Indonesia Advisory

The standard GST rate in Singapore is 7%. The exportation of goods and
the provision of international services are zero-rated. The sale and
rental of residential properties and specified financial services are
exempt from GST.

Goods and Services Tax (GST) is a broad base consumption tax aimed at
taxing the final consumer of the goods and services. The supply of
goods and services made in the ordinary course of business in
Singapore by a GST registered person is subject to GST. The
importation of goods into Singapore is also subject to GST.

Persons carrying on businesses making taxable supplies are required to
register for GST if their annual turnover (retroactive or prospective)
is more than S$1m. A GST registered person (GST taxpayer) has to
charge GST on his supplies (Output GST) and pay GST on his purchases
(Input GST). The GST taxpayer has to file a monthly or quarterly GST
return to declare the Output GST collected and the Input GST incurred.
He will pay (or claim) the difference (after netting the Output GST
against the Input GST) together with the GST return.

GST Registration – A person is required to be registered if the total
annual value of his/ her taxable supplies exceeds SGD 1 million.
Companies may apply for voluntary registration even if turnover is
less than SGD 1 million. However, once registered, the taxpayer must
remain registered for at least 2 years.

Filing and payment of GST – A registered taxable person is required to
furnish a tax return to the Comptroller not later than 1 month after
the end of each 3-month accounting period. The amount of tax payable
for the accounting period to which the return relates should be made
together with the submission of the tax return.

Source : http://www.taxrates.cc

The standard corporate tax rate in Singapore is 17%.

A partial tax exemption is given on first S$300,000 of the chargeable
income (CI). Under this scheme, 75% of the first S$10,000 of CI is tax
exempt and 50% of the next S$290,000 of CI is tax exempt:

Income Exemption Exempt amount
First $10,000 @ 75% $7,500
Next $290,000 @ 50% $145,000
Total $300,000 $152,500

The exemption does not apply to Singapore dividends received by
companies enjoying a concessionary tax rate granted by a tax incentive
and income of a non-resident company subject to a final withholding
tax rate.

Qualifying newly Singapore-incorporated companies may enjoy a separate
tax exemption scheme for its first three consecutive years of
assessment. This scheme allows qualifying new companies to enjoy a tax
exemption on the first S$100,000 of CI and on 50% of the next
S$200,000 of CI:

Income Exemption Exempt amount
First $100,000 @ 100% $100,000
Next $200,000 @ 50% $100,000
Total $300,000 $200,000

Resident and non-resident companies are taxed on income accruing in or
derived from Singapore as well as on foreign income remitted (actual
or deemed) into Singapore. Remittance of foreign income (dividends,
branch profits, services income) may be tax exempt when remitted by a
resident company under certain conditions. A company is tax resident
in Singapore if the management and control of its business is
exercised in Singapore.

The tax year, referred to as the year of assessment (YA), runs from 1
January to 31 December of each year. Income for the YA is computed
based on the income derived in the preceding calendar year (known as
the basis year) from all sources. For a trade, business, profession or
vocation with a non-31 December accounting year end, the Inland
Revenue Authority of Singapore (IRAS) normally accepts the accounting
year as the basis year instead of the calendar year. Under such
circumstances, tax is assessed for each YA on the income for the
accounting year preceding that YA.

A company is required to provide an estimate of its CI within three
months after the end of its financial year. The estimated tax payable
can be paid via instalments. The number of instalments available
depends on when the estimated CI is filed within the three-month
window period and on the method of filing. The annual corporate income
tax return must be filed by 30 November of the YA. After the
submission of the tax return, IRAS will issue a notice of assessment
to collect any tax shortfall. The tax payment has to be paid within
one month after the date of issue of the notice of assessment.

STAMP DUTY

Stamp duty is levied on legal instruments relating to the sale,
mortgage or lease of immovable property and the sale or mortgage of
stocks and shares.

DETERMINATION OF TAXABLE INCOME

Singapore-incorporated companies are required to prepare their
financial accounts according to Singapore Financial Reporting
Standards (FRSs). The FRSs are closely modelled on the International
Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards
Board (IASB). The accounting profits are adjusted in accordance with
Singapore tax rules to arrive at the taxable income.

