Tag: taxman

  • Government Push Google to Pay Tax

    Government Push Google to Pay Tax

    Director General of Tax Ken Dwijugiasteadi confirmed that Google Asia Pasific Pte Ltd will settle their tax debts by the end of 2016. The government has decided to negotiate with the company instead of filing a report to the police. “Google must pay their tax debts this year, the company and the government will release a statement after the investigation,” Ken said on Monday.

    Ken had met with Google representatives last week. According to the Director General, Google has the right to file their objection towards the tax investigation results as long as an agreement has not been made. The company however, will be required to pay off their debts based on the investigation’s closing conference.

    In response to the issue, Google spokesman Jason Tedjakusuma refused to provide any comment. Jason also refused to respond to questions related to the results on last week’s meeting. “No comment,” Jason said briefly.

    The government estimated that Google Asia Pacific’s revenue, based on service and product sales in Indonesia, had reached Rp 5.5 trillion. On the other hand, Google representative office in Indonesia only generates revenues from advertising services.

    Google Indonesia had been registered at the Tanah Abang Tax Office as a foreign investment company since September 15, 2011. However, state officials cannot collect the company’s taxes because Google is not registered as an Indonesian legal entity.

    Yustinus Prastowo, Executive Director of Center for Indonesia Taxation Analysis doubted the government’s ability to force Google to pay their taxes by the end of 2016. “Even if there is a payment, it wouldn’t be as large as it was expected,” Yustinus said.

  • Is it necessary to chase Google income?

    Is it necessary to chase Google income?

    Internet commercials are starting to take over the advertisement business from print and electronic media, especially television. Wide accessibility and ease of use are the internet’s main points of attraction. However, this poses new problems, as online advertisers are not bound by physical presence.

    Google’s business in Indonesia is a case in point, highlighting problems that accompany the advance of the digital economy, where the concept of space itself is being distorted. People can conduct business in places without having any physical presence there. The law of the land is failing to catch up to this new trend, with tax rules being one prominent example.

    Google’s business model allows such phenomena to arise. Payments for advertisements from Indonesia are sent to Google Asia Pacific Pte. Ltd. (GAP), a Singaporean company.

    Because of the tax treaty between Indonesia and Singapore, Indonesia must refrain from taxing the company’s income. Unless GAP has a permanent establishment (BUT) in Indonesia, such income cannot be taxed.

    The Directorate General of Taxation (DJP) claims that GAP’s business activities constitute a dependent agent BUT through the presence of PT Google Indonesia (GI). This view is contested by GI, which says GAP has no BUT in Indonesia. Moreover it refuses to cooperate with the DJP and resists investigation.

    The existence of a BUT as claimed by the DJP is doubtful. A dependent agent BUT exists when the agent (i.e. GI) basically conducts the non-resident taxpayer’s (GAP’s) business activities. The fact that there is an associated company in Indonesia and income sourced from Indonesia is not enough for the DJP to claim there is a BUT as a tax subject. The DJP needs to study the relationship between GAP and GI carefully. Is GI doing its own business or is it doing GAP’s business?

    Furthermore, even if the DJP makes the case that Google has a BUT in Indonesia, that does not mean that all of Google’s income can be attributed to that BUT. The next question is the functions performed by such a BUT. Are significant functions performed in order to generate all of the income?

    Profits attributed to the BUT are based on those significant functions performed there or the contributions of the BUT performed in GAP’s business. The DJP cannot tax profits that cannot be attributed to the BUT if functions related to those profits are not performed there.

    This approach is more or less the same as if the DJP accepted GI’s claim. If the DJP accepts the claim, then GI’s transactions with other members of the Google group will be treated as transactions between independent entities.

    Therefore, such transactions need to be priced properly by transfer pricing analysis. Such analysis will delineate GI’s role and responsibilities in the whole Google business model. From there, its contribution to the profits will be described, and on that basis we can calculate how much profit is attributable to GI.

    At the end of the day, both approaches look at the activities performed in Indonesia by GI. To be more precise, it depends on the company profiles and their roles and responsibilities in the whole business model of Google.

    Those factors determine the share/contribution in creating the value of the products of the group and thus the profit allocation. Creating a new BUT concept alone is not enough, because it does not solve the problem of attributing profits to the BUT.

