• Maulana Ibrahim & Gabriel Muara Thobias

Article 4(2) Income Tax on Interest on Time Deposits from Export Proceeds in Rupiah



In order to maintain the stability of the exchange rate of the Indonesian rupiah towards the United States Dollar and strengthen the national economy, the Government of the Republic of Indonesia imposes the Article 4(2) Income Tax on interest on time deposits denominated in Rupiah whose funds are sourced from Export Proceeds (Devisa Hasil Ekspor or “DHE”) placed in banks in Indonesia.


Tax Subject


Article 4(2) Income Tax is imposed on individuals, entities, institutions, or organizations that receive interest on time deposits denominated in United States Dollar whose funds are sourced from DHE and placed at a bank established or domiciled in Indonesia or a branch of foreign bank in Indonesia.


Exceptions are given to Indonesian tax residents whose entire income in 1 (one) Fiscal Year, including interest and discounts, does not exceed the Non-Taxable Income. The individual can apply for a tax refund on the tax that should not be withheld.


Tax Withholder


The tax withholder is a bank that pays interest on DHE deposits.


Tax Object


Article 4(2) Income Tax is imposed on interest on time deposits denominated in United States Dollar whose funds are sourced from DHE obtained after 28 December 2015 and placed at a bank established or domiciled in Indonesia or a branch of foreign bank in Indonesia. These deposits include DHE Deposits which are placed back at maturity.


In the course that the deposit is placed at the bank where DHE is received, the deposit must come from an overbooking of DHE funds placed in an account belonging to the Exporter, which is used only for receiving and accommodating overseas DHE funds. It must be proven using a document regarding DHE receipt reports through a foreign exchange bank in accordance with the provisions in Bank Indonesia Regulation regarding DHE receipts.


In the course that the deposit is not placed at the bank where the DHE was received, the validity of the deposit can be proven by attaching an Exporter's statement letter stating that the funds from DHE which was legalized by the bank where the DHE was received from abroad or by the last bank where the DHE was saved. The Exporter’s statement must include at the very least:

  1. Exporter’s Identity which includes Exporter’s name and address, Taxpayer’s Identity Number, and account number for the placement of Export Proceeds for Foreign Exchange;

  2. Data on Export Proceeds of Foreign Exchange funds include export value, when Export Proceeds Foreign Exchange funds were obtained, number and date of Notification of Export of Goods, and type of currency

  3. Statement that the source funds of account comes from Export Proceeds; and

  4. Statement that the source funds of Deposit is not from re-deposits including through the Deposit extension mechanism.


Tax Rate


Interest on time deposits denominated in United States Dollar whose funds are sourced from DHE and placed at a bank established or domiciled in Indonesia or a foreign bank branch in Indonesia is subject to Article 4(2) Income Tax with the following rates:


  • 7.5% for a period of 1 (one) month;

  • 5% for a period of 3 (three) months; and

  • 0% for a period of 6 (six) months or more than 6 (six) months.


In the course that DHE time deposits are placed back at maturity, the final tax rate also follows the rate as mentioned above.


In the course that deposits whose funds are sourced from DHE are withdrawn before the maturity of the deposit and/or the source of deposit funds is partially or wholly not from DHE funds, the interest income on such time deposits is subject to Article 4(2) Income Tax with the rate of 20%.


Tax Base


The basis for imposition of Article 4(2) Income Tax on interest on DHE time deposits in United States Dollar currency is the gross amount of deposit interest.


Due Date


Article 4(2) Income Tax on interest on time deposits denominated in United States Dollar whose funds are sourced from DHE is payable at the time the interest is received or earned.


In the event that a deposit whose funds are sourced from DHE is withdrawn before the time deposit is due and/or the source of deposit funds is partly or wholly not from DHE funds, the income on the interest on the deposit is subject to Article 4(2) Income Tax with the rate of 20%, which is payable when interest on the following month's deposit is paid or the deposit is withdrawn.


Withholding Tax Procedure


Article 4(2) Income Tax is withheld by the Bank on income in the form of interest received or earned from DHE time deposits. The bank is required to report the details of the placement of DHE time deposits to Bank Indonesia in accordance with the laws and regulations.


During the time this article was written, there were no applicable rules regarding withholding tax slip of Article 4(2) Income Tax on interest from DHE deposits.


Tax Payment Procedure


The Withholder of Article 4(2) Income Tax is required to pay the tax to the Post Office or a bank appointed by the Minister of Finance, no later than the 10th (tenth) of the following month after the month the tax withholding is made.


If the tax payment due date coincides with a holiday including Saturday, Sunday, national holiday, day off for holding the General Election, or national collective leave, the payment can be made on the next working day.


Income Tax payment is made using a Tax Payment Slip with the tax account code 411128 and the payment code 404.


Tax Filing Procedure


The withholder of Article 4(2) Income Tax must report the income tax withheld in the monthly Article 4(2) Final Income Tax return by no later than 20th (twenty) days after the tax period ends.


If the filing due date of the monthly Article 4(2) Final Income Tax return coincides with a holiday including Saturday, Sunday, national holiday, day off for holding the General Election, or national collective leave, the filing can be made on the next working day.


Individuals who receive interest on DHE time deposit are required to report the interest income and Article 4(2) Income Tax withheld in the Annual Individual Income Tax Return by no later than 3 months after the end of the tax year.


Meanwhile, entities that receive interest on DHE time deposit are required to report interest income and Article 4(2) Income Tax withheld in the Attachment IV of the Annual Corporate Income Tax Return by no later than 4 months after the end of the tax year.


Example of Article 4(2) Income Tax on Interest on Time Deposits from Export Proceeds in Rupiah Calculation


PT X has DHE time deposit of Rp1,000,000,000 placed at Bank ABC for the period of 3 months with an interest rate of 12% per year. How to calculate the Article 4(2) Income Tax on interest on DHE time deposit that Bank ABC should withhold each month?


First of all, we have to calculate the monthly interest on DHE time deposit that will be received by PT X using this formula:

12 % x 1/12 x Rp1,000,000 = Rp10,000,000


Then, we calculate the Article 4(2) Income Tax on interest on DHE time deposit by multiplying the tax rate of 5% with the gross amount of monthly interest on DHE time deposit, as follows:

5% x Rp10,000,000 = Rp500,000


Therefore, PT X will receive Rp9,500,000.

 

Legal Basis:

  1. Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 11 Year 2020 regarding Job Creation

  2. Government Regulation Number 131 Year 2000 regarding Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate as lastly amended by Government Regulation Number 123 Year 2015 regarding Amendment of Government Regulation Number 131 Year 2000 regarding Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate

  3. Minister of Finance Regulation Number 212/PMK.03/2018 regarding Withholding of Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate

 

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