Companies are required under FRS to prepare their financial accounts
according to their functional currency. Those with non-Singapore
dollar functional currency accounts are required to furnish their tax
computations to the IRAS in that functional currency. Expenses must be
incurred wholly and exclusively for the production of income in order
to be tax deductible unless specifically disallowed or restricted
(e.g. noncommercial motor vehicles, medical expenses, expenses of a
capital nature). Special rules apply to expenses incurred by
investment holding companies, companies that commence business
activities during the financial year and expenses incurred in respect
of foreign sourced income.

INTEREST DEDUCTIONS

Interest is deductible to the extent it relates to funds borrowed for
income-producing purposes. There are no thin capitalisation rules in
Singapore.

STOCK/INVENTORY

There is no prescribed valuation methodology under the domestic income
tax law. As such, IRAS will generally accept the valuation methodology
under FRS.

CAPITAL GAINS AND LOSSES

There is no separate capital gains tax regime in Singapore. Gains of a
capital nature are not subject to income tax. Similarly, expenses of a
capital nature are not deductible for income tax purposes. IRAS will
look at the facts and circumstances of the transaction to determine
whether the gain is capital in nature or a trading gain which is
subject to income tax.

DIVIDENDS

Dividends paid by Singapore companies are exempt from tax in the hands
of the shareholder from 1 January 2008. Foreign sourced dividends
remitted into Singapore may be tax-exempt under certain circumstances.

CAPITAL ALLOWANCE

Capital allowances, instead of accounting depreciation, are granted
for plant and machinery acquired and used in a trade or business. Most
plant and machinery qualify for three-year straight line tax
depreciation. Low cost items (costing not more than S$1,000 per item)
may be tax depreciated in full, subject to a total claim of S$30,000
for each YA. Certain equipment (such as computers, automation
equipment, pollution-control equipment, energy-saving equipment) may
qualify for 100% tax depreciation in the year of acquisition.
Industrial buildings used for qualifying purposes can claim an initial
allowance of 25% plus an annual allowance of 3%.

Current year unused capital allowances can be carried back (up to a
total of S$100,000 for both unused capital allowances and unused tax
losses) to the YA immediately preceding the YA in which the capital
allowance arose. The unused capital allowances can also be carried
forward indefinitely. The utilisation of unused capital allowances
carried back or carried forward is subject to the business continuity
test and the shareholding test. For the YA 2009 and YA 2010, the
unused capital allowances (together with unused losses) can be carried
back to the three YAs immediately preceding YA 2009 or YA 2010 and up
to a limit of S$200,000.

The business continuity test requires the business/trade for which the
capital allowances were granted to be carried on. The shareholding
test requires that there is no substantial change (no more than 50%)
in the ultimate shareholders and their respective shareholdings on
certain dates.

TAX LOSSES

Current year unused trade losses can be carried back (up to a total of
S$100,000 for both unused capital allowances and unused tax losses) to
the YA immediately preceding the YA in which the trade losses were
incurred up. The unused tax losses can also be carried forward
indefinitely. For the YA 2009 and YA 2010, the unused losses (together
with unused capital allowances) can be carried back to the three YAs
immediately preceding YA 2009 or YA 2010, as the case may be) and up
to a limit of S$200,000.

The carry back/forward of tax losses is subject to the same
shareholding test for the carry back/forward of unused capital
allowances.

TAX INCENTIVES

Singapore has a comprehensive list of tax incentives and development
schemes to attract investments and to assist investors in expanding
their businesses. Highlights of key incentives and schemes are
summarised below.

The Regional and International Headquarters Awards encourages
companies to use Singapore as a regional or global base. A customized
package of tax incentives (such as Pioneer Incentive, Development and
Expansion Incentive, Investment Allowances) and grants will be given
to qualifying companies.

The Pioneer Incentive encourages the introduction and growth of new
industries in Singapore. A pioneer enterprise is granted full income
tax exemption on its qualifying profits for up to 15 years.

