Management of Repatriated Assets under Tax-Amnesty Program

The Minister of Finance(“Minister”)has just issued Regulation No. 119/PMK.08/2016 onProcedures for the Transfer of Taxpayer Assets to Indonesia and Their Placement in Investment Instruments in the Financial Market Through the Tax-Amnesty Framework (“2016 Regulation”).The 2016 Regulation implements Article 24 (c) of Law No. 11 of 2016 on Tax Amnesty(“Tax-Amnesty Law”) [1] and sets out further investment procedures for assets which are repatriated from overseas to Indonesia under the auspices of the tax-amnesty program. [2] Furthermore, the 2016 Regulation also covers: 1) The types of investment instrument that can be used to channel the repatriated assets; and 2) The agency which will administer and channel repatriated assets into investment instruments (“Gateway”).The 2016 Regulation is of relevance to all individuals, as well as to corporate taxpayers (“Taxpayer”).Tax-AmnestyAs is now widely known, under the current tax amnesty, Taxpayers may be eligible to receive pardons for any tax liabilities which may arise from any outstanding payable tax, and also be freed from any administrative and criminal sanctions by disclosing their assets and paying certain ransom fees (uang tebusan). [3] Such assets include assets which are held both in Indonesia and foreign countries, which must be disclosed in a statement letter which is submitted to the Ministry (“Statement”) via the relevant tax-service office where the applicant is registered, or via another designated place (e.g.Indonesian Embassies in Singapore, Hong Kong and so forth). [4] Asset Assignment to Investment InstrumentsThe Tax-Amnesty Law offer options whereby taxpayers can disclose any funds/assets which they may be holding overseas and invest them in certain investment instruments in Indonesia for a minimum of three years. In return, such Taxpayers will be entitled to pay lower ransom tariffs in comparison with Taxpayers who choose not to transfer their assets. Note that the 2016 Regulation states that unreported funds should be invested in Indonesia if: 1) The funds have been located in Indonesia since 31 December 2015; and 2) The Minister has yet to issue an approval letter granting a tax amnesty to the Taxpayer in question (“ApprovalLetter”). [5] In order to undertake the abovementioned investment, Taxpayers must first secure an Approval Letter and open a special account at a commercial bank (“Receiving Bank”) in Indonesia. These banks are appointed by the Minister in order to collect and manage repatriated funds. [6] Assets may be transferred directly to a Receiving Bank in Indonesia or through a branch office located in a foreign country (“Branch Office”). If the latter applies, then the branch office must assign the assets to a Receiving Bank in Indonesia before the end of the next business day. [7] The Receiving Bank must then report to the Directorate General of Tax (“Directorate General”) regarding the special account and also any assets which have been received from the Taxpayer. [8] Investment InstrumentsAfter transferring their assets to Receiving Banks, Taxpayers must channel them through the following types of investment instruments: [9]