A Tax Residence Certificate (TRC), also referred to as Certificate of Residence (CoR) or Surat Keterangan Domisili (SKD) in Indonesia, is an official document that affirms the tax residency status of an individual or entity. This certificate plays a vital role in ensuring compliance with international tax treaties, mitigating the risk of double taxation, and optimizing tax benefits.
If you’re a foreign individual or company operating in Indonesia or involved in cross-border transactions, understanding the concept of a TRC is essential for navigating Indonesia’s tax regulations effectively.
Also read: Indonesia Tax Rate for Foreigners: What You Need to Know
What Is a Tax Residence Certificate?
The Tax Residence Certificate (TRC) certifies that an individual or company qualifies as a tax resident of Indonesia. This status determines the country where the taxpayer is liable for tax obligations. According to Indonesia’s PER-25/PJ/2018 regulation, this document is crucial for accessing reduced tax rates and exemptions under international tax treaties.
In simpler terms, the TRC ensures that a taxpayer pays taxes only in the country of residency and not in multiple jurisdictions, thus avoiding double taxation.
Key Regulations: PER-25/PJ/2018
Regulation PER-25/PJ/2018 governs the issuance and use of the Tax Residence Certificate in Indonesia. Key points include:
- The TRC must align with Double Taxation Avoidance Agreements (DTAA) terms.
- It must be submitted before the deadline for monthly or annual tax filing.
- Foreign entities must include a declaration of beneficial ownership and ensure no misuse of treaty benefits.
This regulation ensures transparency and minimizes the risk of tax evasion.
Also read: Progressive Tax in Indonesia: Complete Guide for Expats
Benefits of Obtaining a Tax Residence Certificate
Reduced Tax Burden
The TRC enables taxpayers to benefit from reduced withholding tax rates under Double Taxation Avoidance Agreements (DTAA) between Indonesia and other countries.
Enhanced Tax Compliance
The certificate simplifies the process of reporting and paying taxes, ensuring compliance with Indonesian tax laws.
Eligibility for Tax Treaty Benefits
It confirms the taxpayer’s residency status, enabling them to claim treaty benefits, including exemptions and reductions for certain types of income.
Streamlined Regulatory Requirements
As per PER-25/PJ/2018, taxpayers must submit this document when filing tax returns or applying for treaty benefits. It also supports compliance with electronic tax filing regulations introduced in Indonesia.
Also read: Capital Gains Tax in Indonesia: A Guide for Foreign Investors
How to Obtain a Tax Residence Certificate in Indonesia
Obtaining a TRC in Indonesia involves the following steps:
Gather Required Documents
The applicant must prepare necessary documents, including:
- Taxpayer Identification Number (NPWP)
- Completed Form DGT
- Proof of tax residency declaration
Submit Application
Applications must be submitted to the Directorate General of Taxes (DGT) or relevant tax office. Ensure that all forms are filled accurately and signed by the authorized person.
Certification Process
The tax office will review the application and certify the TRC. This certification must meet specific requirements, such as being written in English and including:
- Name of the taxpayer
- Date of issuance
- Tax year of validity
- Signature of the authorized official
Additional Requirements
Foreign taxpayers using a TRC must also complete Form DGT for other sections not covered by the CoR.
Also read: Personal Income Tax in Indonesia: A Comprehensive Guide for Foreigners
Frequently Asked Questions
Who Issues the Tax Residence Certificate?
The Directorate General of Taxes (DGT) or a competent authority in Indonesia is responsible for issuing the certificate. For foreign entities, their home country’s tax authority may issue a CoR, which must meet the requirements specified in PER-25/PJ/2018.
Can the Certificate of Residence (CoR) Replace Form DGT?
No, the CoR cannot fully replace Form DGT. According to the Directorate General of Taxes, the CoR can substitute Part II of Form DGT, but other sections must still be completed and submitted.
What Happens if You Don’t Have a TRC?
Without a TRC, you may be subject to higher tax rates or face difficulties in claiming benefits under Indonesia’s tax treaties.
Also read; Tax Treaty Indonesia: Countries List and Complete Guide
The Tax Residence Certificate (TRC) is a vital tool for managing international tax obligations and ensuring compliance with Indonesian tax laws. It helps individuals and businesses avoid double taxation, access treaty benefits, and streamline tax filing processes.
If you’re planning to obtain a TRC, ensure all documents and forms are prepared according to PER-25/PJ/2018 regulations. For further assistance, InvestinAsia’s Indonesia tax consultant and compliance services can be your best choice.
Our experienced team of professionals is ready to assist you in every tax matter, such as:
- Accounting and tax reporting services in Indonesia
- Indonesia Payroll Service
- Indonesia LKPM Reporting Service
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