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03.10.2016 01:49 Age: 2 days

Indonesia tax amnesty programme hugely successful


As of 30 September, more than 347,000 Indonesian residents had applied to use the country's tax amnesty.

Details of the amnesty

The amnesty opened on 18 July and will run until the end of March 2017. It is exceptional in that it eliminates the taxpayer's principal tax debt, all administrative sanctions and tax crime sanctions if the taxpayer makes a 'redemption payment'. Law firm Withers explains that the rates for the redemption payment are between 2 and 10 per cent: the lowest rate of 2 per cent, which applied for declarations made before the end of September 2016, has now expired and going forward the rates applicable are: 3 per cent for declarations made before end of December 2016; and 5 per cent for those made before end of March 2017.

The redemption payment for amnesty users who do not repatriate their funds has now risen from 4 to 6 per cent. This rate will be held until December this year, after which it will rise to the final level of 10 per cent.

Lower redemption payment rates of 2 per cent to 5 per cent are available to those who repatriate their offshore assets to Indonesia provided that the applicant commits to retaining such assets within the country for at least the next three years, says Withers.

Take up

Despite this, take-up was slow at first. By 22 August, only USD3.4 billion of assets had been declared, of which USD437 million was from overseas. This was welcomed by the Singapore financial industry, which is estimated to be holding some USD200 billion of undeclared Indonesian funds. In fact, law firm Herbert Smith Freehills suggested that Singapore's financial regulator was partly responsible for the slow start, by requiring Singapore financial institutions to file a suspicious transaction report and even freeze an Indonesian customer's account as soon as the customer indicated they were considering participating in Indonesia's current tax amnesty.

However, the number of applications increased sharply as the 30 September deadline approached. According to tax officials, queues of applicants began to form outside tax offices during the night. It is also said that some of Indonesia's wealthiest individuals have signed up.

Sources of funds

Most of the USD263 billion of offshore funds declared so far are in Singapore, followed by the Cayman Islands, Hong Kong, China and the British Virgin Islands, according to Indonesia's finance ministry.

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Indonesia tax amnesty programme hugely successful