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Dear XXX Pursuant to your email dated on 26 July 2007, we provide below our comments regarding your queries

on: I. Is it possible from a tax perspective to carry out a "cost sharing" of the administrative costs such as above among the group companies in Asia? In other words, is there a concept of "cost sharing", and if yes, will the cost be deductible? Will the payment be free of withholding tax? II. Are there conditions to make the payment deductible, such as contracts or some other proof that the functions were actually performed? III. Will it be easier to make the payment deductible if we treat the payment as fees for administrative services? Will the payment be free of withholding tax if it was a payment for administrative services performed outside of Indonesia? Are there conditions to make the payment free of withholding tax? For each statement, please provide reasons, background or related regulations/rulings. Background The global center of operations of the group companies is located in Brussels, and the Japan-Asia area headquarters is located in Tokyo. The expenditure for the global headquarters is shared with the three regions, but the contribution for the Japan-Asia region is currently come from only by ABC. In addition, the expenditure for the Japan-Asia area headquarters is also come from only by ABC. The nature of the headquarters' expenditure are administrative costs which are mainly costs for "business planning", "coordination", and "monitoring" of 5 to 10 group companies in Asia. The cost is likely to be shared in proportion to the sales amount of each entity, which will be an amount of 1-2% of sales. Recently, the Japanese tax authority putting more eyes on transfer pricing (especially on transfer pricing relating to intangibles and services). The company is considering to share the above costs born by ABCamong the related parties in Asia. Dian Arief Wahyudi Comment I. Possibility in a Tax Perspective on "cost sharing".

Cost sharing could only be occurring between the head office with the Indonesia branch (PE). It is possible in a tax perspective to carry out a "cost sharing" of said costs among the group companies in Asia only if the head office located abroad has a branch or permanent establishment ("PE") Pursuant to SE-04/PJ.7/1993 ("SE-04") dated on 09 March 1993 states that the tax implication on such transaction is allowable and it is deductible or it could be claimed as an expense in the annual corporate income tax return as long as those overhead cost is matching against the benefit obtain from every PE and is not a cost duplicate. Interest for the usage of head office fund is not included with the head office cost that could be allocable to the PE, except for banking type of business, and license/rent of head office assets. As an addition there has been no specific regulation issued on the taxation of cost sharing between affiliates. There is however a Decree issued by the Director General of Taxation No. KEP-62/PJ/1995 that stipulates head office administration expenses that can be claimed by the PE operating in Indonesia and this may provide some guidance as to the principles which may be adopted by the Tax Office. Certain administrative costs incurred by a foreign head office and allocated to its PE in Indonesia may be claimed by the PE as deductible expenses provided the following criteria are met: - The costs are incurred in relation to supporting the business or

activities of the PE to secure, recover or maintain income; - The amount of administrative costs claimed shall be proportionate to the amount of the PE's turnover in Indonesia against the worldwide turnover of the company; - The PE is required to submit with its tax return the consolidated audited financial statements for the head office for the relevant tax year; - The consolidated financial statements should indicate the worldwide turnover of the company and the type and amount of administration costs incurred by the head office as well as the allocation of these costs to the PE's in countries where the company carries on business. There is no law of regulation specifically covering cost sharing but the principles of this Decree may be used as guidance in determining the type, amount, documentation and methodology of allocation costs to local companies. In addition, details of the calculation of the charges are needed to be attached to the invoices. On the other hand, the cost sharing concept could not be applied between the head office and the Indonesian PT Company (subsidiaries) because both of them are two separate legal entities. As an addition, it would be impossible in a tax perspective to carry out a "cost sharing". Should the Head Office allocate its administrative costs to PT. Company in Indonesia, the Tax Authorities will treat the allocation cost as a Non Deductible Expenses. No Withholding Tax ("WHT") should be withheld by the Indonesian Company on head office's allocation cost since the allocation cost is treated by the Tax Authorities as a Non Deductible Expenses. II. Conditions to make the payment deductible in a tax perspective on the said costs among the group companies in Asia. Conditions to make the payment of the said transactions deductible in Annual Corporate Income Tax Return is to treat the mentioned cost or payment as an ordinary business transactions. Because A. Co and PT. B are two separate legal entities, so that based on this conditions A.Co can charge "Fees [we prefer to propose Commission Fees or Management Fees]" to PT B and PT B could claim its payment cost as a deductible cost in the Annual Corporate Income Tax. We may conclude that in order to make the payment as a deductible cost in the Annual Corporate Income Tax Return, the condition of Arm length transactions should be fulfilled. In other word, the Head Office can charge "Commission Fees or Management Fees" to PT. Company in Indonesia in relation to provide business planning, coordinating and monitoring services in Indonesia as long as the services have benefit for PT Company in Indonesia. III. The Tax Implication on payment treatment as fees for administrative services. Yes, it will be easier to make the payment deductible if the Head Office treats the payment as "Commission Fees or Management Fees" rather than "Allocation Cost" of Administrative expenses (Please refer to Point I above). a. Article 26 Withholding Tax ("Art 26 WHT")

We would assume that the Head Office would not be imposed with Article 26 WHT, should the Head Office charged "Commission Fees or Management Fees" and PT Company in Indonesia treated the payment as "Commission Fees or Management Fees" (excluded consulting services or supervisory services in connection with building, construction, or installation activities). Pursuant to Article 5 (8) states that:

Article 5 (8) "An enterprise of Contracting State shall no be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other Contracting State through a broker, general commission agent or any other agent of an Independent status, provided that such persons are acting in the ordinary course of their business" Based on the above Article of Tax Treaty between Indonesia and Japan, the Commission Fees or Management Fees charged by the Head Office are exempted of Article 26 WHT. In addition, in order the Head Office can enjoy the exemption of Article 26 WHT, the Head Office also need to provide the following documents: - Agreements that mention that the scope of work of services provided by the Head Office and reasonable rate charged on "Commission Fees or Management Fees"; - Original Certificate of Domicile; - Invoice and transfer payment evidences. The above documents need to be shown to Tax Authorities in the event of Tax Audit. b. Self Assess Value Added Tax ("Self Assess VAT")

The "Commission Fees or Management Fees" provided by the Head Office as mentioned above and charged to PT Company Indonesia is object to Self Assess VAT. Note that, the payment of Self Assess VAT can be treated as Tax Credit for PT Company in Indonesia. The payment should be paid by the PT Company itself (on behalf of Head Office) by issuing Tax Payment Form ("SSP") with the code 411211/102 and use the tax id number: 00.000.000.XXX.000 where the "XXX" is the tax office which PT Company has jurisdiction. We trust the above explanation provides sufficient reply to your queries. Should you need further clarification feel free to contact us. B. Regards, Dian Arief Wahyudi