, it's important to understand that Tax Amnesty refers to the forgiveness or cancellation of taxes that should have been payable, without the imposition of administrative sanctions or criminal charges in the field of taxation. This is done by disclosing previously unreported assets and paying a redemption fee. The provisions regarding Tax Amnesty are regulated under Law No. 11 of 2016 (“Law 11/2016”) concerning Tax Amnesty.

According to this law, taxpayers are only required to disclose their assets and pay a redemption fee as a form of tax forgiveness for assets that had not been reported to the Director General of Taxes. 

Several benefits are expected from the implementation of the Tax Amnesty program, including:

1. Increasing short-term state tax revenues through the collection of payments related to previously undisclosed assets;
2. Encouraging awareness and honesty among taxpayers to voluntarily report their wealth. This is expected to lead to the repatriation of assets held overseas, which in turn would support and improve the domestic economy;
3. Serving as a transitional tool toward a new tax system, making the amnesty program justifiable within a broader reform framework;
4. Encouraging non-compliant taxpayers to fulfill their obligations, as the program provides a one-time opportunity to come forward without fear of penalties.

According to data from the Directorate General of Taxes, the first phase of the Tax Amnesty program was joined by 956,793 taxpayers. The total value of assets disclosed during the program reached IDR 4,854.63 trillion, while the value of repatriated assets (transferred back into Indonesia) amounted to IDR 147 trillion. From this program, the government collected IDR 114.02 trillion in redemption payments.

In addition, for taxpayers who did not fully disclose their assets during the first Tax Amnesty, the government is now introducing the Voluntary Disclosure Program, also referred to as the Second Phase of the Tax Amnesty. This program includes two main policy components:

1. First Policy: Targeted at individual and corporate taxpayers who participated in the first Tax Amnesty but failed to disclose all assets acquired between January 1, 1985, and December 31, 2015.
2. Second Policy: Aimed at individual taxpayers who have not submitted their Annual Tax Return (SPT) for the year 2020.

Policy I
Mr. A participated in the 2015 Tax Amnesty program; however, at that time, there was still a property in Indonesia that was not disclosed, valued at IDR 2 billion as of December 31, 2015. To avoid sanctions under the Tax Amnesty Law, Mr. A participates in the Voluntary Disclosure Program.

Mr. A intends to only declare this domestic asset without investing in government bonds (SBN), downstream industries (hilirisasi), or renewable energy. Therefore, Mr. A pays a final income tax at the rate of 8%, amounting to IDR 160 million (8% x IDR 2 billion).

Policy II
Mr. B owns two houses and a bank account in Indonesia acquired between 2016 and 2020. The two houses, valued at IDR 3 billion, have been reported in the 2020 Annual Tax Return, but the bank account, valued at IDR 1 billion, was not reported.

Mr. B will participate in the Voluntary Disclosure Program and intends to invest the funds in government bonds (SBN). Consequently, Mr. B pays a final income tax at the rate of 12%, amounting to IDR 120 million (12% x IDR 1 billion).

As additional information, the asset disclosure period lasts for six (6) months, starting from January 1, 2022, until June 30, 2022. For those planning repatriation, the deadline for transferring assets back to Indonesia is no later than September 30, 2022. Participants who intend to invest their assets in the processing sectors.

Assets invested in the natural resources sector, renewable energy, and/or government bonds (SBN) must be done no later than September 30, 2023. 

If you have any questions or concerns regarding the management of the Second Phase of the Tax Amnesty, please feel free to contact our Client Relations team or email us at admin@anclegalbusiness.com.

*Disclaimer: This article is for general information only and does not constitute legal advice. We accept no liability for any consequences arising from its use. Unauthorized use or reproduction is prohibited and may result in legal action.