Investors undertaking projects that will generate significant economic
benefits for Singapore may apply for the Development and Expansion
Incentive. The incentive provides preferential income tax rates on all
qualifying profits above a pre-determined base, for a set period.

Companies investing into new equipment that introduces new technology
to the industry or contributes to its efficiency can apply for
Investment Allowances. This is a capital allowance given to partially
offset the costs of acquiring qualifying equipment within a set period
and is in addition to the normal tax depreciation.

The Approved Royalties Incentive encourages companies to transfer
their cutting edge technology and knowhow to Singapore by providing
full or partial withholding tax exemption for royalty payments or
technical assistance fees payable to non-residents. Investors looking
into developing or bringing new R&D capabilities can apply for the
Research Incentive scheme. The project should result in an increase of
hiring and training of research scientists and engineers in Singapore.
The scheme provides grants to partially offset the R&D project costs
incurred for manpower training, equipment investment, intellectual
property management and professional services.

The Local Enterprise Finance Scheme (LEFS) is designed to assist and
encourage companies (with at least 30% local ownership) to upgrade and
expand their operations. LEFS loans are available for factories,
machinery and working capital.

The Local Enterprise Technical Assistance Scheme (LETAS) encourages
and assists companies (with at least 30% local ownership) in seeking
external expertise to improve their operations. Generally, assistance
provided is up to 50% of the cost of engaging an external expert to
implement quality management and IT systems (e.g. ISO certification,
upgrading computer systems).

FOREIGN TAX RELIEF

Under Singapore's network of 60 comprehensive double tax treaties,
Singapore will grant a tax credit for foreign tax suffered in the
treaty country. The tax credit granted is limited to the lower of the
foreign tax suffered and the Singapore tax payable on that income.
Singapore also grants a unilateral tax credit for certain income
derived from countries that have not entered into tax treaties with
Singapore.

CORPORATE GROUPS

A corporate group (comprising of a Singapore-incorporated holding
company and its Singapore-incorporated subsidiaries) can transfer
current-year unused losses, unused capital allowances and unused
donations within companies in the group. There is a 75% ownership
requirement that need to be maintained to remain within the group.

RELATED PARTY TRANSACTIONS

IRAS issued transfer pricing guidelines for the first time in February
2006. The purpose of the guidelines is to give guidance on applying
the arm's length principle and the recommended preparation and
maintenance of documentation to demonstrate compliance with the arm's
length principle. In February 2009, IRAS issued a supplementary guide
to provide further guidance and application of the arm's length
principle to related party loans and related party services.

Singapore is now in the process of legislating the arm's length
principle for related party transactions in the domestic tax law. This
will give the IRAS the basis for making adjustments if it is of the
opinion that the arms length principle is not applied appropriately by
the taxpayer

WITHHOLDING TAX

Interest, fees, payments in connection with any loan or indebtedness: 15%
Royalty or other payment for the use of movable property: 10% (final tax)
Payment for the use or right to use scientific, technical, industrial
or commercial knowledge or information: 10% (final tax)
Technical assistance and service fees and management fees: Prevailing
corporate tax rate (20% for individuals)
Rent or other payments for the use of movable properties: 15% (final tax)
Time charter fees and voyage charter fees, bareboat charter fees: Nil to 3%
Directors' remuneration/directors' fees: 20%

There is no withholding tax on dividends.

Source : http://www.taxrates.cc

Resident individuals deriving employment income and rental income is subject to
Singapore personal income tax at progressive rates up to 20%, based on
the following progressive rates.

