Individual Assignment 8
The tax agreement (DTA) says that someone is a “resident” of a country if that person has to
pay tax there because of where they live, where their business is based, or similar reasons.
In the context of the case, Mr. Andhika lives and works in Indonesia for more than 183 days a
year, so he likely counts as a tax resident there. At the same time, because he has dual
citizenship, owns property, and has investments in Singapore, he might also be seen as a
resident in Singapore under their tax rules. Therefore, Mr. Andhika could be considered a
resident in both countries (dual residency).
To determine the sole residency for the purpose of the agreement when an individual is a
resident of both Contracting States, The DTA (Article 4, paragraph 2) provides a set of
tie-breaker rules (applied sequentially), which includes the following;
1. Permanent Home & Centre of Vital Interests: If Mr. Andhika has a permanent home
in only one country, he is a resident there. If he has homes in both countries, the
next question is: where are his strongest personal and economic ties (like family,
work, and business)? Since he lives and works in Indonesia for most of the year, it's
likely that his permanent home and main ties are in Indonesia.
2. Habitual Abode: If it's not clear where his main ties are, or if he has no permanent
home, the next test looks at where he spends most of his time. Because Mr. Andhika
stays in Indonesia for over 183 days a year, it's likely that his habitual abode is also
Indonesia.
3. Nationality: If he spends equal time in both countries or in neither, then nationality
is considered. But Mr. Andhika has citizenship in both countries, so this rule doesn’t
help resolve the issue.
4. Mutual Agreement: If none of the above rules solve the problem, then the tax
authorities of Indonesia and Singapore must work together to decide which country
gets to treat him as a resident for tax purposes. This would involve the Ministry of
Finance (or its representatives) from both countries.
Since Mr. Andhika lives and works in Indonesia for more than 183 days a year, the tax
agreement between Indonesia and Singapore (DTA) would likely treat him as a tax resident
of Indonesia only. This is because his permanent home, main personal and economic ties,
and habitual place of stay appear to be in Indonesia. His dual citizenship and connections to
Singapore would only be relevant if these other factors were unclear, which does not seem
to be the case here. Once his residency is determined under the DTA, the agreement’s rules
will apply to income he earns from Singapore, such as property income, business profits,
dividends, interest, or capital gains to decide how that income is taxed and to prevent him
from being taxed twice.