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INDONESIA: Government Looks to Provide Amnesty on Undeclared Funds Held Locally and Overseas

A nine-month tax amnesty has been introduced in the hope of boosting government coffers while encouraging repatriation of undeclared overseas assets of up to Rupiah 560 trillion (US$41.8 billion). The scheme will allow residents to come clean over undeclared assets held both within and beyond Indonesia’s borders.

During the amnesty, transgressors coming clean will pay only a comparatively low level of tax on their newly-declared funds, with the penalties operating on a sliding scale. The minimum penalty will be 2% on domestically-held funds declared in the first three months of the amnesty, while the maximum will be 10% on all sums held overseas and only declared during the last three months of the initiative.

The government is expected to establish an Offshore Financial Centre (OFC), in effect an officially-sanctioned tax haven, after amnesty expires. The OFC will function as a low-tax jurisdiction based in Indonesia to allow both citizens and overseas investors to conduct offshore trade via legitimately-established shell companies. Neither a date for the launch of the OFC nor its likely location has been announced.

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