Indonesia
This report analyses the implementation of the AEOI Standard in Indonesia with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Indonesia’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Indonesia’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Indonesia’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Indonesia’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). Indonesia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
Overall rating in relation to the effectiveness in practice: On Track
General context
Indonesia commenced exchanges under the AEOI Standard in 2018.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Indonesia:
enacted Law Number 9 of 2017 on Enactment of Government Regulation in Lieu of Law of The Republic of Indonesia, Number 1 of 2017 on Access to Financial Information for Tax Purposes to Become Law; and
Introduced the Regulation of the Minister of Finance Number 70/PMK.03/2017 as most recently amended by Regulation of the Minister of Finance Number 19/PMK.03/2018 on Technical Guidance on Access to Financial Information for Tax Purposes.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 July 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.
Following the initial Global Forum peer review, Indonesia amended its legislative framework to address issues identified, effective from 19 February 2019.
With respect to the exchange of information under the AEOI Standard, Indonesia:
is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018; and
put in place a bilateral agreement.1
Table 1 sets out the number of Financial Institutions in Indonesia that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Indonesia requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Indonesia’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Indonesia in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Indonesia’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Indonesia:
the Directorate General of Taxes (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Indonesia’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by creating two online Portals which allow Reporting Financial Institutions to submit the XML files; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Indonesia's legal frameworks implementing the AEOI Standard concluded with the determination that Indonesia’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Indonesia’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Indonesia are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Indonesia’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Indonesia has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Indonesia has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Indonesia has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Indonesia has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Indonesia’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Indonesia’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Indonesia and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Indonesia has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Indonesia put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Indonesia’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Indonesia are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Indonesia’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Indonesia is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Indonesia implemented all of the requirements in accordance with expectations. The key findings were as follows:
Indonesia implemented an overarching strategy to ensure compliance with the AEOI Standard. This included communication, awareness raising activities and guidance to ensure that all Financial Institutions are well informed and possess all the necessary knowledge to have common understanding of their obligations in respect of AEOI. These activities have been conducted on a regular basis through various engagements with the licensing authorities, for instance the Financial Service Authority (FSA) and the financial industry associations. The strategy also encompasses an understanding of the population of Financial Institutions the monitoring of the reporting obligations and compliance audits based on a risk assessment process. The risk assessment process is carried out annually and takes into account a range of relevant information sources. Some of those sources are data maintained internally by the DGT (e.g. the profile and business activities of Financial Institutions, fulfilment of tax obligations, fulfilment of CRS obligations and feedback received from exchange partners) and external data gathered from other government and/or non-government bodies (e.g. compliance with AML obligations, articles and external publications related to the financial industry). Indonesia’s compliance strategy facilitates compliance and incorporates a credible approach to enforcement. Indonesia intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Indonesia has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources. These include the list of regulated entities maintained by the licensing authorities, the tax authorities (DGT’s) database (as all Financial Institutions in Indonesia should be licensed and must obtain a tax identification number (TIN)), the list of Foreign Financial Institutions for FATCA purposes and intelligence information gathered by a Government task force to monitor risks in the financial sector. Indonesia is taking action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. Indonesia intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The DGT, responsible for implementing Indonesia’s compliance strategy, involves different departments in the compliance activities. The sub directorate of Exchange of Information within the Directorate of International Taxation, the Directorate of Tax Audit and Collection and the Directorate of Law Enforcement are in charge of ensuring the effective implementation of AEOI in Indonesia. They have teams skilled and responsible for conducting verifications, audits, including onsite audits and enforcement. The DGT appears to have the necessary powers and resources to discharge its functions, Indonesia has assigned 11 full time staff in the three Directorates to monitor and ensure compliance by Reporting Financial Institutions, which have access to IT systems and tools to conduct risk assessments. Overall, they appear to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities, including in-depth reviews and the inspection of records held by Reporting Financial Institutions.
With regard to verification activities, Indonesia has procedures in place and has carried out specific checks during both desk-based verifications and onsite audits to ensure that Reporting Financial Institutions have performed due diligence procedures in accordance with the AEOI standard and to ensure that self-certifications are being obtained in accordance with the standard.
It therefore appears that Indonesia effectively enforces the requirements, including through the inspection of records of Reporting Financial Institutions and is ready to apply dissuasive penalties and sanctions for non-compliance. It also appears that Indonesia has started to take action to address circumvention of the requirements if such circumvention is detected, by creating a channel for the public to report potential circumvention of the CRS. Indonesia has conducted one-on-one follow-up meetings with the Reporting Financial Institutions that have reported undocumented accounts. Indonesia does not have a jurisdiction-specific list of Non-Reporting Financial Institutions or Excluded Accounts.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
In terms of the Financial Account information collected and sent by Indonesia, while the presence of the dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts, the proportion of Tax Identification Numbers with respect to the individuals associated with the accounts was significantly lower when compared to most other jurisdictions. These are key data points for exchange partners to effectively utilise the information. Follow-up discussions confirmed that Indonesia is aware of the issue and is taking steps to address it.
