Indonesia Tax Treaties with other countries

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Indonesia has signed Double Taxation Agreements (DTA) with over 70 countries.

Indonesia’s DTA generally follows the UN model treaty, but some might be changed to OECD Model.

If tax obligations in DTA do not exist in Indonesia or the DTA rate is higher than local rate, local laws shall be prevailed.

Please see China Section and Taiwan Section

We set up below judgment criteria on Treaty application:

Scenario:
If you are not an Indonesian legal resident, and if your resident country has DTA with Indonesia, and if you are without PE (Permanent Establishment), please go to Section Ａ.

If you are not an Indonesian legal resident, and if your resident country has DTA with Indonesia, and if you are with PE (Permanent Establishment) please go to Section Ｂ.

If you are not an Indonesian legal resident, and if your resident country has no DTA with Indonesia, please go to SectionＣ.

Section Ａ:
Scenario:

If you are not an Indonesian legal resident, and if your resident country has DTA with Indonesia, and if you are without PE (Permanent Establishment), it will be redeemed as “non-Indonesia Domestic Sourced Income”.
That means Indonesia will levy zero-tax.
However, your still need to send zero-tax application to Indonesia Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:

印尼的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In Indonesia, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Indonesia has signed DTAs with the following 70 countries:

*Ratified but not yet effective, pending.
**Renewed treaty but pending.

DTA-Q-20:
為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in Indonesia, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. Article defines if foreign entity having PE in Indonesia. Article 7 regulates if no PE, non-Indonesia domestic sourced income will not be levied tax in Indonesia.

DTA-Q-30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎? Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Indonesia be regarded as a foreign-funded subsidiary in Indonesia?

DTA-A-30:

According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Indonesia will not be treated as PE because it is a separate legal entity.
That means if an Indonesia Subsidiary pay a service fee to a non-Indonesia Parent Company through a service contract signed between subsidiary and non -Indonesia Parent company as an investor, 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.
Please see the Indonesia Transfer Pricing webpage.

DTA-Q-40:
外資在印尼設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in Indonesia, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or Office in Indonesia, then will be considered as Indonesia domestic Income.
But According to DTA Article 5 item 4，if an Office is only doing a preparatory or auxiliary activity, will apply a zero-tax rate.

DTA-Q-50:
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?

DTA-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 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 the 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

Section Ｂ:

Scenario:
If you are not an Indonesian legal resident, and if your resident country has DTA with Indonesia, and if you are with PE (Permanent Establishment), 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.
Below, we will let you understand through Q&A

DTA-Q-60:
被視為印尼來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:
Definition of source income in Indonesia.
Income that is earned in Indonesia will be imposed taxes.
Source principle – impose a tax on an income received or earned by an entity only if the income to be subject to tax is obtained or received by the entity concerned from Indonesia.
In this principle, it does not matter who and what the status of the entity that earns the income is because the basis for the imposition of taxes is the tax object arising or originating from Indonesia.

DTA-Q-70:
DTA第五條及第七條優先於印尼來源所得的判定要素?
Do Article 5 and Article 7 in the DTA take precedence over the Indonesia determination factors on Indonesia domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between Indonesia domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail over the domestic regulations.
When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in Indonesia, then will be considered non-Indonesia domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
當非印尼稅務居民有印尼來源所得，不考慮DTA 情況下，印尼稅法扣繳稅率多少?
When non-tax residents of Indonesia having Indonesia domestic sourced income, what is the withholding tax rate according to Indonesia tax regulations excluding DTA?

DTA-A-80:
In Indonesia, there are several types of withholding tax which includes:
Article 21 states employers are required to withhold tax from the salary paid to employees.
Article 22 states companies importing goods, receiving income from the State Treasurer/ state-owned enterprises, buying oil fuel, gas fuel, lubricants etc., or purchasing extravagant luxury products.
Article 23 states the specific types of income paid to tax residents which are subject to withholding tax.
Article 26 states that 20% withholding tax is applicable on specific income paid to non-Indonesian taxpayers. This rate can be reduced by using tax treaty provisions, or exempt services that qualify as business profits. Briefly summarize, these are general rates under domestic law.

Business Profits – 20%

Dividend – 20%

Interest (loan) – 20%

Royalties fee – 20%

Technical services – 20%

Professional services – 20%

DTA-Q-90:
If DTA Tax Rate is higher than the Indonesia tax rate, apply which tax rate?

DTA-A-90
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.

DTA-Q-A0:
當非印尼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 non-tax residents of Indonesia having Indonesia domestic sourced income, what is Indonesia’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:
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 the website.
The Indonesian withholding agent should receive an Electronic Receipt Note from DGT, which then passed to a 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

Section Ｃ:

DTA-Q-B0:
As an investor, if your country has not signed DTA with Indonesia, what kinds of tax rates when you have Indonesia relevant income?

DTA-A-Q0:
If you are not an Indonesia legal resident, and if your resident country has no DTA with Indonesia,
Whatever you are with PE or without PE, all kinds of income will be levied according to Indonesia’s domestic sourced income.
Besides, it will be levied by Indonesia Tax Rates.
In Indonesia, there are several types of withholding tax which includes:
Article 21 states employers are required to withhold tax from the salary paid to employees.
Article 22 states companies importing goods, receiving income from the State Treasurer/ state-owned enterprises, buying oil fuel, gas fuel, lubricants etc., or purchasing extravagant luxury products.
Article 23 states the specific types of income paid to tax residents which are subject to withholding tax.
Article 26 states that 20% withholding tax is applicable on specific income paid to non-Indonesian taxpayers.
This rate can be reduced by using tax treaty provisions, or exempt services that qualify as business profits. Briefly summarize, these are general rates under domestic law.

Business Profits – 20%

Dividend – 20%

Interest (loan) – 20%

Royalties fee – 20%

Technical services – 20%

Professional services – 20%

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

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