Important Changes to Financial Information Access for Tax Purposes

Recent changes to Indonesia's financial information access rules have significant implications for taxpayers and financial institutions. The Minister of Finance Regulation No. 47 of 2024 (“Regulation”) introduces new anti-avoidance measures and expands reporting requirements, reflecting a global shift towards greater transparency and cooperation in tax matters.

The Regulation was issued on 18 July 2024, and came into force on 6 August 2024. It is the third amendment to Minister of Finance Regulation No. 70/PMK.03/2017, which regulates access to financial information for tax purposes, including general tax compliance monitoring by the Directorate General of Tax and the exchange of information under the Exchange of Information agreements with tax authorities in other jurisdictions.

We take a closer look at the main updates in the Regulation below.

Anti-Avoidance Rules

The Regulation introduces a new chapter VA, titled “Anti-Avoidance”. This chapter replaces the previous anti-avoidance provisions, although some of the old provisions have been moved to different sections within the Regulation.

Chapter VA includes a new Article 30A, which stipulates as follows:

• Prohibition on avoidance: Under Article 30A paragraph (1), all parties, including financial institutions and their employees, are strictly prohibited from entering into agreements or taking actions designed to circumvent their obligations under the financial information reporting regulations. Any such agreements or actions will be deemed null and void, and the parties involved will be required to fulfil their original obligations.

• Authority of the Director General of Tax: Under Article 30A paragraph (2), the Director General of Tax has the power to identify agreements or actions aimed at avoiding reporting obligations. The Director General of Tax is also authorised to obtain any financial or other relevant information related to suspected avoidance activities.

• Prohibition on false statements: Under Article 30A paragraph (4), all parties are prohibited from making false statements or concealing information that is required to be reported under the Regulation. A statement is considered false if it is inaccurate or not based on facts.

Oversight by the Director General of Tax

The Director General of Tax has the authority to investigate potential non-compliance with the Regulation, including violations of the new anti-avoidance rules in Article 30A.

If the Director General of Tax suspects a violation, it may request clarification from the relevant party. In this case, the relevant party must provide clarification within 14 days after receipt of the request. After receipt of the clarification, if the Director General of Tax determines a violation has occurred, or if no clarification is provided, a written warning will be issued. The Director General of Tax may follow up the written warning with a tax audit if the party:

• Fails to fulfil its obligations after the warning; or

• Continues the violating activities.

If the Director General of Tax identifies a potential tax crime, it may conduct a pre-investigation (pemeriksaan bukti permulaan), potentially leading to a full tax crime investigation.

Key Takeaways

This regulatory update brings Indonesia’s financial information access rules in line with international standards, promoting greater transparency and cooperation in tax matters. As discussed above, failure to adhere to the Regulation can trigger a tax audit, potentially resulting in additional tax assessments and lengthy proceedings. Therefore, proactive approach is essential, and taxpayers and financial institutions subject to the Regulation must ensure they fully understand and comply with their obligations.