Does having this Second Home Stay permit result in tax liability?

The Second Home Residence permit being a long-term one, is likely to result in Indonesian tax liability.

When is a person considered as tax resident, he or she will have to pay tax on income earned. In the case of Indonesia, the income subject to tax is income earned any anywhere in the world.

Under the Indonesian tax law, a person is considered as a tax resident if: he “resides” in Indonesia; or is present in Indonesia for more than 183 days within any 12-month period; or he or she is present in Indonesia within any tax year and demonstrated an intention to reside in Indonesia.

Minister of Finance Regulation No.18/PMK.03/2021 states that an “intention to reside in Indonesia” can be substantiated by documents such as:

  • A permanent residence permit (Kartu Izin Tinggal Tetap/KITAP);
  • A limited stay visa (Visa Tinggal Terbatas/VITAS);
  • An employment agreement with a period of more than 183 days; or
  • Other supporting documents such as long term leasing agreement.

Indonesian residents (those with Indonesian tax residence) are subject to tax on income earned inside and outside Indonesia.

Obligations of tax residentns

Tax residents are required to register with the Indonesian Tax Office and be issued Tax ID Number (‘NPWP’) taxed on worldwide income, regardless of source.

Indonesia tax office implements self-assessment system whereby resident need to declare worldwide income and assets and liabilities annually.

Tax reporting forms – declaration to be made in Form 1770 (for resident taxpayers with business income), Form 1770-S (for those receiving income from employment and other sources), and Form 1770-SS (for resident taxpayers with annual gross income not exceeding IDR 60 millions).

Reporting period – 1 January to 31 December and to be lodged with the Tax Office not later than 31 March of the following year. The annual tax return can be lodged directly to the Tax Office where the taxpayer is registered, or through Drop Boxes.

Tax must be paid before filing tax return. Resident taxpayers may be required to prepay tax in monthly instalment (“Article 25 Income Tax”).

Preserve documents required to support the income, taxes paid, and  assets and liabilities declared in the individual tax return,  such as  bank statements, tax withholding slips, foreign tax  returns, asset ownership certificate, etc. Documents to be maintained for a minimum period of 10 (ten) years.

Obligation to deregister tax ID number/NPWP if leaving Indonesia  permanently.