The Indonesian government has officially ratified the new tax treaty (Perjanjian Penghindaran Pajak Berganda/P3B) between Indonesia and Singapore.
The ratification of the new tax treaty between Indonesia and Singapore is outlined in the Presidential Regulation of the Republic of Indonesia No. 35 of 2021 concerning Ratification of the Agreement between the Government of the Republic of Indonesia and the Government of the Republic of Singapore for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (Pres. Reg. 35/2021).
The tax treaty has been renewed to improve bilateral relations between Indonesia and Singapore, specifically, cooperation in the economic sector. On another note, the tax treaty has also been updated to adapt to the latest developments in international tax standards.
The Indonesian and Singaporean governments reached an agreement in a negotiation for the renewal of the Tax Treaty on 4 February 2020 in Bogor. The new tax treaty will replace the tax treaty between Indonesia and Singapore signed on 8 May 1990 in Singapore.
In general, under the new tax treaty, the two countries agree to lower the royalty tax rate from 15% to two layers, i.e. 10% and 8%. In addition, the branch profit tax rate has also been reduced from 15% to 10%.
Next, the most favored nation (MFN) clause or equal treatment for all members in the taxation arrangements of production sharing contracts and contracts of work related to the oil, gas, and mining sectors has been abolished.
A copy of the original text of the tax treaty between the Governments of Indonesia and Singapore, both in Indonesian and in English, is attached in Pres. Reg. 35/2021.