Singapore Personal Income Tax Rates for resident individuals:

Chargeable Income Tax Rate Gross Tax Payable ($)
First $20,000 0% 0
Next $10,000 3.50% 350
First $30,000 - 350
Next $10,000 5.50% 550
First $40,000 - 900
Next $40,000 8.50% 3,400
First $80,000 - 4,300
Next $80,000 14% 11,200
First $160,000 - 15,500
Next $160,000 17% 27,200
First $320,000 - 42,700
Above $320,000 20%

Singapore Personal Income Tax Rates for non-resident individuals:
Employment income of non-residents are taxed at a 15% tax rate or
resident rate, whichever gives rise to a higher tax amount. All other
income of nonresidents sourced in Singapore, including directors' fees
and consultants' fees, is taxed at a flat rate of 20%. A nonresident
individual (other than a director) exercising a short-term employment
in Singapore for not more than 60 days may be exempt from tax in
Singapore.

A Singapore citizen is considered tax resident if the individual
normally resides in Singapore except for temporary absences that are
consistent with the claim to be a resident. A foreigner is considered
resident in Singapore if the individual is physically present or
exercises a Singapore employment for 183 days or more during the basis
year.

Non-resident individuals exercising an employment in Singapore are
subject to income tax depending on the number of days in Singapore.
Employment income derived from short term employment (not more than 60
days) is exempt from Singapore income tax for the non-resident
employee. This exemption does not apply to non-resident company
directors, non-resident public entertainers or non-resident
professionals including foreign experts, foreign speakers, queen's
counsels, consultants, trainers, coaches etc. Nonresident employees
exercising an employment in Singapore for a period of 61 - 182 days
will be taxed at the higher of 15% (without personal tax reliefs) or
the progressive resident rates (with personal tax reliefs).
Non-residents deriving rental income are taxed at 20%.

Dividend income from Singapore companies, interest income from
savings, current or fixed deposit accounts with approved banks or
finance companies in Singapore and foreign-sourced income are tax-
exempt for individuals (regardless of residency).

Filing status – Each individual is required to file a separate tax
return, including married couples living together.

Taxable income – Income includes gains or profits from a trade or
profession and earnings from employment (including the value of
employer-provided food, clothing or housing and allowances other than
for subsistence, transport, travel or entertainment).

Capital gains – Singapore does not tax capital gains.

Tax Deductions and allowances – Personal reliefs and tax rebates are
granted only to resident individuals. Personal reliefs may be deducted
against assessable income to ascertain chargeable income on which tax
is then computed. Tax rebates are deducted from the tax payable to
determine the final tax liability of the individual.

Other taxes on individuals:

Capital duty – No
Stamp duty – Same as for companies.
Capital acquisitions tax – No
Net wealth/net worth tax – No

Real property tax – Property tax, levied on all immovable property in
Singapore, is payable annually by the owner at the beginning of the
year. Immovable property includes Housing Development Board flats,
houses, offices, factories, shops and land. The annual property tax is
calculated based on a percentage of the gross annual value of the
property as determined by the property tax department. The property
tax is 4% for owner-occupied residential property and 10% for other
property. A property tax exemption for land under certain development
may be granted for certain cases.

Inheritance/estate tax –Estate duty has been abolished for deaths
occurring on or after 15 February 2008.

Social security contributions – Only employees who are Singapore
citizens or Singapore permanent residents are required to contribute
to the CPF at a rate of 20%. Graduated rates may apply for the first 3
years when the employee first attains permanent residence.

Singapore Tax year – Singapore tax year is the calendar year

Filing and payment of tax – An individual is required to file his/her
Singapore tax return in respect of income from the preceding year by
15 April of the following year.

Penalties – Penalties apply for late filing or failure to file.

Source : http://www.taxrates.cc

Service tax and sales tax are currently the two major types of
consumption taxes imposed on certain prescribed goods and services.

The rate of Sales Tax: 5%-10%
The rate of Service tax: 5%.

The Malaysian government has intended to widen the scope of indirect
taxes by proposing to introduce Goods and Services Tax (GST). However,
this move has been put on hold indefinitely.

SERVICE TAX

Service tax is a single stage tax applicable to certain prescribed
goods and services in Malaysia. The tax also applies to professional
and consultancy services as prescribed by the Malaysian customs
authorities. The rate of service tax currently is fixed at 5% of the
price, charge, or premium of the taxable goods or services prescribed.

Professional services provided by a company to companies within the
same group will be exempted from service tax, subject to terms and
conditions.

