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Indonesia updates double taxation avoidance regulations

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Indonesia's Director General of Tax (DGT) issued Regulation No. PER-25/PJ/2018 (PER-25) on November 21 2018, simplifying the procedures concerning the implementation of the double taxation avoidance agreement.

PER-25 replaces previous Regulation No. PER – 10/PJ/2017.

PER-25 introduces a template and procedures related to the certificate of domicile (DGT form). It can be summarised as follows:

  • It must be submitted once within the period covered by the DGT form (no longer per month);

  • The DGT form is prepared by the offshore tax resident and submitted online by the Indonesian tax withholder, with receipt. The DGT form reporting receipt should be provided to the offshore tax resident;

  • The offshore tax resident will only be required to provide the receipt for the future transaction covered under the DGT form period to the Indonesian tax withholder;

  • The period covered is a maximum of 12 months, and may extend over the calendar year (e.g. August 2018 – July 2019).

  • The DGT form should be reported no later than the deadline of submitting the withholding tax (WHT) return for the period where the withholding is payable (which is normally on the 20th of the following payable period). For example, for a payable period of January 2019, the DGT form should be reported no later than the deadline of submitting the January 2019 WHT return (i.e. February 20 2019);

  • The Indonesian tax withholder is required to check the DGT form receipt provided by the offshore tax resident to the online system for its validity; and

  • Failure to provide a valid DGT form on time and fulfill the no tax treaty abuse condition will result in the Indonesian tax withholder having to withhold the tax using a normal tariff of 20%, instead of the tax treaty tariff which is normally lower than 20% (or even 0%).

PER-25 is effective from January 1 2019.

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