    If the DJP really wants to capture the income, it should pay more attention to linking GI’s activities to Google’s income and maybe pursue GI through an audit, rather than trying to establish a BUT and attributing the profits later.

  • No Solution yet to Google Tax Issues

    No Solution yet to Google Tax Issues

    The Communications and Informatics Ministry said that it has not come up with the best solution in relation to the endeavor of collecting taxes from giant tech company Google, as the regulation on foreign app companies (over the top or OTT) has not been realized yet.

    “No solution yet, and I’m still coordinating with the Finance Ministry. But I keep on pushing to have a playing field level between the national OTT and the International OTT,” Communications and Informatics Minister Rudiantara said in Jakarta on Friday, October 7, 2016.

    Earlier, Rudiantara said that Google Indonesia was not running an advertising business. In addition, Google has not set up a permanent local entity (BUT) in Indonesia, making it difficult for the government to collect taxes from Google.

    Rudiantara called on Google to show its good will to discuss the issue.

    “However, the amount of taxes to be paid by Google remains Finance Ministry’s jurisdiction,” he said.

    Rudiantara had also set a target to finalize regulations on OTT companies in the third quarter of 2016. However, the realization remains sluggish since the Ministry cannot issue a regulation that is not applicable and enforceable.

    Google Singapore, as Google Indonesia’s holding company, refused to be audited by the Tax Directorate General, following a finding that Google gains income from Indonesia, although it has not yet established a permanent local entity in the country. The Tax DG found an indication of criminal offenses and conducted investigation into the company.

    Finance Minister Sri Mulyani has not provided details about steps to be taken to collect taxes from Google. However, Sri said that the government would continue to demand Google to fulfill its tax obligations.

  • Google may face over $400 million Indonesia tax bill for 2015

    Google may face over $400 million Indonesia tax bill for 2015

    Indonesia has really slammed Google this time around. If you can’t pay the fine don’t do the crime. The latest with the two is that Indonesia is arranging to seek after Google for a long time of back charges, and the colossal exploratory giant could be condemned with a bill of more than $400 million for 2015 single-handedly, in the occurrence that it is found to have maintained a strategic distance from installments.

    Muhammad Hanif, leader of the assessment office’s exceptional cases branch, went to Google’s neighborhood office in Indonesia on Monday. The duty office claims Google Indonesia paid under 0.1 percent of the aggregate wage and esteem included expenses it owed a year ago.

    Google Indonesia emphasized an announcement made a week ago in which it said it keeps on participating with neighborhood powers and has paid all pertinent charges.

    On the off chance that discovered blameworthy, Google will need to pay fines of up to four times the sum it owed, conveying the greatest expense bill to 5.5 trillion rupiah ($418 million) for 2015. OUCH!

    The greater part of the income produced in the nation is reserved at Google’s Asia Pacific base camp in Singapore. Google Asia Pacific declined to be reviewed in June, provoking the expense office to heighten the case into a criminal one,

    Google’s contention is that they simply did tax planning. Tax arranging is lawful, however forceful expense arranging – to the degree that the nation where the income is made does not get anything – is not lawful. That’s right, the law will bite you, so make sure you do your homework beforehand.

    Tax avoidance, not at all like tax evasion, is legitimate. Be that as it may, numerous expansive organizations push into legitimate hazy areas with forceful methodologies intended to expand “charge effectiveness”. A typical approach to move benefits seaward is through exchange evaluating, when auxiliaries in various nations charge each other for merchandise or administrations “sold” inside the gathering. This is especially prevalent among innovation and medication organizations that have bunches of licensed innovation, the estimation of which is particularly subjective. These intra-organization eminence exchanges should be arm’s-length, however are regularly evaluated to minimize benefits in high-charge nations and amplify them in low-impose ones.

    The assessment office will summon chiefs from Google Indonesia who additionally hold positions at Google Asia Pacific, including that it is working with the Indonesian police.

    All around, it is uncommon for a state examination of corporate assessment structures to be swelled into a criminal case. It ordinarily takes no less than three years for an Indonesian court to settle on a choice on an assessment criminal case.

