Indonesia Tax Treaties with China
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CN-Q-10:
中國母公司在印尼是否可以依DTA申請沒有常設機構(PE)下零稅率?
China Parent Company, can apply for zero tax rate without PE under DTA in Indonesia?
CN-A-10:
Yes.
China has DTA with Indonesia, and if China Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Indonesia Domestic Sourced Income”.
That means Indonesia will levy zero-tax.
However, China Legal Resident company still needs to send the zero-tax application to Indonesia Tax Bureau for being approved.
That means if an Indonesia Subsidiary pay service fee to a non-Indonesia Parent Company through a service contract signed between the subsidiary and non -Indonesia Parent company
as an investor, a non-Indonesia Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Indonesia Tax Bureau.
CN-Q-20:
中國母公司在印尼設立了印尼子公司， 中國母公司替子公司服務收入能否申請零稅率?
When China Parent Company as an Investor, set up an Indonesia subsidiary, and provide services from China to Indonesia Subsidiary, can apply for zero tax rate without PE under DTA in Indonesia?
CN-A-20:
According to DTA Article 5 item 7, A Indonesia subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.
That means if an Indonesia Subsidiary pay service fee to China Parent Company through a service contract signed between the subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Indonesia Tax Bureau.
CN-Q-30:
印尼依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Indonesia to apply for zero tax rate under DTA without PE?
CN-A-30:
DGT Regulation PER-61/PJ/2009 (DGT Regulation 61), as amended by DGT Regulation PER-24/PJ/2010 (DGT Regulation 24) governs the application procedures for tax treaties.
*Certificate of domicile (COD) form (Form DGT-1) to be certified by the competent authority in the residence country of recipient and submitted to the Indonesian withholding agent.
*If unable to obtain the endorsement for the Form DGT-1, may use any form of Certificate of residence (COR) commonly issued by the treaty partner jurisdiction’s tax authorities, and this is to be attached with the completed DGT-1.
A No PE declaration letter.
The withholding agent will submit Form DGT-1 or COR to DGT via website.
The Indonesian withholding agent should receive an Electronic Receipt Note from DGT, which then passed to non-resident.
Refer to the below website for Regulation Number PER-25/PJ/2018 about the Procedure for implementation of Double Tax Avoidance Agreement.
https://www.pajak.go.id/id/peraturan/tata-cara-penerapan-persetujuan-penghindaran-pajak-berganda-0
CN-Q-40:
中國母公司有印尼來源所得的各項所得扣繳稅率為何?
When China Resident company having Indonesia domestic sourced income, what are the withholding tax rates for various incomes in Indonesia?
CN-A-40:
China has DTA with Indonesia, and if you are with PE (Permanent Establishment) in Indonesia, your income will be considered as Indonesia domestic sourced income.
As for levying Tax Rate, please be aware:
if Indonesia Tax rate > DTA Rate, adopt DTA Rate; if Indonesia Tax rate < DTA Rate, adopt Indonesia Rate.
If DTA is applied, the DTA rates between China and Indonesia are as below:
| No. | Type of Payments | DTA rates | Indonesia Rates | Applicable Rates |
| 1 | Business profits (with PE) | 20% | 20% | 20% |
| 2 | Dividends | 10% | 20% | 10% |
| 3 | Interest (General) | 10% | 20% | 10% |
| 4 | Royalties fee | 10% | 20% | 10% |
| 5 | Technical services | 0% | 20% | 0% |
| 6 | Professional services (Individual) | 0% | 20% | 0% |
*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.
CN-Q-50
當中國稅務居民有印尼來源所得，依DTA優惠稅率申請的程序為何?
When China Tax Resident having Indonesia domestic sourced income, what is Indonesia’s application procedure based on the DTA preferential tax rate?
CN-A-50:
DGT Regulation PER-61/PJ/2009 (DGT Regulation 61), as amended by DGT Regulation PER-24/PJ/2010 (DGT Regulation 24) governs the application procedures for tax treaties.
*Certificate of domicile (COD) form (Form DGT-1) to be certified by the competent authority in the residence country of recipient and submitted to the Indonesian withholding agent.
*If unable to obtain the endorsement for the Form DGT-1, may use any form of Certificate of residence (COR) commonly issued by the treaty partner jurisdiction’s tax authorities, and this is to be attached with the completed DGT-1.
The withholding agent will submit Form DGT-1 or COR to DGT via website.
The Indonesian withholding agent should receive an Electronic Receipt Note from DGT, which then passed to non-resident.
Refer to the below website for Regulation Number PER-25/PJ/2018 about the Procedure for implementation of Double Tax Avoidance Agreement.
https://www.pajak.go.id/id/peraturan/tata-cara-penerapan-persetujuan-penghindaran-pajak-berganda-0
Summary of TAX TREATY between Indonesia and CHINA
The Government of the People’s Republic of China and The Government of the Republic of Indonesia concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 07 November 2001 and takes effects from 01 January 2004.
Permanent Establishment
Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:
*A place of management
*A branch
*An office
*A factory
*A workshop
*The furnishing of services, including consultancy services through employees or other personnel (other than agents of an independent status) for periods aggregating more than 6 months.
Withholding Tax
| No. | Type of Payments | DTA rates | Article in DTA | Indonesia Rates | Applicable Rates |
| 1 | Business profits (without PE) | 0% | Article 7 | 0% | 0% |
| 2 | Business profits (with PE) | 20% | Article 7 | 20% | 20% |
| 3 | Dividends | 10% | Article 10 | 20% | 10% |
| 4 | Interest (General) | 10% | Article 11 | 20% | 10% |
| 5 | Royalties fee | 10% | Article 12 | 20% | 10% |
| 6 | Technical services | 0% | Article 7 | 20% | 0% |
| 7 | Professional services (Individual) | 0% | Article 14 | 20% | 0% |
*Article 7 of DTA between Indonesia and China explained, Indonesia may not tax payments on business profits rendered by China corporations unless it is attributable to the permanent establishment situated in the relevant territory.
*In Article 10, dividends paid by an Indonesia Resident enterprise to a China Resident enterprise, the tax charged shall not exceed 10% of the gross dividends.
*Article 11 states that where the beneficial owner of the interest (exclude exempted interest) is a non-resident, shall be taxed in the territory in which it arises at the rate not exceeding 10% of the gross interest.
*Article 12 explained royalties means payment for the use of, right to use of any copyright, patent, design or model, plan, secret formula or process, trademark, any industrial, commercial, or scientific equipment or supply of any assistance etc.
*Technical services not regarded as royalties are covered by the business profits in Article 7. Indonesian corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.
*A professional service or other activities provided by individuals of an independent character as explained in Article 14. Indonesian corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Indonesia for 183 days or more. An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.
Elimination of Double Taxation
Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.
Exchange of Information
Article 26 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.
Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.
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E-mail: jkt4ww@evershinecpa.com
or
Contact us by WeChat or Skype or Whatsapp in the day-work-time of Taiwan (GMT+8)
The Engaging Manager from Headquarter
Project Manager Cindy Victoria Speak in Bahasa, English, and Chinese.
Whats App +886-989-808-249
wechatid: victoria141193
or
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