IMPROVED UNDERSTANDING OF TAX TREATY INDONESIA – MALAYSIA, SPECIFICALLY FOREIGN INCOME OF EMPLOYEES AND FREELANCERS

Abstract

Urbanization and globalization have occurred in the last few years, including human resources. Business activities can be carried out by domestic and foreign people. Malaysia is one of the closest countries to Indonesia where Indonesians earn income, and vice versa. Taxes are the largest state revenue for the majority of countries, including Indonesia and Malaysia, and one of the tax objects is Income Tax. So the income received by the foreign tax subject is at risk of being subject to double taxation between the country of origin and the country of source of income. For this reason, the Indonesian Government and the Malaysian Government agreed to the Tax Treaty in 1991. Many taxpayers are not aware of the Indonesia-Malaysia tax treaty and how their income is taxed in the source country, how Indonesian and Malaysian citizens who work and are domiciled in another country as employees or who are still domiciled in their home country but earn income in another country as freelancers. Specifically, through the Indonesia - Malaysia Tax Treaty, it is explained how income tax is deducted on income as an employee or freelancer who comes from a foreign country, or vice versa. PERMAI is an NGO whose members are mostly Malaysians who have Indonesian ancestry or have families with Indonesian ancestry, and have various activities such as being employees or owning businesses in Penang, Malaysia. Together with Universiti Sains Malaysia and NGO PERMAI, this activity aims to increase understanding of Malaysian people who have income in Indonesia and Indonesian people who have income in Malaysia. With this activity, it is hoped that Indonesian or Malaysian citizens who receive income abroad understand how the income tax withholding process on income received from foreign countries.