The coronavirus infection situation in Indonesia has become extremely serious, and special flights to Japan have begun to be launched. I think there are some people who are temporarily returning to Japan due to unplanned circumstances, and some who are returning to Japan to receive vaccinations. I think there are some people who have already encountered this situation while returning to Japan and are unable to decide when to re-enter Indonesia from Japan, and some who have made plans but things don't go as planned and their temporary return to Japan becomes longer than planned. This time, I would like to explain the taxation related to "temporary return of expatriates", which may require a long period of re-entry to Indonesia.

１. Salary received in Japan
I believe that some expatriate employees receive salaries from their Japanese corporations in Japan in addition to the salaries they receive in Indonesia. Since the expatriate's status in Japan is non-resident, only domestic source income is subject to tax. In the case of salary, the source of income is determined by the place of work, so salaries paid "from a Japanese corporation" while working in Indonesia (the "stationed place" is Indonesia) are not subject to withholding tax in Japan but are subject to taxation in Indonesia. On the other hand, salaries paid ``from a Japanese corporation'' during a temporary return to Japan are subject to withholding tax for non-residents in Japan (uniform rate of 20.42%) because the place of work is Japan (the ``station'' is Japan), but in reality, there are many cases where withholding tax is not collected on salaries paid to short-term residents. In addition, in the case of a short-term return to Japan for a period of less than 183 days, regardless of the calendar year or any year, the income tax in Japan on the salary paid "by an Indonesian corporation" will be exempted due to the application of the tax treaty (special provisions for short-term residents).

２. 183Temporary return to Japan for more than one day
So, what happens if your temporary return to Japan is for 183 days or more? The 20.42% withholding tax for salaries paid "from a Japanese corporation" in Japan is the same as in the case of temporary return to Japan for less than 183 days. If you stay in Japan for more than 183 days, you will no longer be eligible for special treatment for short-term residents, and you will need to file a final tax return in Japan as domestic source income paid overseas for wages paid "from an Indonesian corporation." Income tax paid in Japan can be declared as the amount paid abroad when filing a final tax return in Indonesia and receive a tax credit. The treatment of withholding income tax on salaries in Indonesia changes after the period of stay of 183 days, so it is important to confirm the period of stay.

３. Cost of temporary return
When considering whether an expatriate's business trip expenses should be covered by the Japanese corporation or the Indonesian corporation, the purpose of the business trip will determine which corporation should bear the expense. For example, if you return to Japan to attend a meeting at the request of a Japanese corporation, the expenses will be borne by the Japanese corporation. So, what about evacuation from coronavirus infections like this one? Since the purpose of the act is to protect the health of the employee, it is possible for the Japanese corporation to deduct it as a loss. However, if the secondment contract includes a clause such as ``the Indonesian corporation will bear all of the expatriate's travel expenses,'' there is a risk that the temporary return expenses paid by the Japanese corporation will be considered a donation on the Japanese side, so we recommend that you check the secondment contract and other contracts between the Japanese corporation and the Indonesian corporation before making a decision regarding the burden of expenses.

Related laws and regulations: Article 15 of the Agreement between Japan and the Republic of Indonesia for the avoidance of double taxation and prevention of tax evasion regarding taxes on income, Articles 161 and 172 of the Income Tax Law