Based on recommendations from the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Minister of Finance has just issued Regulation No. 19 / PMK.03 / 2018 (“PMK 19/2018“), which amends Ministry of Finance of The Republic of Indonesia Regulation Number No. 70 / PMK.03 / 2017 concerning Technical Guidelines for Access to Financial Information for Taxation Purposes (“PMK 70/2017“) for the second time. This legal update will explain the important points in PMK 19/2018 which need to be observed by Business Actors.
According to Article 1 of PMK 19/208, the exchange of financial information referred to in this regulation is an activity to convey, receive, or obtain financial information relating to taxation under an International Agreement. The purpose of this information exchange is to prevent tax evasion, misuse of multiple tax avoidance agreements, and to obtain information related to the fulfillment of tax obligations. Access to financial information in Article 2 includes the automated submission of reports containing financial information and the provision of information and evidence or information on request.
There are two types of Financial Service Institutions (“LJK“) which are regulated under this regulation:
- LJK, other than LJK and / or other entities (“Related Parties“) that are required to automatically submit reports containing information about financial accounts (“Reporting Entity“). In this regulation, Collective Investment Contract is part of LJK. Previously, in PMK 70/2017 Collective Investment Contract was not a part of LJK.
- Related parties who are not required to automatically submit reports (“Non-reporting Entity“).
The Reporting Entity as referred to in this regulation must submit a report containing information about the financial account that has been identified as an account that must be reported, and held by:
- One or more individuals and or entities that must be reported.
- Passive non-financial entities, in the event that one or more controlling entities are private persons that must be reported (the parties to this entity are listed in the Annex to PMK 19/2018).
An individual who must be reported is any individual who is the subject of domestic tax from the Jurisdiction Reporting Objectives or an undivided inheritance of an individual who has died. Meanwhile, entities that are required to be reported are entities whose domicile countries are Jurisdictions Reporting Objectives except companies whose shares are traded regularly on one or more stock exchanges of entities affiliated with the company.
Financial accounts that must be reported by the Reporting Entity are all accounts held by the holder of an individual financial account, or the holder of an entity’s financial account. Then, the account that must be reported is an account that has a balance of at least IDR 5 billion or an equivalent amount in another currency. The Reporting Entity is not obliged to report a financial account if the financial account is one or more Old Financial Accounts whose aggregate of the balance is not more than USD 250,000 on June 30, 2017, December 31, 2017, and December 31 of the following calendar year. If there is an error in reporting the financial account, the Reporting Entity has the right to make changes to the report that has been submitted.
Meanwhile, for the implementation of information exchange based on the request as intended, the Director General of Taxes or the Director of International Taxation on behalf of the Director General of Taxes can request information and/or evidence or information from LJK, Other LJK, and / or Other Entities, either head office, branch office or the unit that manages information and/or evidence of the intended information. (ana)
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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.