I think people are mixing between Tax Residence and Permanent Residence term. Lot of them are thinking that to be a tax residence, they have to become permanent residence. In fact, tax residence refers to the domicile of a person during a taxation period for the interest of the tax calculation. While permanent residence refers to the person’s visa status and it does not always a tax residence.
For more clear understanding, see following examples:
From January 2012 – October 2012, Tole worked in Indonesia. Starting from September 2012, he moved to Singapore and worked in new company in Singapore. He was so lucky to obtain his Singapore Permanent Residence status on the second month.
Total #working days in Indonesia = 243 days
Total #working days in Singapore = 121 days
In this case Tole is Indonesia tax-residence, and Singapore non-tax-residence. His obligation is to report Pph21 to Indonesia Tax Authority for his earning (the 242 days) with tax-residence tariff – he is also oblige to pay Singapore tax of non-residence tariff amounted 15% of his earning during 121 days. This amount is regardless Tole’s visa status.
From January 2012 – October 2012, Tole worked in Singapore. Starting from September 2012, he returned for good to Indonesia. His Singapore Permanent Residence is still valid until 2018.
Total #working days in Singapore = 243 days
Total #working days in Indonesia = 121 days
In this case Tole is Singapore tax-residence and Indonesia non-tax-residence. He obliges to pay Singapore tax using tax-residence tariff and report Pph21 to Indonesia Tax Authority for the rest of his earning day (121 days). In this example, although Tole is Indonesian citizen and returns for good to Indonesia, but since his earning residency was mostly in Singapore; then he still has obligation to pay Singapore tax with tax-residence tariff.
1. You don’t need to be Permanent Residence to enjoy Tax Residence tariff.
2. Tax Residence ≠ Permanent Residence