Possible Treatment of Offshore Trusts in Non-Recognizing Jurisdictions: An International Comparative Review from Indonesia

The growing concern over offshore trusts leaks and Indonesia’s lack of specific trust rulings underscore the need for legal reform in this area. Indonesia’s lack of clear trust rulings could lead to inconsistent treatment, legal uncertainty and challenges in addressing tax avoidance issues related to undeclared offshore assets. This article analyses Indonesia’s current tax system alongside practices from six jurisdictions – the United Kingdom, the United States, the Netherlands, Australia, Singapore and Hong Kong – to propose practical solutions. The study identifies temporary measures, such as classifying trusts by analogy with existing legal frameworks, and more permanent solutions, including the enactment of specific trust rulings. Such legislation would formalize the recognition of trusts, establish income attribution rules and integrate anti-avoidance measures. The proposed treatment aims to ensure legal certainty for taxpayers and enhance compliance while addressing potential issues of double taxation and non-taxation.