DGT Updates the Registration Method of Financial Institutions Under AEoI

The Directorate General of Taxes (DGT) has updated the provision regarding the procedures for registration of Financial Institutions and how to submit reports, related to the Automatic Exchange of Information (AEoI).

The update is carried out by issuing Director General of Taxes Regulation Number PER-7/PJ/2024 which was issued and effective on 5 July 2024. This regulation amends the previous provision, namely the Regulation of the Director General of Taxes Number PER-04/PJ/2018. 

The changes made are related to the mechanism for correcting the report submitted by the reporting Financial Institution or Financial Service Institution (FSI). In the latest regulation, the correction mechanism is regulated in more detail. 

This is in accordance with the agreement of the members of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The forum is a multilateral framework established by the OECD and consists of 171 jurisdictions, including Indonesia.

Read: Updated, Indonesia's List of AEoI Participating Jurisdictions and Destinations Expands

In the previous provision, there were no detailed rules regarding the mechanism for correcting reports submitted by Reporting Financial Institutions. The following is the correction mechanism stipulated in the new provision.

1. There is an Error

Report correction is conducted if the Reporting Financial Institution finds an error in the report that has been submitted. In addition, the correction can also be submitted if requested by DGT based on the examination found indications of errors. Correction is also made if there is a notification or request for explanation from the reporting jurisdiction that requires correction. 

2. Maximum of One Month

The Reporting Financial Institution is obliged to submit an explanation or make corrections within a maximum of one month from the date of the DGT's request for correction.

3. Procedure for Submission of Correction

Corrections made by Financial Services Institutions (FSIs) related to the implementation of international agreements must be submitted to the DGT through the Financial Services Authority (OJK).

Meanwhile, corrections made by other FSIs related to the implementation of international agreements can be submitted directly to the DGT.

Likewise, if the correction is related to the implementation of taxation laws and regulations, both FSIs and other FSIs can submit directly to the DGT.

4. Submission Media

The submission of corrections directly to the DGT can be done electronically or online through the DGT website or other websites determined by the DGT or offline. Offline submission can be done through the Tax Office (KPP), as well as DGT echelon II unit in charge of formulating and implementing policies and technical standardization in the field of tax data and information.

Read: AEoI, a Momentum for Tax Reform

About AEoI

Automatic exchange of financial information or AEoI is an information exchange mechanism conducted based on a Double Taxation Avoidance Agreement (DTAA), multilateral agreement, or based on Tax Information Exchange Agreements (TIEAs). 

Previously, the obligation to submit financial information reports for automatic information exchange was stipulated in Law No. 9/2017 on the Stipulation of Government Regulation in Lieu of Law (Perppu) No. 1/2017 on Access to Financial Information for Tax Purposes into Law. 

The regulation is then derived in more technical rules through PMK number 70/PMK.03/2017 which is amended by PMK 73/PMK.03/2017 and PMK number 19/PMK.03/2018. 

Based on these provisions, FSIs are required to submit a report on accounts owned by an entity with an aggregate balance or account value as of 31 December each year above USD 250,000. 

Information to be Submitted

Some of the information that must be submitted include the identity of the account holder, account number, identity of the reporting financial institution, account balance or value, and income related to the financial account.  

To implement the information exchange agreement, DGT requests the FSIs and other FSIs to submit financial information reports automatically. The submitted report covers financial accounts managed by FSIs, other FSIs, and other entities including collective investment contracts.

However, the request for the obligation to submit financial information reports can also be carried out for the implementation of applicable tax provisions.

To be able to report financial information, FSIs, other FSIs, and other entities must register themselves with the DGT. Registration can be done electronically, in person, or through post, expedition services, and courier companies. (ASP/AUD)