Resident and Non-resident Taxpayer in Indonesia

Based on Income Tax Law 36 Years 2008, Tax Subject in Indonesia consists of Resident and Non-resident Taxpayer.

A Resident Taxpayer constitutes a Taxpayer if he/she derives income that exceeds personal exemption.
A resident corporate taxpayer constitutes a taxpayer since it is established, or is domiciled in lndonesia.

Non-resident taxable persons, both individual or as an entity corporate, constitutes a taxpayer because of income they received and/or obtains from lndonesia or because of income shall mean any individual or any entity who/which has already fulfilled its subjective and objective obligation.
With respect to the Taxpayer Indentification Number, an Individual Taxpayer receiving income less than personal exemption is not necessary to register himself or herself to obtain a Taxpayer Indentification Number.

Principal differences between Resident and Nonresident Taxpayers are in the manner that they fulfill their tax obligation, among others are as folIows:

1. A Resident Taxpayer is taxed on his income derived from lndonesia and overseas, whereas a Non-resident Taxpayer is taxed only on the income originating from sources in lndonesia;
2. A Resident Taxpayer is taxed based on the net income with a general rate, whereas a Non¬resident Taxpayer is taxed based on the gross income with an appropriate rate; and
3. A Resident Taxpayer is obliged to submit Annual Return as means for assessing his tax obligation in a taxable year, whereas a Non-resident Taxpayer is not, because his tax obligation are fulfilled through with holding tax, which is final in nature.

Non-resident Taxpayers doing business or conducting activities through permanent establishment in lndonesia are equivalent with Resident Taxpayers in the manner of the fulfillment of their taxation as regulated in this Law and The Law on General Provisions and Tax Procedures.

The determination of an individual’s residence or an entity’s domicile is important to ascertain which Tax District Office shall have the taxation jurisdiction on the income derived by the individual or entity.

Basically, an individual’s residence or an entity’s domicile shall be determined based on the facts and the circumstances. Therefore the determination of a residence or a domicile shall not only be based on formal condition, but shall also on the reality.

Several matters necessarily considered by the Director General of Taxes in determining the residence of an individual or the domicile of an entity among others are the domicile, residential address, residence of the family, the place to conduct the main business, or other essential matters to facilitate the implementation of the tax obligation fulfillment.

sources: idtaxes.wordpress.com