TAX

Indonesian Tax Treaties

Quick Reference Guide
March 2009 December 2008
KPMG Hadibroto

Contents 1. 2. 3. 4. 5. Tax Treaty Summary Tax treaty rates: Dividends and Interest Tax treaty rates: Royalties and Branch Profits Tax treaty rates: Time Test Disposal of shares by a nonresident

Tax Treaty Summary In order to assist our clients, we have prepared an updated summary of the most pertinent tax treaty provisions. We hope that this will help those who are involved in cross border transactions, whether planning a new business venture in Indonesia or considering a change to their current business structure.
In Indonesia, non-residents are normally subject to a 20% withholding tax on the remittance of interest, dividends, royalties and other fees outside the country. Double tax treaties offer a lower withholding tax rate, usually 10% or 15%. In addition, most treaties provide for an exemption from withholding tax where interest is paid to the government or other specified authority of the other country. The treaties also provide for a time test for determining when a permanent establishment is deemed to exist. As at the end of 2008, Indonesia has negotiated and implemented tax treaties with 57 countries. In addition the treaties with Myanmar, Papua New Guinea, Morocco, Armenia. Tajikistan, Qatar and the amended treaty with Philippines have been signed but are not yet in force. The amended Treaty with Malaysia which reduces the withholding tax rates on dividends, royalties and interest to 10 % has not been implemented, as ratification from both governments is still awaited. Further, this treaty seeks to exclude companies incorporated in Labuan from obtaining treaty benefits.

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Attached is a summary of the most relevant treaty provisions: witholding tax rates for dividends, interest, royalties and branch profits tax; time tests for construction projects and services; and tax treatment on the disposal of shares by a non-resident.

Note that a certificate of tax domicile from the competent tax authority of the country of residence must be provided in order to obtain treaty relief. Each treaty differs in scope and wording and this summary is intended for general reference purposes only. Specific advice should be sought before proceeding with any business transaction for which a tax treaty might be applicable. Should you require further information, we will be happy to assist you.

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Tax Treaty Rates: Dividends and Interest

The table should be used as a quick reference guide only - for detailed advice refer to the specific wording in the treaty.
Country Algeria Australia Austria Bangladesh Belgium Brunei Bulgaria Canada China Czech Rep. Denmark Egypt Finland France Germany Hungary India Italy Japan Jordan Korea, North Korea, South Kuwait Luxembourg Malaysia Mexico Mongolia Netherlands New Zealand Norway Pakistan Philippines Poland Portugal Romania Russia Seychelles Singapore Slovak South Africa Spain Sri Lanka Sudan Sweden Switzerland Syria Taiwan Thailand Tunisia Turkey UAE United Kingdom %for lower rate refers to level of shareholding unless otherwise specified 2 normaly exempt if paid to the government or a subdivision thereof
1

Dividends Normal 15 15 15 15 15 15 15 15 10 15 20 15 15 15 15 15 15 15 15 10 10 15 10 15 15 10 10 10 15 15 15 20 15 10 15 15 10 15 10 15 15 15 10 15 15 10 10 15 12 15 10 15 15 15 10 15 15 Lower 10 10 10 0 10 10 10 10 10 10 10 10 10 10 0 10 10 15 10 12.5 10 10 10 10 10 10 10 10 10 10 Condition for lower1 Normal 25% 10% 25% Government 25% 20% 25% 25% 25% 25% 25% 25% 25% voting stock 25% Government 25% 25% 25% 20% 25% 25% 10% 25% 25% 25% 25% 15% voting stock 20% 25% voting stock 10% 15 10 10 10 10 15 10 10 10 12.5 10 15 10 15 10 15 10 10 10 10 10 10 5 10 15 10 10 10 10 10 15 15 10 10 12.5 15 10 10 10 10 10 15 10 10 10 10 10 15 12 10 5 10 10 10 10 10 15 0 0 0 0 0 0 0 0 0 0 0 0 0 10 / 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 / 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Interest Lower Conditions2 Government Government Government Government Government Government Government Government Government Government Government Government Government Industry / Government Government Government Government Government Government Government Government Government Government Government Government Government Government Govt / loan > 2 years Government Government Government Bonds / Govt Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government Government

Ukraine United States Uzbekistan Venezuela Vietnam

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Tax Treaty Rates: Royalties and Branch Profits

The table should be used as a quick reference guide only - for detailed advice refer to the specific wording in the treaty.
Country Algeria Australia Austria Bangladesh Belgium Brunei Bulgaria Canada China Czech Rep. Denmark Egypt Finland France Germany Hungary India Italy Japan Jordan Korea, North Korea, South Kuwait Luxembourg Malaysia Mexico Mongolia Netherlands New Zealand Norway Pakistan Philippines Poland Portugal Romania Russia Seychelles Singapore Slovak South Africa Spain Sri Lanka Sudan Sweden Switzerland Syria Taiwan Thailand Tunisia Turkey UAE United Kingdom Ukraine United States
3

Royalties Normal 15 15 10 10 10 15 10 10 10 12.5 15 15 15 10 15 15 15 15 10 10 10 15 20 12.5 15 10 10 10 15 15 15 15 15 10 15 15 10 15 15 10 10 15 10 15 12.5 20 10 15 15 10 5 15 10 10 10 20 15 10 / 7 .5 10 10 10 12.5 10 10 5 15 10 10 10 Lower 10 0 10 lower applies to: equipment / information3 Government excludes technical services copyright excludes use of equipment equipment, info / tech.services equipment / information technical services excludes technical services other than copyright other than copyright copyright equipment / information services copyright copyright equipment technical assistance -

