Tax Amnesty for Taxpayers in Possession of SPV Assets

In a bid to create more certainty as regards the various assets which must be disclosed under the framework of Law No. 11 of 2016 on Tax Amnesty (“Tax-Amnesty Law”), [1] the Minister of Finance (“Minister”) recently issued Regulation No. 127/PMK.010/2016 on the Tax Amnesty Based on the Tax-Amnesty Law for Taxpayers in Possession of Indirect Assets in Special Purpose Vehicles(“2016 Regulation”). [2] With this objective in mind, the 2016 Regulation sets out further guidelines for both individual and corporate Taxpayers (“Taxpayers”), as regards the disclosure and treatment of any of their assets which are placed into any special purpose vehicles (“SPV”), in order that they be able to obtain a tax amnesty.Disclosure of SPV AssetsUnder the framework of the Tax-Amnesty Law, Taxpayers may receive pardons for any tax liabilities arising from their outstanding payable tax, provided that the Taxpayers in question are not currently subject to any criminal investigation process, proceedings or sanctions relating to the committing of tax crime. In order to receive the amnesty, Taxpayers are also required to disclose their assets, as well as to pay certain ransom fees (uang tebusan). [3] In relation to asset disclosure however, there was previously no clarity as regards whether Taxpayers were required to disclose any SPV assets or not. The Regulation, however, now clarifies that Taxpayers must also disclose any indirect assets which have been placed within domestic and/or overseas SPVs (“SPV Assets”). An SPV itself refers to any entity that does not engage in significant business operations but which has been established for a specific purpose in the interest of its founders, such as investment. [4] In order to disclose any SPV Assets, Taxpayers are required to submit statement letters. However, the value of the various SPV assets which must be disclosed may differ, based upon certain conditions which are described in the table below: [5] It should however be noted that Taxpayers are exempt from the obligation to disclose their SPV Assets if they established the SPV and also provided loans to any such SPV as well. [6] Following the process of asset disclosure outlined above, Taxpayers are then required to dissolve the SPV or relinquish their ownership rights over the SPV and its various assets by transferring such rights into their name, instead of them remaining under the SPV’s name. Taxpayers may also transfer any such rights to any Indonesian limited-liability companies that they may own. [7] Note that any transfers of immovable assets (either land and/or buildings) and shares are exempt from the imposition of income tax, provided that an agreement covering any such transfer is signed by 31 December 2017 at the latest. [8] The 2016 Regulation also mandates that any Taxpayers who own assets in SPVs should also eventually comply with the provisions set out under Ministry Regulation No. 118/PMK.03/2016 [9] on the Implementation of the Tax-Amnesty Law. [10] Ransom-Fee PaymentAside from the disclosure of any such assets, Taxpayers who own SPV Assets are also required to pay certain ransom fees in order to secure an amnesty. In general, the payable ransom fee is calculated using the following formula: [11] Ransom tariff x (total value of actual assets – total tax liability)The 2016 Regulation then specifies that any ransom tariffs relating to SPV assets should be in compliance with the tariffs set out in the Tax-Amnesty Law, as follows: [12]