Indonesia Tax Treaties with Taiwan

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Tw-Q-10:
台灣母公司在印尼 是否可以依DTA申請沒有常設機構(PE)下零稅率?
Taiwan Parent Company, can apply for zero tax rate without PE under DTA in Indonesia?

Tw-A-10:

Yes.
Taiwan has DTA with Indonesia, and if Taiwan 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, Taiwan Legal Resident company still needs to send zero-tax application to Indonesia Tax Bureau for being approved.

Tw-Q-20:
台灣母公司在印尼設立了印尼子公司， 台灣母公司替子公司服務收入能否申請零稅率?
When Taiwan Parent Company as an Investor, set up an Indonesia subsidiary, and provide services from Taiwan to Indonesia Subsidiary, can apply for zero tax rate without PE under DTA in Indonesia?

Tw-A-20:

According to DTA Article 5 item 7, A Indonesia subsidiary will not be treated as PE of Taiwan Parent company as an investor because it is a separate legal entity.
That means if an Indonesia Subsidiary pay a service fee to Taiwan Parent Company through a service contract signed between subsidiary and Taiwan Parent company
as an investor, Taiwan 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.

Tw-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?

Tw-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 Procedure for implementation of Double Tax Avoidance Agreement.
https://www.pajak.go.id/id/peraturan/tata-cara-penerapan-persetujuan-penghindaran-pajak-berganda-0

Tw-Q-40
台灣母公司有印尼來源所得的各項所得扣繳稅率為何?
When Taiwan Resident company having Indonesia domestic sourced income, what are the withholding tax rates for various incomes in Indonesia?

Tw-A-40:
Taiwan 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 Taiwan and Indonesia are as below:

*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.

Tw-Q-50
當台灣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 Taiwan Tax Resident having Indonesia domestic sourced income, what is Indonesia’s application procedure based on the DTA preferential tax rate?

Tw-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 Taiwan

The Indonesian Economic and Trade Office to Taipei and The Taipei Economic and Trade Office 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 01 March 1995 and takes effect from 01 January 1996.

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 120 days.

Withholding Tax

*Article 7 of DTA between Indonesia and Taiwan explained, Indonesia may not tax payments on business profits rendered by Indonesian corporations unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by an Indonesian Resident enterprise to Taiwan Resident enterprise, the tax charged shall not exceed 10% of the gross dividends.

*Article 11 states that where the beneficial owner of the interest (excluding interest from the government) 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, copyright of literary, artistic, or scientific work, information concerning the industrial, commercial, or scientific experience.

*Technical services rendered are covered by the business profits article. Indonesian corporations may not tax payments for technical services rendered by a Taiwanese 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 is defined to include an independent professional such as physicians, lawyers, engineers, architects, dentists, and accountants.
Indonesia may not tax payments rendered by Taiwanese residents unless it is attributable to a fixed base that the Taiwanese resident has for performing his/ her activities.

Elimination of Double Taxation

Article 22 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 25 states that the competent authorities of the territories shall exchange such information 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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Email address:dalechen@evershinecpa.com
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