Branch Profits Tax rates N/A to some PSCs 10 15 12 10 10 10 15 15 10 12.5 15 15 15 10 10 20 if transferred / 0 if not 10 12 10 20 10 10 10 10 12.5 10 10 10 20 15 10 20 10 10 12.5 12.5 20 15 10 10 10 20 10 15 10 10 5 20 12 10 5 10 10 10 10 10 10

industrial, scientific, commercial equipment / informationing unless otherwise specified

Uzbekistan Venezuela Vietnam

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Tax Treaty: Time Test

The table should be used as a quick reference guide only - for detailed advice refer to the specific wording in the treaty
Country Algeria Australia Austria Bangladesh Belgium Brunei Bulgaria Canada China Czech Rep. Denmark Egypt Finland France Germany Hungary India Italy Japan Jordan Korea, North Korea, South Kuwait Luxembourg Malaysia Mexico Mongolia Netherlands New Zealand Norway Pakistan Philippines Poland Portugal Romania Russia Seychelles Singapore Slovak South Africa Spain Sri Lanka Sudan building site, construction, assembly or installation project, or supervisory activities connected thereto (in most cases) -- see treaty for details 5 installation or drilling rig or ship used for exploration / exploitation of natural resources 6 assembly or installation project 7 supervisory services relating to construction, assembly or installation project; Japan does not include assembly 8 offshore oil activities 9 exploration / exploitation of natural resources 10 exploration of natural resources
4

Time Test construction4 3 months 120 days 6 months 183 days 6 months 183 days 6 months 120 days 6 months 6 months 6 months 6 months 6 months 6 months 6 months 3 months 183 days 6 months 6 months 6 months 12 months 6 months 3 months 5 months 6 months 6 months 6 months 6 months 6 months 6 months 3 months 6 months 183 days 6 months 6 months 3 months 6 months 183 days 6 months 6 months 183 days 90 days 6 months 6 months 183 days 6 months 6 months 6 months 3 months 6 months 6 months 183 days 6 months 120 days 6 months 6 months 6 months services 3 months 120 days 3 months 91 days 183 days 3 months 120 days 120 days 6 months 3 months 3 months 3 months 3 months 183 days 7 .5% 4 months 91 days 3 months ----1 month 6 months 3 months 3 months 10% 3 months 91 days 3 months 3 months 3 months 3 months 15% 183 days 120 days 183 days 4 months ----3 months 90 days 91 days 120 days 3 months 90 days 3 months 3 months 5% 183 days 120 days 183 days 3 months 183 days 6 months 91 days 4 months 120 days 3 months 10% 3 months other 120 days5 3 months6 3 months6 4 months6 183 days7 6 months7 30 days8 3 months9 30 days8 3 months6 3 months6 6 months7 6 months10 120 days5 -

Sweden Switzerland Syria Taiwan Thailand Tunisia Turkey UAE United Kingdom Ukraine United States Uzbekistan Venezuela Vietnam

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Disposal of shares by a non-resident

(with no permanent establishment)
The table should be used as a quick reference guide only - for detailed advice refer to the specific wording in the treaty
Country Algeria Australia Austria Bangladesh Belgium Brunei Bulgaria Canada China Czech Rep. Denmark Egypt Exempt Not exempt: capital gains tax article does not limit the right of Indonesia to levy tax on shares Exempt Exempt Exempt Exempt: except shares traded on the Stock Exchange Exempt Exempt: except where the value of the shares of the Indonesian company derives principally from immovable property located in Indonesia Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Exempt Exempt Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia OR where shares represent a participation of 25% of the Indonesian company Exempt: except where the shares carry rights for the shareholder to enjoy immovable property belonging to the company located in Indonesia Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Exempt Exempt Exempt Exempt Exempt Not exempt Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Exempt Exempt Exempt Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Not exempt Exempt Exempt: except where the shareholder owns at least 5% of issued capital and was an individual resident in Indonesia in the course of 10 years prior to the disposal Exempt Exempt: except if the shares form part of an interest which is at least 30% of the Indonesian company Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Time Test

Finland France Germany Hungary India Italy Japan Jordan Korea, North Korea, South Kuwait Luxembourg Malaysia Mexico Mongolia Netherlands New Zealand Norway Pakistan

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

kpmg.co.id
Country Philippines Poland Portugal Romania Russia Seychelles Time Test Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia Exempt Exempt Exempt Exempt Exempt Not specified Exempt Exempt Exempt Exempt Exempt Exempt: except where the shareholder was an individual resident in Indonesia at any time in the 10 years prior to the disposal Exempt Exempt: except where the shares carry rights for the shareholder to enjoy immovable property belonging to a company or trust located in Indonesia Exempt Exempt Exempt Exempt: except if less than 1 year between acquisition and alienation Exempt Exempt: except where the shareholder was an individual resident in Indonesia at any time in the 5 years prior to the disposal Exempt: except where the assets of the Indonesian company are principally real property located in Indonesia Exempt Exempt Exempt: except where the assets of the Indonesian company are principally immovable property located in Indonesia or rights pertaining thereto OR where shares represent a participation of >10% of stock of the Indonesian company Not exempt

KPMG Hadibroto 33rd Floor Wisma GKBI 28, Jl. Jend. Sudirman Jakarta 10210, Indonesia Tel +62 (0) 21 570 4888 Fax +62 (0) 21 570 5888

Singapore Slovak South Africa Spain Sri Lanka Sudan Sweden Switzerland Syria Taiwan Thailand Tunisia Turkey UAE United Kingdom Ukraine United States Uzbekistan Venezuela Vietnam

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situations

2009 KPMG Hadibroto, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.