Generally, the imposition of service tax is subject to a specific
threshold based on an annual turnover ranging from RM150,000 to
RM500,000, subject to the types of taxable services and taxable
person. The threshold would not apply for certain prescribed
professional and consultancy services.

It is proposed that with effect from 1 January 2010, service tax be
imposed on credit cards and charge cards including those issued free
of charge as follows:
- RM50 per year on the principal card
- RM25 per year on the supplementary cards.

SALES TAX

Sales tax is a single stage tax imposed on taxable goods manufactured
locally and/or imported. "Taxable goods" means goods of a class or
kind not for the time being exempted from sales tax. Generally, all
exports are exempted from sales tax.

Manufacturers of taxable goods are required to register with the
custom authorities and to levy, charge and collect the tax from their
customers. For imported goods, sales tax is collected from the
importer upon the release of taxable goods from customs control.

Sales tax is an ad valorem and can be computed based on the value of taxable
goods sold, used, disposed of, or imported.

Sales tax is imposed on certain imported and locally manufactured
goods under the Sales Tax Act 1972. The tax rate ranges from 5 - 10%
for majority of the goods except for food preparations other than
alcoholic and non-alcoholic compound preparations (other than those of
heading No. 33.02) used for making beverages. Sales tax is also
imposed on petroleum and petroleum products according to specific
rates.

http://www.taxrates.cc

The standard corporate tax rate in Malaysia is 25%, while resident
small and medium-sized companies (i.e. companies capitalised at MYR
2.5 million or less and not part of a group having a company exceeding
the above capitalisation threshold) are taxed at 20% on the first MYR
500,000, with the balance taxed at the 25% corporate tax rate:

- Company with paid up capital not more than RM2.5 million
. On first RM500,000
20%
. Subsequent Balance
25%

- Company with paid up capital more than RM2.5 million 25%

Residence – A corporation is resident in Malaysia if its management
and control are exercised in Malaysia.

Basis – Corporations are taxed on income derived from Malaysia.
Foreign-source income is not taxable unless the corporation is
carrying on a business in the banking, insurance, air transport or
shipping sectors.

Taxable income – Taxable income comprises all earnings derived from
Malaysia, including gains or profits from a trade or business,
dividends, interest, rents, royalties, premiums or other earnings.

Taxation of dividends – As from assessment year 2008, Malaysian
companies are transitioning to the single tier system (STS) and
phasing out the imputation system. Corporations in Malaysia have until
31 December 2013 to adopt the STS. Dividends received under the
imputation system are taxable with a credit available for underlying
corporate tax paid. Dividends paid by companies using the STS are not
taxable.

Capital gains – Capital gains are not taxed in Malaysia, except for
gains derived from the disposal of real property or on the alienation
of shares in a real property company (RPC). The real property gains
tax, which applied to such gains, had been suspended since 1 April
2007, but is reinstated at a rate of 5% as from 1 January 2010.

Losses – While losses can only be carried back for assessment years
2009 and 2010, they may be carried forward indefinitely (except where
there is a substantial change in corporate ownership of a dormant
company).

Surtax – No

Alternative minimum tax – A Labuan offshore company may elect to pay
MYR 20,000 or to be taxed at 3% of the audited accounting profit.

Foreign tax credit – Foreign tax paid may be credited against
Malaysian tax on the same profits (limited to 50% of foreign tax in
the absence of a tax treaty), but the credit is limited to the amount
of Malaysian tax payable on the foreign income.

Participation exemption – No, but foreignsource income is not taxable
and local dividends do not attract further tax or are tax exempt.

Holding company regime – An investment holding company (IHC) is a
company whose activities consist mainly of the holding of investments
and that derives not less than 80% of its gross income, other than
gross income from a source consisting of a business of holding of an
investment, from such investments. Generally, only expenses falling
within the definition of "permitted expenses" in the tax legislation
would qualify for tax deduction in respect of an IHC.

