Indonesia is one of the most beautiful countries in the world and it has always attracted expats from different places around the world. Specifically, Bali has the highest concentration of American expats. Indonesia has an extensive network of collecting taxes so the proper expatriate tax preparation is required for American expats in Indonesia.
We get multiple questions from American expats Indonesia. What are foreign income taxes in Indonesia? Who is required to file an expat tax return in Indonesia? Do you offer US expatriate tax preparation services for American expats in Indonesia or Bali, specifically? The purpose of this guide is to provide an answer to the most popular questions.
Expatriate Tax Rules and Returns for American Expats Indonesia
The USA is one of the few countries that taxes its citizens and green card holders on a worldwide income whether they live in Bali or New York. Consequently, American expats Indonesia are required to file US expatriate tax returns if they meet annual filing requirements.
However, there are several IRC 911 exclusions and credit that can help avoid double taxation for Americans abroad.
- Foreign earned income exclusion. American expats Indonesia can exclude up to $101,800 of the earned income for a calendar year 2016 if they meet one of the tests: a bona fide residence test or physical presence test.
- Foreign housing exclusion. Additionally, American expats Indonesia may exclude certain foreign housing expenses if they have earned income.
- Foreign tax credit. American expats Indonesia can take a foreign tax credit if they paid income taxes in Indonesia.
Additionally, American expatriates in Indonesia with foreign financial assets may be required to file the FBARs as a part of US expatriate tax preparation.
Tax system in Indonesia– FAQ
I am an American expat residing in Indonesia. Is my worldwide income taxed in Indonesia?
- American expats in Indonesia who are considered resident individuals are taxed on their worldwide income.
- Non-resident individuals are taxed only on income from Indonesia.
Who is considered a tax resident in Indonesia?
American expat in Indonesia is considered a resident individual in one of the following cases:
- s/he is present is present in Indonesia for 183 days or more during any 12-month period.
- s/he is present in Indonesia during a tax year and s/he has an intention to reside in Indonesia.
What is the tax year in Indonesia?
Indonesia has a calendar tax year.
What is an income tax rate in Indonesia?
Effective January 1, 2009, resident individuals are subject to income tax rates in a range 5% to 20% over non-taxable threshold. Non-residents’ tax rate is a flat 20% rate on gross income.
Which income of expats Indonesia is considered a taxable income?
There is an extensive list of taxable income: compensation from employment, rental income, interest, dividends, royalties, lottery, prizes, annuities etc.
As an American expat in Indonesia file a expat tax return with a spouse?
Spouses can file joint or separate tax returns. Spouses with separate Tax Identification Numbers are required to calculate the total tax on the combined income and then prorate the amount.
Is it a requirement to file an expatriate tax return in Indonesia every year?
Most tax returns in Indonesia have to be filed by March 31 after the taxable year if the total income exceeds IDR15,840,000 for a single filer and IDR21,120,000 for a married taxpayer with 3 dependents.
Does Indonesia have a tax treaty and social security agreement with the USA?
A double tax treaty was signed on January 1, 1990 between the USA and Indonesia. The USA does not have a totalization agreement with Indonesia that prevents social security protection of expats working in both countries. Although, the USA currently does not have the FATCA agreement with Indonesia, the FATCA will have a substantial impact on foreign financial institutions (FFIs) in Indonesia. To learn more about FATCA, please read our article about What is FATCA. American expats in Indonesia should seek advice of an expatriate tax professional to review personal circumstances and issues related to overseas taxes and US expatriate tax returns.
This guide is an overview of the basic tax questions that American expats in Indonesia should review before moving to Bali and filing US expatriate tax returns on overseas taxes.
American expatriates with additional questions and concerns about US expatriate tax preparation, FATCA, FBARs, PFIC or any other overseas tax issues should seek help of an expat tax CPA that specializes in international tax law. International tax experts at Artio Partners are pleased to advise on a wide range of overseas tax topics.