    The duty office wants to pursue back assessments from different organizations that convey content through the web (over-the-top administration suppliers) in Indonesia.

    The Indonesian correspondence and data service is chipping away at another direction for OTT suppliers, and the duty office has suggested that an organization with system nearness in Indonesia ought to likewise be liable to tax assessment.

    Lawsuits are a pretty common manner with society and especially businesses. The Law dictionary outlines it significantly. According to the most recently acclaimed statistics, approximately 95 percent of awaiting lawsuits end in a pre-trial settlement. This means that just one in 20 cases are determined in a court of law by a judge or jury. It also means that planning for a pre-trial settlement is a vital factor of any lawful policy. Evidently, many seasoned plaintiffs use the immensity of the pre-trial preparation period to assemble a case that persuades their opponents into resolving for a favorable sum.

    We have to consider that Google is a very, very, very successful business. So despite them possibly being hit with this bill, chances are they can afford to pay for it. But of course who wants to waste money like that? How much does Google make exactly? I’m sure you’re all wondering. Moz indicates that in 2013, Google made $58.8 Billion in revenues. In Q1 of 2014, Google reported making $15.4 billion – on track to beat $60B for the year. For the financial year 2010, Google reported revenues of $29.3 Billion.

  • Rich Indonesians snapping up Singapore luxury homes as taxman calls

    Rich Indonesians snapping up Singapore luxury homes as taxman calls

    Never mind that Singapore is experiencing one of the worst property slumps in its history, demand for luxury housing is suddenly coming from an unexpected group: wealthy Indonesians.

    This year’s purchases by Indonesian nationals of homes valued at S$5 million or more have already nearly quadrupled from last year’s total.

    The stepped-up buying coincides with the passage of a law in Jakarta aimed at getting Indonesians to repatriate or pay taxes on an estimated US$300 billion that had fled to Singapore during previous periods of unrest, lest those who took their money out be found out for tax evasion – a reason cited by three property agents as a primary reason behind the purchases.

    Indonesians were the top foreign buyers at the luxury OUE Twin Peaks tower, which went on sale in July.

    “We’re seeing a big increase in Indonesians buying the most expensive property,” said Ang Kok Leong, a senior agent at SLP Realty Pte, who cited Indonesians’ concerns about Singapore’s upcoming move to share financial information as the single biggest motivation for his Indonesian clients. “These people are generally in tune with this kind of situation back home, so if I’m not about to let the Indonesians know what I have, I will buy in Singapore.”

    Indonesia, Singapore and other countries are adopting global tax reporting requirements to tell each other about nationals holding assets abroad. Indonesians moving money into property are counting on only assets held in banks, not in real estate, being shared, agents and brokers say.

    While the numbers in the official data are small, they show surging demand that likely understates the real total. Indonesians bought 30 Singapore properties valued at S$5 million or more between the start of the year and Aug 17, compared with only eight such deals for all of 2015, according to the Urban Redevelopment Authority. Disclosure of nationality is voluntary.

    During the first half of this year, Indonesians bought 189 properties of all values in Singapore, 23 per cent more than in the same period last year, data from Cushman & Wakefield Inc show. While purchases from Chinese and Malaysians declined during the second quarter, transactions by Indonesians rose 19 per cent.

    Not all Indonesians buying real estate are seeking to avoid taxes, of course, and some may see value in a market that bottomed out in prime areas at the end of 2015. Indonesians are drawn to property in Singapore’s center, especially the Orchard Road area where the OUE Twin Peaks towers are located. Apartment prices there have risen 0.6 per cent since their low at the end of 2015, according to Cushman & Wakefield.

    At the OUE Twin Peaks development, where luxury condos in the second tower of the 36-story high rises went on sale in July, the developer sold almost half the first batch of 86 units with price tags of as much as S$4 million, with Indonesians the top foreign buyers, according to Propnex Realty Pte, a company handling sales for the project.

    A Propnex agent who asked not to be identified said the strong demand from Indonesians came as a surprise. It’s a marked change from past sales of downtown luxury homes, such as the Marina One Residences last year, when Indonesian buyers accounted for just three of about 200 units sold, Cushman & Wakefield data show.

