Tax Question For American Teachers Working In Indonesia

[teacherguy]

The American staff at my international school in Indonesia became aware of a tax treaty between Indonesia and the USA. Basically the treaty says if you come here from the USA to teach at a non-profit school (and I think all international schools here are yayasans) you do not have to pay Indonesian income tax for the first two years you are working here.

It's a valid treaty, even my school's legal department agrees with that. The trouble is we can't get more out of the school. Basically accounting and legal are dragging their feet and telling us, "it's valid, but it's complicated, and we're going to withhold tax until we hear otherwise."

My question is: Are there any American teachers teaching in Indonesia who are NOT having income tax withheld?

[teacherguy]

Bump. Hoping someone will stumble across this with an answer.

[Mr.C4ke]

Asked a US teacher who I worked with in Jakarta last year who appeared extremely well up on laws in relation to expats over there, here's part of his reply:

Yes there is a treaty, however there are stipulations. First there are residential vs. non-residential, which means if a teacher has a KITAS he/she is a resident albeit temporary. Second, to say all Yayasans are non-profit is misleading because while most Yayasans are non-profit, the law stipulates that Yayasans are allowed to peruse a certain amount of commercial profit. Furthermore, I have never heard of a contract in Indonesia that quoted a gross salary for expats. It is usually net. In keeping with this, income tax is not withheld from the agreed upon salary, but is paid by the school. So if this guy wants more money maybe he should negotiate more or work at another school. But, at the end of it all, US Tax Code states that US citizens should not have to pay taxes in a country that they do not have citizenship. When, I file every year, there is a separate petition that I can complete and the US Government will reimburse me for any taxes paid.

Hope this is of some help.

[teacherguy]

My school quoted me a gross salary. They also told me I'd be taxed. All of that is fine. I knew what I was getting into. My net salary is very respectable. I'm not complaining. But I'd just as soon not have Indo taxes withheld if there's a law that says they shouldn't be. Like I said, even our legal department agrees the treaty is valid. They just can't or won't take the next step. Which is why I asked the question. Perhaps every American teacher in Indonesia is having their taxes taken out of their salary. If that's the case, then no harm no foul.

Please thank your friend for his reply. And thank you for asking him.