Implementation of Automatic Exchange of Information (AEOI) in Indonesia

Supervising the tax obligations of multinational corporations has become a significant issue in todays globalized world. To address this challenge, Indonesia, along with G-20 countries, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2011.

This convention serves as the primary foundation for the exchange of information among G-20 nations in the realm of taxation. The cooperation includes the exchange of information, tax collection assistance, and document services, providing a solution to the limitations concerning data and information often encountered in tax compliance monitoring.

In 2014, G-20 nations collectively adopted the Common Reporting Standard (CRS) as the international standard for implementing the Automatic Exchange of Information (AEOI). To implement this international agreement, the Indonesian government enacted Law No. 9 of 2017 regarding access to financial information for tax purposes. Furthermore, detailed regulations related to this law were issued through the Minister of Finance Regulation (PMK) No. 70/PMK.03/2017, which provides Technical Guidelines on Access to Financial Information for Tax Purposes, and PMK No. 19/PMK.03/2018 (PMK 19/2018).

Under these regulations, the Directorate General of Taxation (DJP) is granted authority to access financial information from Financial Services Institutions (Lembaga Jasa Keuangan - LJK) and similar institutions. This access aims to enforce tax regulations and international tax agreements.

In the context of international agreements related to information exchange, certain institutions and entities are obliged to report their financial information. According to Article 4 of PMK 19/2018, financial service institutions (LJK) that are required to report include custodian institutions, deposit-taking institutions, insurance companies, and investment entities. Examples of reporting LJKs include banks, capital markets, and insurance companies.

However, some institutions and entities are not obligated to submit reports. These include government entities, international organizations, and central banks. Certain pension funds, excluded collective investment contracts, specific trusts, and entities with a low risk of tax avoidance are also exempt from reporting financial information.

The information that must be reported by LJKs and reporting entities includes financial information for each financial account. Financial accounts that must be reported meet specific criteria. For example, financial accounts opened before July 1, 2017, with an aggregate balance exceeding USD 250,000 are subject to reporting. In contrast, there is no minimum balance requirement for financial accounts opened by entities after July 1, 2017, or for personal financial accounts.

Reported information must include the account holders identity (name, address, tax residence country, TIN, place and date of birth for individuals, and entity controllers identity), account number (or equivalent in cases where an account number is unavailable), the reporting financial institutions identity (name and tax registration number), the balance/value of the financial account at the end of the calendar year (including cash value/surrender value for annuity contracts or insurance contracts with cash value), and income related to the financial account (e.g., interest, dividends, other amounts paid or credited to the financial account during the calendar year or other reporting period).

In cases where no reportable financial accounts exist during a calendar year, the reporting financial institution is still required to submit a nil report.

The reporting deadlines vary depending on the type of reporting institution. LJKs must submit their reports to the Financial Services Authority no later than August 1st each year, and the Financial Services Authority is responsible for forwarding these reports to the Directorate General of Taxation by August 31st. On the other hand, for other LJKs and reporting entities, reporting must be done no later than April 30th each year directly to the Directorate General of Taxation.

With these measures, Indonesia is committed to enhancing tax transparency and ensuring that multinational corporations adhere to their tax obligations. This ensures that the country can optimize tax revenue for sustainable development.