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Digital nomad brouhaha highlights legal vacuum
Immigration rules unclear for foreign freelancers
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he recent brouhaha between an American woman and Indonesian netizens on Twitter has shed light on the fact that the country has yet to have clear regulations on digital nomads, especially in terms of immigration and taxation.
Indonesian internet users accused 28-year-old Kristen Gray of making money from social media posts suggesting that foreigners could move to Indonesia and live a luxury lifestyle on the cheap amid the global health crisis and strict travel restrictions. The Bali Immigration Office eventually deported her for “spreading information that unsettles local residents”, including painting the island as “queer-friendly”.
Digital nomads are flourishing in Indonesia with the rise of the digital economy. Bali is among the popular destinations for foreign nomads who like to work while traveling, aside from Jakarta and Yogyakarta.
However, Indonesia has yet to have immigration regulations that specifically regulate foreign digital nomads, creating potential legal loopholes that allow them to extend their stay in the archipelago.
Bali Immigration Office head Eko Budianto said most digital nomads on the resort island used a single-entry visa to come and stay in the country.
Normally, this visa is valid for 60 days and can be issued for people wanting to visit Indonesia for various purposes, including holidays. The single-entry visa is not valid for individuals intending to work for an Indonesian company, which would require them to have a temporary (KITAS) or permanent stay permit (KITAP).
The 2011 Immigration Law, however, does not stipulate a requirement for foreign visitors who work remotely for offshore clients to obtain a KITAS or KITAP.
Read also: Bali deportation of 'digital nomad' unearths post-colonial power dynamics
Other countries have set clearer regulations to accommodate tourists who also want to work virtually. Estonia launched the world’s first so-called Digital Nomad Visa last year that grants the right for remote workers to temporarily stay in the country for up to one year and legally work for an employer registered abroad. Dubai and Thailand followed suit by issuing a similar visa.
Many Indonesians also raised concerns that digital nomads working from Indonesia were evading the country’s tax rules while generating income during their stay.
The 2008 Income Tax Law stipulates that domestic taxpayers are any individual, including foreigners, who have resided in Indonesia for more than 183 days within a 12-month period or resided in the country for a full tax year.
Taxation Directorate General spokesperson Hestu Yoga Saksama said foreign digital nomads meeting the requirement should obtain a tax identification number (NPWP) and pay income to the Indonesian government — even if they are earning an income from sources outside the country.
While foreigners working for an Indonesian company usually have their taxes covered by the firm, he said freelancers should report their income and taxes to the nearest tax office by themselves.
“I don’t think that there are many [digital] nomads reporting their income to the Indonesian tax office,” Hestu said.
Read also: Surviving financially as a creative digital nomad
Bawono Kristiaji, a research partner with the Darussalam Tax Center, said the tax office should ensure the digital nomads’ compliance in reporting and paying their taxes. He suggested that authorities be more proactive in collecting their data for tax collection.
He acknowledged that tax authorities might have a hard time collecting the necessary data for taxation as most digital nomads were informal workers; therefore, the tax office must be able to trace their source of income.
“They can generate income from various sources and countries, making it challenging for the tax office to make sure the nomads report and pay their income tax accurately and clearly. There should be cooperation with tax authorities in other countries,” Bawono said on Thursday.
Hestu said the Taxation Directorate General had joined hands with the Immigration Office to gather data on the people entering the country to create a better taxation system for digital nomads.
The trend is getting more popular amid the emergence of coworking spaces that allow people to work without having to own office space, as well as the COVID-19 pandemic allowing people to work remotely.
Recently, newly appointed Tourism and Creative Economy Minister Sandiaga Uno said the ministry was looking to promote a “work from destination” approach that would allow digital workers to work from tourist destinations as part of the economic recovery program after the pandemic, tempo.co reported.
