PAYMENT OF PERSONAL INCOME TAX IN INDONESIA.: PENSION

Given new implementing regulations issued by the government to the Omnibus Law, relating to taxation general provisions of law, Income Tax Law, and Value Added Tax (VAT) law, the Insonesian tax dept has started a hunt for tax evading residents and have thought of starting with retirees, easier to spot since they have a retirement visa.
Pensions are classed as worldwide income and are subject to tax in Indonesia if you are a resident taxpayer.
If your country has a tax agreement with Indonesia check at follow link the agreement to see specific details for your own country. https://perpajakan.ddtc.co.id/p3b?fbcli … VlWEOYTRkg
eg ITALY Article 18
PENSIONS
Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.
2.(a) Any pension paid by, or out of funds created by, a Contracting State or a political or administrative subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
A summary of the regulations:
Residency Rules
Resident taxpayers are defined as individuals who:
• are domiciled in Indonesia; or
• stay in Indonesia for more than 183 days in any 12-month
period; or
• are present in Indonesia during a tax year and intending to
reside in Indonesia.
A foreigner who qualifies to be a resident taxpayer becomes a tax
resident from the date of arrival in Indonesia until the date of final
departure from Indonesia.
Tax Obligations
Resident Taxpayers
• Must register with the Indonesian Tax Office and obtain Tax ID
Number (‘NPWP’) - A residency permit eg KITAS/KITAP is required to obtain a NPWP.
• Are taxed on worldwide income, regardless of source.
Worldwide Income
The Indonesian tax regime adopts the worldwide income concept
for resident taxpayers. Income is defined as any increase in
economic prosperity received or accrued, originating within
or outside Indonesia, used for consumption or to increase the
wealth of the taxpayer, in whatever name or form.
Income Inclusions
*Labor income
*Income from engaging in an independent profession or business;
*Passive income (dividends, royalties, interest, insurance income);
*Capital gains (from the sale or transfer of property); and
*Rent and other income from the use of property
Exemption from Individual Income Tax and Non-Taxable Income
The following are excluded from an individual’s gross income:
*Aid support and donations;
*Inheritances;
*Payments by an insurance company to an individual taxpayer in connection with health, accident, life or education insurance;
*Benefits in kind received from employers with certain conditions attached; and
*Scholarships that meet the criteria set by the Ministry of Finance.
Tax Rates (see photo below)
Tax free threshold -up to 54m
(Resident taxpayers do not need to obtain a tax number or file a return if income is under 54m)
Over 54m subject to scale (max 30%)
Foreign Tax Relief /Double Tax Relief and Tax Treaties
Where an Indonesian resident has foreign branches (or earns other foreign-source income), the income of those branches will be taxable in Indonesia.
Where such income has been subject to foreign tax, tax credits will be granted, subject to a maximum of the Indonesian tax payable on the income concerned.
eg All income from abroad has to be taxed in Indonesia, if you live in Indonesia for more than 183 days a year.
If you pay taxes in the home country, it will be calculated as "down payment" for your Indonesian tax obligation.
A taxpayer who has income derived outside Indonesia that is subject to taxation abroad is entitled to a credit, not to exceed the Indonesian tax payable on the foreign income.
Indonesia has entered into double tax treaties with the following jurisdictions - (See lists in photos below)
The tax treaties generally provide for the elimination of double taxation of personal income and include specific provisions pertaining to artists, athletes, teachers, students and those engaged in employment and independent personal service
Summary & Related information links
A tax resident is generally taxed on worldwide income, although this may be mitigated by the application of double taxation agreements (DTAs).
The new Omnibus Law (effective from 2 November 2020) has added a provision to the Income Tax Law stipulating that foreigners who have become domestic tax subject by reason of becoming tax resident in Indonesia can be taxed only on Indonesian-sourced income (including if paid offshore) if they meet certain skill requirements.
(**NOTE** You cannot work on a retirement visa. Skill requirements are not applicable. This therefore does not apply to Retirement Visa.)
This will only be available for the first four years they become tax resident.
This territorial taxation system may not be applicable when the foreigner receives income from overseas and he/she utilises the applicable tax treaty between Indonesia and the source country.
Non-resident individuals are subject to a general withholding tax (WHT) at 20% in respect of their Indonesian-sourced income. Concessions are, however, available where a DTA is in force.
SOURCE   https://www.conventuslaw.com/report/ind … 5MNessgwaA