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JAKARTA (TheInsiderStories) – The Indonesia government officially issued Government Regulation in Lieu of Law (Perppu) No. 1 of 2017 on Access to Financial Information for Tax Interest as a part of Indonesia’s commitment to implement Automatic Exchange of Information (AEoI) before June 30, 2017.

The Perppu was signed by President Joko Widodo on May 8, 2017.

Indonesia has entered into an international agreement on taxation, which is obliged to fulfill the commitment of participation in implementing the automatic exchange of financial information information. The government considers that it must immediately formulate legislation at the level of law regarding access to financial information for tax purposes prior to June 30, 2017.

Coordinating Minister for Economic Affairs Darmin Nasution confirmed that the regulation applies to foreign customers in Indonesia as well as to all Indonesian citizen customers, even though the regulation is not specifically regulated. He said, after this regulation was published, there may be derivative rules that are also published from each related institution.

According to him, with the issuance of the Perppu then automatically annul the other laws that still regulate the confidentiality of customer banking data. Not only that, the Director General of Taxes need not ask permission to the Minister of Finance and the Governor of Bank Indonesia to access customer data, as set forth in the previous provisions.

Access to financial information for tax purposes, according to this Perppu, includes access to receive and obtain financial information in the framework of implementation of the provisions of laws and regulations in the field of taxation and the implementation of international agreements in the field of taxation.

According to this Perppu, the Director General of Taxes is authorized to obtain access to financial information for tax purposes from financial services institutions conducting activities in the banking sector, capital markets, insurance, other financial services institutions and / or other entities categorized as appropriate financial institutions Financial information exchange standards based on international agreements in the field of taxation.

Under these rules, all financial services institutions are required to report their customer data to the Directorate General of Taxes. In the rules which consisting of the ten articles, the financial services institutions that conducting activities in the banking sector, capital markets, insurance and other entities must report at least the identity and number of accounts, and source income (Article 2, paragraph 3).

The financial service institutions must report to the Financial Services Authority (OJK) no later than 60 days prior to the expiry of the period of AEoI. Then, OJK must report to DJP no later than 30 days before the expiry of the period of AEoI (Article 3, paragraph 3).

In addition, financial services institutions are also required to perform account identification procedure and give information to the DJP when requested. If the financial services institutions does not fulfill these three items (reporting,  procedure, or giving of information), then the management or employees of the financial services institution may be sentenced to a maximum of 1 year or a maximum fine of Rp 1 billion (Article 7).

Director International Tax DJP John Hutagaol said Perppu 1/2017 is a consequence of the Indonesia’s commitment to implement AEoI which aiming to promote global financial information disclosure for tax purposes. Through this Perppu, said John, Indonesia have to collect data and financial information without being asked. Then, the data or information referred to the jurisdiction partner. He also added that exchange of information was also reciprocal.

“It can be predicted, DJP will be flooded with data and information of financial assets which owned by Indonesians abroad,” said John.

Coordinating Minister for Economic Affairs Darmin Nasution added, with the issuance of the Perppu, the DJP can get customer data automatically without having to ask permission formally to OJK or Finance Minister.

“In the past, they have to asked for approval from the Finance Minister and OJK. Currently, they can get directly because the Perppu annulled the previous rules,” he said.

He also stated that the Perppu was deliberately prepared by not providing detail explanation the opening for foreign or local customer. In other words, the opening of customer data for tax purposes applies to all customers, whether foreign or local.

As a part of Indonesia commitment to implement of AEoI, Indonesia have to fullfill with issuing strong law related to opening banking customer data for tax purpose. If Indonesia fails to fulfill that commitment, Indonesia credibility as G20 member will be lowered, including in the eyes of investor. Beside that, Indonesia also will be considered as a destination country for illegal fund. (*)

Sanctions

This Perppu imposes sanctions for the heads and / or employees of financial services institutions, leaders and / or other financial institution employees, and the leadership and/or employees of the entity that does not submit the report as intended, not performing proper financial account identification procedures; and does not provide information or evidence or information as intended shall be punished with a maximum imprisonment of one year or a maximum fine of Rp1 billion.

As for financial services institutions, other financial services institutions or other entities did not submit the report as intended and not implementing the iden procedure. (RF)

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