    Indonesian President Joko Widodo’s ambitious tax amnesty plan, under discussion since earlier this year and ultimately passed in June, is aimed at repatriating Indonesian cash stashed overseas while giving evaders a way to come clean.

    Under the amnesty, Indonesians are to pay a tax rate starting at 4 per cent on declared property or funds left overseas. It increases in stages to 10 per cent as the amnesty period draws to a close in March. Those who send their money home and keep it in Indonesia for at least three years pay 2 per cent and are offered a wide range of possible investments. Those who don’t declare and are found out face paying 200 percent of the tax owed.

    The tax amnesty deal may attract S$5 billion to S$9 billion of Indonesian funds deposited in Singapore, Sanford C Bernstein & Co analysts Kevin Kwek and Norbert Topouzoglou wrote in a July 21 report. Most of the assets are probably invested in properties, securities or businesses, and are thus less likely to be repatriated quickly, they said.

    Wealthy clients typically allocate about 20 per cent of their assets to property, according to Evrard Bordier, Singapore-based managing partner of Swiss private bank Bordier & Cie. That percentage might increase because of the new tax transparency standards from the Organization for Economic Cooperation and Development that both Singapore and Indonesia have agreed to, he said. They currently don’t include reporting on real estate holdings.

    “This global shift into increased transparency will no doubt result in subtle yet important changes in the portfolio allocation of a typical high-net-worth individual,” said Bordier, noting that the global trend toward sharing information across jurisdictions eventually will make hiding money in property difficult.

    In response to a request for comment, the Monetary Authority of Singapore and the country’s Ministry of Finance said Singapore is ready to help in “any case of suspected cross-border tax evasion.”

    Singapore and Indonesia have yet to agree to the mechanisms needed for the automatic exchanges of information under OECD tax standards, due to come into effect by 2018. Until then, information transfers including information on property ownership take place upon request between the two tax authorities.

    “Expectations of motivating substantial repatriation whilst there are still doubts/lack of clarity may be overly optimistic,” Vishnu Varathan, an economist with Mizuho Bank Ltd., said by e-mail. “Declaring taxable monies to be repatriated could subject their accounts/finances to more scrutiny.”

    Singapore is currently mired in its most prolonged housing slump on record. Home prices in the city-state fell for the 11th straight quarter in the three months ending June 30, posting the longest losing streak since records started in 1975.

    Singapore’s government is holding steadfast on cooling measures it has rolled out since 2009, for fear of inflating a property bubble. The measures, including a stamp duty on foreign buyers, limit the investment appeal of what is still a key high-end housing market in Asia. Wealth advisers and property agents say property is often seen as a conservative investment option and a way to store wealth at a time of economic uncertainty and mediocre returns in financial markets.

    “Indonesians see Singapore as a politically stable safe haven,” said Jasslyn Yeo, Singapore-based global market strategist for JPMorgan Chase & Co’s asset management unit. “This is an important factor, especially at this time when you see so much instability in the region.”

    Indonesian wealth fled the country as far back as the 1960s when violence against ethnic Chinese was part of a campaign by President Sukarno to stamp out Communism. Other periods of instability include 1998, when anti-Chinese riots coincided with the ouster of President Suharto, and thousands of ethnic Chinese took refuge in Singapore and elsewhere.

    Many Indonesians travel to Singapore for medical checkups and procedures, so locations near hospitals are at a premium, agents say. Indonesian citizens bought 42 of 211 apartments in the range of S$1 million to S$4 million earlier this year in the Cairnhill Nine condo development, within walking distance of two hospitals, Cushman & Wakefield data show. The second-largest group of foreign buyers was Malaysians, with 16 units.

    Unlike Singaporeans, who mostly buy to reside in properties and take time to decide, Indonesians often close deals in a matter of days and aren’t picky about details, the agents say. They typically look for amenities such as hot tubs and swimming pools, as well as private elevator entrances, a feature that has become popular in recent years.

    “This kind of buyer, sometimes they will come wearing big sunglasses if they’re famous, so you don’t recognize them, and often they come with their own family agent,” said Kent Tan, an agent with realtor Home Guru Pte, who has seen a recent uptick in the number of queries by Indonesians. “These buyers know Singapore’s market very well and have known it for many years.”