Tax Incentives – A wide range of incentives are available for certain
industries, such as manufacturing, IT services, biotechnology, Islamic
finance, energy conservation and environment protection. Available
incentives include: tax holidays of up to 10 years (pioneer status);
investment tax allowances (i.e. 100% allowance on capital investments
made up to 10 years); accelerated capital allowances; double
deductions; and reinvestment allowances (i.e. 60% allowance on capital
investments made in connection with approved projects).

Withholding tax:

Dividends – Malaysia does not levy withholding tax on dividends.

Interest – A withholding tax of 15% applies to interest paid to
nonresidents, which may be reduced under an applicable tax treaty.

Royalties – A withholding tax of 10% applies to royalties paid to
nonresidents, which may be reduced under an applicable tax treaty.

Other – A withholding tax of 10% applies to rentals of movable
property, technical fees for services rendered in Malaysia and certain
one-time income paid to nonresidents, which may be reduced under
applicable tax treaties.

Branch remittance tax – No

Other taxes on corporations:

Capital duty – Capital duty is levied at rates ranging from MYR 1,000
to MYR 70,000.

Payroll tax – Tax on employment income is withheld by the employer
under a pay as you earn (PAYE) scheme and remitted to the tax
authorities.

Real property tax – Individual states in Malaysia levy "quit" rent and
assessments at varying rates.

Social security – Employers and employees are required to make social
security contributions to the Social Security Organisation (SOSCO).
Generally, an employer contributes 1%-1.25% of an employee's
remuneration. Employers and employees also must contribute to the
Employees Provident Fund (EPF) at the rate of 12% and 8% of the
employee's remuneration, respectively.

Stamp duty – Stamp duty is levied at varying rates between 1% to 3% of
the transacted value of property transfers and 0.3% on share
transaction documents.

Transfer tax – No, except for stamp duty.

Other – Equity requirements have been substantially relaxed as from 2009.

Anti-avoidance rules:

Transfer pricing – Transfer pricing rules are imminent and guidelines
have been issued by the tax authorities. Taxpayers can request an
advance pricing agreement.

Thin capitalisation – There are no specific thin cap rules, but
legislation has been amended to allow for such rules.

Controlled foreign companies – No
Disclosure requirements – Yes

Administration and compliance:

Malaysia Tax year – Fiscal year (i.e. generally the accounting year).

Consolidated tax returns – Consolidation is not permitted as each
company is required to file a separate tax return. However, subject to
certain conditions, 70% of a company's adjusted loss may be used to
set off profits of a related entity.

Tax Filing requirements – Malaysia imposes a self-assessment tax
regime. Advance corporate tax is payable in 12 monthly instalments. A
tax return must be filed within 7 months of the company's year end.

Penalties – Penalties at various rates apply for failure to comply.

Rulings – Taxpayers may request an advance ruling on the tax treatment
of a specific transaction. Public rulings also are issued.

Source : http://tax-rates.cc

Malaysia individual income tax rates are progressive, up to 26%.
Individuals who do not meet residence requirements are taxed at a flat
rate of 26%.

Taxable Income RM Tax Rate Tax Payable RM
on the first 2,500 0% 0
on the next 2,500 1% 25
on the first 5,000 25
on the next 5,000 3% 150
on the first 10,000 175
on the next 10,000 3% 300
on the first 20,000 475
on the next 15,000 7% 1,050
on the first 35,000 1,525
on the next 15,000 12% 1,800
on the first 50,000 3,325
on the next 20,000 19% 3,800
on the first 70,000 7,125
on the next 30,000 24% 7,200
on the first 100,000 14,325
on the next 50,000 26% 13,000
on the first 150,000 27,325
on the next 100,000 26% 26,000
on 250,000 53,325
Above 250,000 26%

Basis – Individuals are taxed on income derived from Malaysia.
Foreign-source income is not taxable in Malaysia.

Residence – An individual is considered tax resident if he/she is in
Malaysia for 182 days or more in a calendar year. Alternatively,
residence may be established by physical presence in Malaysia for a
mere day if it can be linked to a period of residence of at least 182
consecutive days in an adjoining year.

