Retirement Visa Question and Answer 28 Agustus 2009Posted by ignatiusedy in Pajak Penghasilan.
Does expatriates on Retirement Visa have the obligation to apply Tax ID Number (NPWP) ?
Comment : Yes, since the expatriates on retirement visa (also do have KITAS > time length 6 months) is categorized as Indonesian Tax Residency, they need to apply for NPWP.
Based on Indonesian Tax Law No. 36/2008, definition of Resident tax subject is any individual who :
a. resides in Indonesia, or
b. lives in Indonesia for more than 183 days in a period of 12 months, or
c. lives in Indonesia in one fiscal year and has the intention to reside in Indonesia;
What is Retirement Visa ?
This facility to provide renewable stay permits of one year’s duration was originally announced and regulated in February 1998 by the Keputusan Presiden RI nomor 31 tahun 1998, then completed in October 1998 by the Keputusan Menteri nomor M.04-IZ.01.02 tahun 1998.
In the first few years after the regulations were issued few retirees were actually able to actually get the visa due to the strict requirements. The “better explanation” of the regulations in April 2002 (decree by the General Director of Immigration in law No. F. 492-UM.01.10, April 18, 2002) brought the requirements within closer reach of the financial capabilities of most retirees.
Definition Retirement Visa (http://www.expat.or.id/info/retirement.html)
The retirement visa facility is intended to assist those wishing to spend their retirement in Indonesia and has the following requirements:
a. Applicant is 55 years of age or older,
b. Possess a passport or travel documents with more than 18 months remaining validity,
c. Submit full identification (copy of all passport pages) and four passport photos 4 x 6 cm,
d. Curriculum vitae,
e. Statement from Pension Fund Foundation or Bank from the country of origin (or Indonesia) of funds available, minimum of US$1,500 per month, to provide the applicant living expenses during the proposed stay in Indonesia (Total US$18,000 per year) (VERY stiff compared to other countries requirements – US$600/month in Panama),
f. Proof of medical/health Insurance, death insurance, and personal liability insurance in country of origin or Indonesia,
g. Statement of living accommodation in Indonesia. Minimum cost of US$35,000 if purchased house/apartment or, a minimum rental cost of US$500/month in Jakarta, Bandung, and Bali; US$300/month for other cities in Java Island, Batam, and Medan, and other cities a minimum US$ 200/month.) in the tourist areas according to the regulations,
h. Statement to declare employment of an Indonesian maid servant whilst living in Indonesia,
i. Payment of Immigration Fee based on effective regulations,
Sponsor letter from the appointed travel agency, costs to be paid by applicant,
j. Statement agreeing not to engage in business activities or work for a living. You MAY NOT WORK in Indonesia on this visa!
k. You may stay in Indonesia for one year on this visa, extendable for up to a maximum stay of five years.
Does expatriates from every countries may apply for retirement visa ?
No, Based on Keputusan Menteri nomor M.04-IZ.01.02 tahun 1998, it only limited to citizens of the following countries:
Australia ,Austria ,Belgium ,Brunei ,Canada ,Denmark ,Finland ,France ,German ,Italy ,Japan ,Luxemburg ,Malaysia ,Netherlands ,
New Zealand ,Norway ,Singapore ,Spain ,Sweden ,Swiss ,Taiwan ,Thailand ,The Philippines ,United Kingdom ,and USA
How much is the cost of applying retirement visa ?
comment : it will be around Rp.9.000.000,- / person (for the first time – 1 year ) and Rp.7.500.000,- /person (for extention -maximal 5 times/years)
How can I apply for retirement visa ?
comment : Please contact travell agency directed by Director General of Imigration.
such as :PT. INTER FAMILY CITRATAMA (021) 7255765 , PT.VISTA EKSPRES TOUR & TRAVEL (021) 3151917, etc
website : http://www.imigrasi.go.id/index.php?option=com_content&task=view&id=18&Itemid=56
Is there any exposure (In Tax Side) if expatriates under retirement visa earn capital gain income in indonesia?
Comment : No, as long as He/She report all of His income to Indonesian Tax Office and pay all the tax payable on it.
However, if the imigration know that He/She earn income in Indonesia, it might be a problem since on some person point of view, the capital gain transaction could be categorized as business profit.
What is the implication for those expatriates on retirement visa who does not have NPWP ?
Based on Director General of Taxation Regulation no. Per-53/PJ/2008 :
Resident individual Taxpayer who does not have NPWP and has reached the age of 21 (twenty-one) years and is departing overseas must pay Fiscal Tax.
The amount of Fiscal Tax payable by resident individual Taxpayer as intended in Article 2 shall be:
a. Rp 2,500,000 per person every time he is departing overseas by air.
b. Rp 1,000,000per person every time he is departing overseas by sea.
Why do expatriates on retirement visa need to apply for NPWP and become an Indonesian Tax Residency, eventhough they can not work in Indonesia ?
Comment : Although they are not allowed to work, But still can have an income that may be taxable.
such as : Interest Income, Dividen income, Rental Income, Share selling transaction, Overseas income, etc
Indonesian tax law practices the principle of “Worldwide Income”, which requires Indonesian tax residents (you and your familiy) to declare worldwide income, received in anyform, derived within and outside the boundary of the Republic of Indonesia.
Does expatriate who under social visa (time length to stay 6 month) obligate to apply NPWP ?
Comment : If they extend the visa or required as being an Indonesian Tax Resident, they also need to apply NPWP
Is there any comparable case in other countries for retirement person ?
In Australia, If you have income, you pay tax on it, including income from social security. There, everyone has a tax number.
There is no difference for a person on a retirement visa to any person who does not fit the criteria for that visa
Expatriates who have chosen to live in a foreign country, there are certain aspects of living abroad, old or not.
The reason that countries have recripocal tax agreements is to ensure that you do not have to pay tax twice.
The reason there are tax accountants is to fill out the tax forms for you.
It would not be workable to exclude a certain section of expats on a particular visa from the general rules for taxation.
We certainly don’t in Australia and I think you will find that they don’t in the USA either (for expats living in the US) whether they are old or not.
Any possibility for using retirement visa but Not to apply NPWP ?
Comment : Unless you are living entirely on savings, and you don’t get any interest on those savings, then you do not have to apply for NPWP.
Sample of Tax Treaty related to Private Pensions and Social Security Payment ? (US – Indonesia Tax Treaty)
Article 21 – PRIVATE PENSIONS AND ANNUITIES
1. Except as provided in Article 18 (Government Service), pensions and other similar remuneration in consideration of past employment derived from sources within one of the Contracting States by a resident of the other Contracting State may be taxed by both Contracting States. If the beneficial owner of pensions and other similar remuneration is a resident of the other Contracting State, the tax so charged may not exceed 15 percent of the gross amount thereof.
Article 22 – SOCIAL SECURITY PAYMENTS
Social security payments and similar benefits paid out of public funds by one of the Contracting States to an individual who is a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned Contracting State. This Article shall not apply to payments described in Article 18 (Government Service).
What is the requirement for using tax treaty ?
comment : Have to provide COD state that you are also residency of other countries.
Instead, it will applied Indonesian domestic regulation. (World Wide Income with no restriction)