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Indonesia: Regulation on Shell Companies Issued

(Aug. 29, 2016) On August 19, 2016, Indonesia’s Ministry of Finance issued a regulation designed to support the tax amnesty program already adopted by the House of Representatives at the end of June under Law No. 11 on Tax Forgiveness. The amnesty program is aimed at encouraging the repatriation of Indonesian assets from abroad. (Ayomi Amindoni, Govt Issues Rule on Shell Companies, Aims for Asset Repatriation, JAKARTA POST (Aug. 22, 2016); Constance Johnson, Indonesia: Tax Amnesty Passed, GLOBAL LEGAL MONITOR (July 6, 2016); Law No. 11 of 2016 on Tax Forgiveness, LEMBARAN NEGARA REPUBLIK INDONESIA [GAZETTE OF THE REPUBLIC OF INDONESIA], No. 131, 2016, (in Indonesian).)

The new regulation focuses on Indonesian holdings in foreign special purpose vehicle (SPV) companies. According to Sri Indrawati, the Minister of Finance, it is hoped that holders of assets in SPVs will join the tax amnesty program to take advantage of the offer of exemptions from value-added tax for those who move their assets and businesses back to Indonesia before the end of the year.  She suggested that “taxpayers are expected to declare or repatriate their assets through the overseas SPV companies, as well as shift their business base to Indonesia.”  (Amindoni, supra.)

The Ministry had previously issued several regulations to implement other aspects of the Law on Tax Forgiveness. Regulation 118, for example, is on procedures for the tax amnesty, while Regulation 122 permits the transfer of assets into forms such as gold bars. ( Id.; Regulation No. 118/PMK.03/2016 on the Implementation of Law No. 11 of 2016 on Tax Forgiveness (July 15, 2016), Directorate-General of Taxation of the Ministry of Finance website; Regulation No. 122/PMK.08/2016 on Procedures for the Transfer from Abroad of Taxpayer Assets and Their Placement Outside the Financial Market for Tax Forgiveness (Aug. 8, 2016), PAJAK ONLINE.COM (both in Indonesian).)