notarisdanppat.com Tax Strategies for Family Offices in Indonesia: Opportunities and Challenges
Growth of Individual Wealth in Indonesia
Indonesia has recorded a significant increase in the number of high-net-worth individuals (HNWIs) in recent years. According to the Knight Frank Wealth Report 2023, in 2022 there were approximately 171,740 individuals in Indonesia who had assets worth at least US$1 million or around Rp15.9 billion, excluding their primary residence. In addition, 600 to 700 people fall into the ultra-high-net-worth individuals (UHNWI) category, with wealth of more than US$30 million.
This increase in the number of wealthy individuals and families has led to the development of the family office, an entity tasked with managing wealth in a targeted, efficient and sustainable manner. Family offices not only help manage assets, but also ensure compliance with domestic and international tax regulations.
Launching Antaranews, DGT’s fiscal officer, Lucky Akbar as the Head of the Jambi Tax Data and Document Processing Office reviewed the importance of tax strategies for family offices to manage wealth transparently and improve tax compliance in Indonesia.
Urgency of Tax Arrangement for Family Office
Family offices play an important role in keeping wealth management efficient, while supporting regulatory compliance. In the Indonesian context, specific regulations governing family office taxes are considered important to prevent potential tax evasion and ensure optimal contribution to the state.
The concept of tax fairness is one of the main principles that need to be applied in this regulation. Entities with large economic capabilities should pay taxes in accordance with their wealth, thus creating a proportional contribution to the country’s development. On the other hand, the principle of tax efficiency ensures that taxes do not interfere with economic growth, especially in preserving capital used for investment.
However, the complexity of a family office’s financial structure-which often includes international assets, investments, and trust funds-requires a risk-based tax strategy to reduce opportunities for tax avoidance.
Read also:
- Tutorial Coretax DJP
- Financial Profession Oversight with New Directorate
- Tax Amnesty 2025
- Tax Neutrality
- Countries that Tax Robots
Family Office Tax Practices in Other Countries
Learning from other countries, tax arrangements for family offices can be designed to encourage transparency and optimize investment.
The United States regulates family offices through corporate tax or as a pass-through entity, which allows double taxation at the corporate and individual level. However, tax incentives are also provided to increase transparency.
Singapore offers tax incentives such as exemptions on investment income managed by family offices, provided they meet local investment requirements. This policy has attracted many wealthy families to set up family offices in the country.
Switzerland, as one of the world’s wealth management centers, provides high flexibility and confidentiality in its tax arrangements. Despite relatively low taxes, fund management adheres to international transparency standards.
Studies from PricewaterhouseCoopers (PwC) show that countries with family office tax incentives have attracted significant investment, while increasing economic growth.
Challenges of Family Office Tax Policy in Indonesia
Despite its great potential, tax regulation for family offices in Indonesia faces a number of challenges:
Lack of Specific Legal Framework
Currently, family offices in Indonesia do not have specific regulations, so they are often treated like ordinary business entities. This can reduce the efficiency of wealth management and increase the risk of non-compliance.
Potential for Tax Avoidance
Family offices run the risk of being used for tax avoidance if not properly regulated. With a wide range of investment services, from property to philanthropy, close supervision is needed to prevent tax leakage.
Complexity of Tax Compliance
Cross-border wealth requires a more complex tax reporting system. Educating wealth owners on the importance of compliance is essential in promoting transparency.
Family Office Tax Policy Development Strategy
To optimize the potential of family offices, the Indonesian government can implement the following strategies:
Development of Special Regulations
Regulations that distinguish family offices from other wealth management entities may include minimum capital limits, tax incentives, and investment requirements. This is in line with practices in Singapore and Switzerland that have successfully attracted global investment.
Providing Tax Incentives
Incentives such as tax deductions or exemptions on investment income can be provided to family offices.