Tax Filing status – A married couple living together may opt to file a
joint or separate assessment.

Taxable income – Resident individuals are taxed at progressive rates
ranging from 0% to 26%. Employment income includes most employment
benefits whether in cash or in kind.

Capital gains – Capital gains are not taxed in Malaysia, except for
gains derived from the disposal of real property or on the alienation
of shares in a real property company. The real property gains tax,
which applied to such gains, had been suspended since 1 April 2007,
but is reinstated at a rate of 5% as from 1 January 2010.

Tax Deductions and tax allowances – Various allowances and personal
deductions are available.

Other taxes on individuals:

Capital duty – No

Stamp duty – Stamp duty is levied at varying rates between 1% to 3% of
the transacted value of property transfers and 0.3% on share
transaction documents.

Capital acquisitions tax – No

Real property tax – Individual states in Malaysia levy "quit" rent and
assessment at varying rates.

Inheritance/estate tax – No
Net wealth/net worth tax – No

Social security – Employees are required to make contributions to the
EPF at a rate of 8% of remuneration and may contribute a nominal
amount to the Social Security Organisation (SOCSO).

Administration and compliance:

Malaysia tax year – Malaysia tax year is the calendar year

Tax Filing and Tax payment – Tax on employment income is withheld by
the employer under a pay as you earn (PAYE) scheme and remitted to the
tax authorities. Malaysia imposes a self-assessment regime. An
individual deriving employment income or business income must file a
tax return and settle any balance owed by 30 April or 30 June
respectively in the following calendar year.

Penalties – Penalties at various rates apply for failure to comply

Source : http://www.taxrates.cc

Indonesia individual Income Tax
Individual income tax (Pajak penghasilan) rates in Indonesia are
progressive up to 30%, as follows:

Taxable income (Rp) Tax Rate
0 – 50,000,000 0 + 5% on excess
50,000,001 – 250,000,000 2,500,000 + 15% on excess
250,000,001 – 500,000,000 32,500,000 + 25% on excess
Above 500,000,000 95,000,000 + 30% on excess

An additional 20% tax is imposed on the individuals, other than
non-tax residents, who do not posses tax identification number (NPWP).

ALLOWABLE TAX DEDUCTIONS

In determining the annual taxable income of an individual, the
following may be deducted from gross income:

- Occupational support: 5% of gross income, up to maximum of 6,000,000
- Pension: 5% of gross income, up to maximum of 2,400,000
- Non-taxable income:
. For the taxpayer 15,840,000
. Additional for a married taxpayer 1,320,000
. Additional for each lineal family member related by blood
marriage who is a full dependent up to a maximum of three 1,320,000
each

A married female employee is only allowed non-taxable income for
herself unless she has a certificate from the local authorities
stating that her husband does not work.

Non-resident individuals are subject to a final tax of 20% where the
payments represent compensation for work performed in Indonesian
regardless of where paid.

Lump sump pension payments and severance pay on individual residents
are subject to final tax on the gross amount at the following rates:

Taxable income Tax Rate
0 – 25,000,000 exempt/non taxable income
25,000,001 – 50,000,000 5% on excess
50,000,001 – 100,000,000 1,250,000 + 10% on excess
100,000,001 – 200,000,000 6,250,000 + 15% on excess
200,000,000 and above 21,250,000 + 25% on excess

However, pension payments made to non-resident individuals are taxed
under Article 26 of Income Tax Law at a rate of 20% on the gross
amount.

Where home leave or education costs are reimbursed, the amount of the
reimbursement is taxable in full on the employee.

Note that food and drink provided at the working area by the employer
to the employees are not subject to tax but deductible for the
employer.

Indonesians are taxed on their worldwide income. Non-residents are
only taxed on income derived from Indonesia. An individual will be a
resident of Indonesia if they are present in Indonesia for more than
183 days or reside in Indonesia during a fiscal year and intend to
stay in Indonesia. Certain tax treaties modify the above rules.