Feedback was also received from Indonesia’s exchange partners indicating that, compared to what they generally experience in relation to the information received from all of their exchange partners, they achieved a relatively low level of success when seeking to match information received from Indonesia with their taxpayer database. Furthermore, several exchange partners have encountered problems such as invalid or missing Tax Identification Numbers, invalid or missing dates of birth and invalid or incomplete addresses. Follow-up discussions confirmed that Indonesia is aware of these issues is seeking to improve the situation, including engaging with the relevant exchange partners and including this issue in their risk assessment compliance strategy.
Based on these findings it was concluded that, overall, Indonesia is meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. It was also noted that there is room for improvement with respect to the identification of relevant non-regulated entities and continuing to address the issues raised by its exchange partners. Indonesia is encouraged to continue its implementation process accordingly, including in relation by addressing the recommendation made.
Indonesia should continue to address the issues raised by its exchange partners.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, Indonesia implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. In particular, Indonesia received notification from three partners (representing 4% of its partners) and successfully processed them in a timely manner, resolving the issues raised. This is depicted in Figure 1. Indonesia also notifies its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Indonesia is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Indonesia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Indonesia’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Indonesia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Three exchange partners highlighted particular issues with respect to preparation and format of the information sent by Indonesia (representing 4% of its partners). These generally related to issues concerning validation of files with the CRS XML Schema requirements. It was noted that Indonesia has already successfully addressed most of the issues, with only one issue where further communication is awaited from the partner jurisdiction. More generally, three (or 4%) of Indonesia’s exchange partners reported rejecting more than 50% of the files received, due to the technical requirements not being met. This is a relatively high amount when compared to other jurisdictions. It was noted that Indonesia has already successfully corrected and re-sent the files to the exchange partners.
Based on these findings it was concluded that, overall Indonesia is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to validation of files with the CRS XML Schema requirements. Indonesia is therefore encouraged to continue its implementation process accordingly, including in relation to the area highlighted.
Indonesia should continue to address the issue raised by its exchange partner.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Indonesia linked to the CTS
Based on these findings it was concluded that Indonesia is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Indonesia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Three exchange partners highlighted delays in the sending of information by Indonesia (representing 4% of its partners). This represents a relatively high proportion of exchange partners. However, in two out of those three cases, it is clear that the delay was not highlighted promptly to Indonesia by the affected partners and Indonesia has worked proactively to effectively address all of the issues as soon as possible.
Based on these findings it was concluded that, Indonesia is fully meeting expectations in relation to exchanging the information in a timely manner. Indonesia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Indonesia’s exchange partners did not raise any concerns with respect to Indonesia’s use of the agreed transmission methods and therefore with Indonesia’s implementation of this requirement.
Based on these findings it was concluded that Indonesia is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Indonesia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Six exchange partners highlighted delays in the sending of status messages by Indonesia, representing 6% of its partners. This represents a relatively high proportion of partners, although it has improved over time. It was noted that Indonesia appears to be addressing the issues to ensure that status messages are sent in accordance with the requirements.
Based on these findings it was concluded that, overall, Indonesia is meeting expectations in relation to the receipt of the information. It was also noted that there is room for improvement with respect to the sending of timely status messages to the sending jurisdictions. Indonesia is encouraged to continue to ensure the ongoing effectiveness of its implementation, including in relation to the area highlighted.
Indonesia should ensure it consistently sends timely status messages to the sending jurisdictions when files are received.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Jurisdiction has responded to notifications and provided corrected, amended or additional information in a timely manner. One exchange partner highlighted delays in Indonesia responding to such notifications. It was noted that Indonesia has taken action to address the issue by sending corrected information to its exchange partner.
Based on these findings it was concluded that, overall, Indonesia appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. It was also noted that there is room for improvement with respect to responding to a notification from an exchange partner in a timely manner. Indonesia is encouraged to continue to ensure the ongoing effectiveness of its implementation, including in relation to the area highlighted.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
Indonesia appreciates the Global Forum Secretariat and the AEOI Assessment Panel for the work and effort undertaken. The comments and recommendations provided to us are invaluable inputs to ensure that the implementation of AEOI is on the right direction. As such we will make every effort to improve the effectiveness of AEOI implementation in Indonesia.
Note
← 1. With Hong Kong (China).