INDONESIAN TAX AUTHORITY CLARIFIES TAX REFUND PROCEDURE FOR NONRESIDENTS
The Indonesian Directorate General of Taxation (DGT) on August 9 issued Regulation PER-40/PJ/2010, clarifying the procedure for tax refund application by nonresident taxpayers with no permanent business in Indonesia.
The tax overpayment meant in this regulation is tax overpayment that has been caused by erroneous withholding or collection of tax, withholding or collection of nontaxable income, or excessive deduction or collection of withholding tax based on the mutual agreement procedures of an applicable tax treaty.
The refund application must be filed by the party doing the withholding/collection of the tax, which acts on behalf of the nonresident taxpayer under a proxy from the foreign entity claiming the tax refund. If the income recipient must be the beneficial owner of the income under applicable tax treaty articles, the application must be accompanied by the financial statement of the foreign entity claiming the refund and the details of its management, number of employees, and source of funds invested in Indonesia.
A refund application will not be approved if:
- the recipient is an Indonesian tax resident;
- the withholding tax has not been remitted by the withholding agent;
- the tax has been claimed as a tax credit overseas or as tax-deductible income overseas, or has been borne by a withholding agent;
- the claim is not in accordance with the applicable tax treaty;
- there is indication of tax treaty abuse; or
- the withholding tax is already in accordance with the relevant tax treaty.
The completed refund application will be reviewed by the DGT and approved or refused within three months of receipt. If the application is approved, the approval will be stated in a Statement Letter of Overpaid Tax (Surat Ketetapan Pajak Lebih Bayar), which will be the basis for the issuance of the Tax Refund Decree (Surat Keputusan Pengembalian Kelebihan Pembayaran Pajak). The refund will be transferred to the bank account of the nonresident taxpayer in Indonesian rupiah. (by: Freddy Karyadi).