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Tax authority responds to 'Automatic Information Exchange '
The Declaration on Automatic Exchange of Information in Tax Matters (AIE) allows the Indonesian Tax Authority (ITA) to have more access to information on companies tax and combat tax evasion. Taxand Indonesia looks at the new legislation.
The exchange of information is based on the principle of reciprocity and there are 3 ways the exchange of information is being conducted:
- Based on request - if information is needed in relation to a suspicion of tax evasion or use of the tax treaty facilities when a tax audit is being conducted, examination of preliminary evidence and in the process of resolving an objection or appeal.
- Spontaneous - the follow-up results of tax audits in Indonesia suggest there is potential for significant tax for the other country, there is an unreported tax payment in the other country, or there is a potential additional tax objects in the other country arising from the tax exemption facility in Indonesia.
- Automatic - the tax information must be given without the need for a prior request in relation to dividend income, royalties, property changes, and change in the domicile of the taxpayer.
If the data obtained are not clear or necessitate additional information, the ITA or the tax authority in the counterpart country is authorised to conduct an examination abroad. If several tax authorities have common interest in the same taxation data, a simultaneous examination can be made.
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In essence, the AIE is a form of multinational co-operation to prevent the tax avoidance and evasion practices internationally. Multinationals and national companies operating in Indonesia should keep abreast of tax legislation in order to remain compliant.