Filing status – The family is considered a single economic unit;
hence, joint filing is required. Separate filing is allowed only if
there is a pre-nuptial agreement between the husband and wife.

Taxable income – Taxable income of individuals includes profits from a
business, employment income and capital gains.

Capital gains – Capital gains derived by an individual are taxed as
income at the normal rates; gains on shares listed in Indonesia are
taxed at 0.1% (final tax) of the transaction value. (An additional tax
of 0.5% applies to the share value of founder shares at the time of an
initial public offering.) Gains on the disposal of land and/or
buildings are taxed at 5% (final tax) of the transaction value.

Source :http://www.taxrates.cc

Jakarta Post: The government will extend its "sunset policy" tax program until February 2009 following requests by businesses which are unable to complete their accounts due to problems related to the global economic downturn.

"The sunset policy is delayed to February 2009," Finance Minister Sri Mulyani Indrawati said in Tuesday's gathering with investors at the Indonesia Stock Exchange.

"But I expect businesses will not wait until the deadline (to improve their tax filings or for people to have a tax registration number," she said.
The initial deadline for the policy was on Dec. 31.

As a result of a new tax law on general tax procedures late last year, the government has issued rules requiring all taxpayers to register and to honestly report their taxes and comply with the existing regulations.

Under the new policy, often referred to as the "sunset policy", the government has also given potential taxpayers time to get a tax registration number and start to comply with the regulations.
The government had originally given one year in which it waived administrative penalties for previous non-compliance in exchange for registration and subsequent accurate tax reporting before starting to impose stiffer sanctions on violators next year.

Mulyani said this month, particularly in the past few days, that tax offices nationwide had been inundated by thousands of people wanting to register for a tax number, or fix their tax reports.
"We are now busy handling people who wanted to comply with the policy," she said.
The extension of the policy will be laid down in the form of a regulation-in-lieu-of-law.
Mulyani said people had grown more aware of the need to register and become taxpayers, as seen from the growing number of people registering for a tax file number, especially recently.
People are flocking to the tax registration offices following the government's plan to slap a higher exit tax on travel overseas for those having no tax registration number, forcing most of the country's middle to upper-income people to comply with the requirements for tax registration.
According to the Directorate General of Taxation, between 50,000 and 100,000 people applied for a tax registration number this month, up from between 7,000 to 8,000 people on average in previous months.

"It is expected that no one who wants to comply with the sunset policy will be left unserved," Darmin said.

"On the other hand, the extension (of the policy) will strengthen the base for national taxation," he added.

The tax office anticipates a decline in tax revenue from the corporate sector, while tax from individuals is forecast to be more stable despite the impact of the global economic slowdown.

According to the directorate general of taxation, Indonesia only has about 6 million taxpayers, including individuals, companies, and institutions, out of a population of 230 million people.

Darmin also said that it was estimated that tax revenue for this year, including oil-and-gas tax revenue, would reach Rp 566.2 trillion, or 5.9 percent higher than the Rp 534.5 trillion targeted in the revised 2008 state budget.

Sunset policy applied by the Directorate General of Taxation has not enhanced compliance taxpayers significantly whereas the sanction elimination program would expire soon, Bisnis Indonesia Daily reported on Monday.

Director General of Taxation Darmin Nasution said that the government must take other measures, such as law enforcement to enhance the compliance.

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"Tax compliance contains a substance of enforcement. Compliance could be established if other institutions conduct and support the enforcement consistently,” he said in Jakarta last week.

Sunset policy constitutes a taxation facility governed in Law Number 28 Year 2007 regarding Taxation General Provisions and Procedures. The facility enables individual or corporate taxpayers to rectify their annual income tax returns in 2006 and previous years without facing administrative sanction.

In the meantime, State Minister for National Development Planning Paskah Suzetta expects the Directorate General of Taxation to extend the program as a compensation for the absence of additional fiscal stimulus next year.

“The sunset policy may be used to boost the real sector amid the liquidity crisis. In addition, the government would no longer provide stimulus funds for the real sector in the form of government-borne tax (DTP) worth Rp 10 trillion next year,” he said.

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