Foreign Income Exemptions in Indonesia
Whilst Indonesia is not commonly associated with International contractors or freelancers, it is however the largest economy in Southeast Asia and has recently introduced a number of tax regime measures hoped to increase its attractiveness to both expatriates and investors.
The country has introduced the Law No. 11 of 2020, known as the Job Creation Law. This seeks to make changes to several major tax laws at once.
In an effort to both strengthen its competiveness and gain the advantage in scientific and technological fields, one of the major overhauls is with regards to individuals with certain expertise whereby foreign tax residents who meet the following criteria will only be taxable on their domestic income for four years and all foreign income will be exempt.
The criteria to consider is as follows:-
- A certificate of expertise (this can be either in Indonesia or country of origin as long as the institution issuing the document is recognised by the relevant governmental body)
- Education Certificate and/or
- Minimum of five years’ work experience
This is not the only change to this law which introduces a number of other measures in the hopes to encourage expats whose skill range is anticipated to enhance Indonesia’s competitive advantage. It has also taken measures to lower corporation tax and give exemptions to dividend income in hopes to increase its appeal and boost investment into the country.
