Background
As a measure to secure tax revenue and ensure tax transparency, Competent Authority of Indonesia has the authority to engage in Spontaneous Exchange of Information (SEOI). SEOI aims to prevent tax avoidance and evasion, curb the misuse of Double Tax Avoidance Agreements, and obtain information related to taxpayers' tax compliance.
Definition of Spontaneous Exchange of Information
Spontaneous Exchange of Information refers to the process where Competent Authority of Indonesia directly convey tax information to the Competent Authority in another country or jurisdiction without any specific request (Outbound SEOI). This process also occurs when Competent Authority of Indonesia receive relevant tax information from another country or jurisdiction Competent Authority without a prior request (Inbound SEOI). Unlike Automatic Exchange of Information (AEOI), Spontaneous Exchange of Information can occur throughout the year whenever information under the scope of exchangeable information is obtained.
Covered Tax Types
Tax types covered in Spontaneous Exchange of Information include:
- Income tax as agreed in Double Tax Avoidance Agreements (DTAA);
- Income tax and Value Added Tax as agreed in Tax Information Exchange Agreements (TIEA);
- Income tax, Value Added Tax, Luxury Goods Sales Tax, and Land and Building Tax as stated in the Mutual Administrative Assistance in Tax Matter Convention (MAAC).
Covered Information for Exchange
Spontaneous Exchange of Information covers tax information within the agreed period (tax period and/or year) in international agreements or conventions. It can involve information related to transactions or activities between Indonesian taxpayers and taxpayers in another country or jurisdiction, acquired through processes such as:
1. tax compliance monitoring;
2. development and analysis of information, data, repot, and complain;
3. tax audits;
4. tax collections;
5. preliminary evidence examinations;
6. tax investigations;
7. adjustments or cancellations of incorrect tax assessment notices;
8. incorrect tax billing adjustments;
9. objections;
10. appeals;
11. judicial reviews;
12. Mutual Agreement Procedure (MAP), or Advance Pricing Agreements (APA).
Spontaneous Exchange of Information can also be carried out for information related to domestic tax regulations and their implementation. The domestic tax regulations are decisions by the Director General of Taxation for specific taxpayers in the form of:
- Advance pricing agreement (APA) approval for proposed transaction schemes; and
- Granting of tax facilities, the information of which must be exchanged based on international assessments for implementing Base Erosion and Profit Shifting Action 5 (Forum on Harmful Tax Practices/FHTP).
Criteria for Exchangeable Information
Information eligible for spontaneous exchange must meet criteria such as:
- Indication of significant potential loss of tax revenue in Indonesia and/or the partner country or jurisdiction;
- Payments from Indonesian taxpayers to taxpayers in another country or jurisdiction suspected to be unreported, and vice versa;
- Reduction or exemption of taxes in Indonesia received by taxpayers in another country or jurisdiction, which may increase tax obligations in the partner country or jurisdiction, and vice versa;
- Business activities between Indonesian taxpayers and taxpayers in another country or jurisdiction conducted through one or more countries designed to reduce taxes paid in Indonesia and/or the partner country or jurisdiction; or
- Suspicion of tax payment reduction due to the artificial transfer of profits within a multinational enterprise group.
Obligation to Maintain Confidentiality
All exchanged information must be kept confidential in accordance with legal regulations and international agreements. All units within the Directorate General of Taxation are required to maintain the confidentiality of exchanged information. Unit heads within the Directorate General of Taxation that intend to disclose information for tax purposes must request permission from the Director of International Taxation, who will further act based on international agreements. Information received from the exchange cannot be used for purposes beyond taxation. Violation of the obligation to maintain confidentiality will result in sanctions according to applicable regulations.
Conclusion
Spontaneous Exchange of Information serves as an instrumental complement to other information exchange mechanisms. Through Spontaneous Exchange of Information, the Directorate General of Taxation can proactively and strategically collaborate with partner countries or jurisdictions to secure tax revenue while maintaining the confidentiality of exchanged information. This collaboration is a crucial step in addressing international tax avoidance and evasion more comprehensively.
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