Income Taxes in Bali when Paid By US Company

[pindelicato]

Hi again everyone,

I am planning to spend three months in Bali with my family. I plan on continuing to work for my current employer here in the US remotely, from Sanur, for most of those three months.

What are the tax implications? In a Deloitte paper (that apparently I am not allowed to link to), it seems that I am not a resident therefore there are no income tax concerns from Indonesia govt:

"Residents are defined as individuals who are present in Indonesia for 183 days or more in any continuous 12-month period, or who reside in Indonesia during the fiscal year and intend to remain there. Nonresident taxpayers are individuals present in Indonesia for fewer than 183 days with no intention to reside in Indonesia. Nonresidents need not register for tax purposes."

Is that accurate?

Part #2:

For those of you doing something similar, what did the US company you work(ed) for have to do for US tax purposes? I hope my employer doesn't have to set up some entity of sorts....

Thanks for your help.

Pete

 

[Mark]

Pindelicato, first, you cannot legally work in Bali (for your US employer or anyone else) without the appropriate visa and work permit. Unless you or your employer set up a company in Indonesia to employ you (an expensive exercise, particularly for only three months) you cannot legally work in Indonesia. Second, assuming you manage to acquire the requisite visa and work permit, all income earned whilst working in Indonesia is subject to Indonesian tax. Your reference to the 183 days rule is relevant so far as Indonesian tax residence is concerned - if you are resident more than 183 days in Indonesia you become a 'tax resident', and all of your worldwide income is subject to Indonesian tax.

Having said all this, I'm sure that huge numbers of foreigners are currently 'working' in Bali on the sort of arrangement you are contemplating without the required visa and without paying tax. Given the ease of working over the internet, it is very hard for the authorities to detect that someone is actually working. How is employment defined anymore? For example, is writing a book (which you intend will be published someday) working? Maintaining a website or writing a blog on which you receive google-related ad income? Selling stuff on ebay? Trading stocks or forex for income? Taking business calls and sending emails during your three week vacation? Technically all seem like they could be considered 'working', but also very difficult for the authorities to prove and arguably not 'employment in Indonesia' (in the traditional sense anyway). So, while legally dodgy, you could theoretically come to Bali on a three month 'sabbatical' with your family using a social visit visa, do web and phone based 'work' under the radar and not have to bother with either local taxes or a work permit. Your risk though.

 

[Georgie]

Pindelicato, first, you cannot legally work in Bali (for your US employer or anyone else) without the appropriate visa and work permit. Unless you or your employer set up a company in Indonesia to employ you (an expensive exercise, particularly for only three months) you cannot legally work in Indonesia. Second, assuming you manage to acquire the requisite visa and work permit, all income earned whilst working in Indonesia is subject to Indonesian tax. Your reference to the 183 days rule is relevant so far as Indonesian tax residence is concerned - if you are resident more than 183 days in Indonesia you become a 'tax resident', and all of your worldwide income is subject to Indonesian tax.

Having said all this, I'm sure that huge numbers of foreigners are currently 'working' in Bali on the sort of arrangement you are contemplating without the required visa and without paying tax. Given the ease of working over the internet, it is very hard for the authorities to detect that someone is actually working. How is employment defined anymore? For example, is writing a book (which you intend will be published someday) working? Maintaining a website or writing a blog on which you receive google-related ad income? Selling stuff on ebay? Trading stocks or forex for income? Taking business calls and sending emails during your three week vacation? Technically all seem like they could be considered 'working', but also very difficult for the authorities to prove and arguably not 'employment in Indonesia' (in the traditional sense anyway). So, while legally dodgy, you could theoretically come to Bali on a three month 'sabbatical' with your family using a social visit visa, do web and phone based 'work' under the radar and not have to bother with either local taxes or a work permit. Your risk though.

I "worked" here for 2 months many years ago on a business visa. I attended meetings, a 1 week conference and met with some Mayors to sign some MOU's. I was told the Business Visa was appropriate for this and my other colleagues also obtained the same visa. We did not take any money from Indonesia, we did not need to pay taxes in Indonesia. Maybe that is the type of visa would do in this situation, I not sure of the work the OP does though. We were very transparent, showed our Itinerary of meetings and conference attendance etc for the 2 months and were given the visa, for 60 days I believe, mine was actually for 12 months but you had to leave every 60 days. If he has a genuine reason to "work" here, I am not clear on that part of his post, that his employer requires him here and it's not just a holiday, then I think a Business visa would work.

 

[Mark]

Good point Georgie. I too had a business visa for easy entry (ie no VOA payment) a few years back (it was multiple entry and good for one year). Only attended a few meetings on behalf of my foreign employer.

 

[pindelicato]

Hi Everyone,
I continued my research, and from what I can tell, I will not be a resident OR a non-resident. From a PDF titled "Doing Business in Indonesia":

Residents
A resident tax subject is defined as any individual present in Indonesia for more than 183
days in any twelve month period, or any individual present in Indonesia and intending to
reside in Indonesia. Resident individuals are taxed at the normal rates on taxable
income,being world-wide gross income less allowable deductions and non-taxable
income.Individual income taxes in Indonesia are levied only at the national level.

Non-residents
A non-resident individual, being an individual present in Indonesia for less than 183 days
with no intention to reside, is deemed to be a non-resident tax subject under the law if he
or she receive or accrues any income from Indonesia. Payments to nonresident
individuals in the form of dividends, interest, royalties, rents for property, prizes or
awards, and payment for technical, management and other services wherever
performed are subject to a 20% withholding tax, subject to any reduced rates under an
applicable tax treaty.

If that is the case, it seems that Indo will not expect to collect tax primarily because I don't "Accrue ay income from Indonesia". All my income will come from the States, as all my work will be designing products for my company back in the states.

Agree? Disagree?