a.

that the provisions on the determination of the time dividends are accrued by resident Taxpayers for capital participation in foreign corporations other than listed corporations have been regulated under the Minister of Finance Regulation Number 256/PMK.03/2008 concerning the Determination of the Time Dividends Are Accrued by Resident Taxpayers for Capital Participation in Foreign Corporations Other Than Listed Corporations;

b.

that to provide more legal certainty for resident Taxpayers for capital participation in foreign corporations other than listed corporations, it is necessary to amend the provisions on the time dividends are accrued by resident Taxpayers for capital participation in foreign corporations other than listed corporations referred to in letter a;

c.

that based on the considerations referred to in letter a and letter b as well as to implement the provisions under Article 18 paragraph (2) of Law Number 7 of 1983 concerning Income Tax as amended several times, last amended by Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax, it is necessary to enact a Minister of Finance Regulation concerning the Determination of the Time Dividends Are Accrued and the Calculation Basis by Resident Taxpayers for Capital Participation in Foreign Corporations Other Than Listed Corporations;

 

 

 

 

 

Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 1983 Number 50, Supplement to the State Gazette of the Republic of Indonesia Number 3263) as amended several times, last amended by Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax (State Gazette of the Republic of Indonesia of 2008 Number 133, Supplement to the State Gazette of the Republic of Indonesia Number 4893);

 

 

 

 

 

MINISTER OF FINANCE REGULATION CONCERNING THE DETERMINATION OF THE TIME DIVIDENDS ARE ACCRUED AND THE CALCULATION BASIS BY RESIDENT TAXPAYERS FOR CAPITAL PARTICIPATION IN FOREIGN CORPORATIONS OTHER THAN LISTED CORPORATIONS.

 

 

 

 

 

Referred to herein this Ministerial Regulation:

1.

Income Tax Law, hereinafter referred to as the PPh Law, is Law Number 7 of 1983 concerning Income Tax as amended several times, last amended by Law Number 36 of 2008 concerning the Fourth Amendment to Law Number 7 of 1983 concerning Income Tax.

2.

Controlled Foreign Corporations, hereinafter referred to as CFCs, are foreign corporations other than listed corporations.

3.

Tax Year is a period of 1 (one) calendar year unless a Taxpayer adopts an accounting year that is different from the calendar year.

4.

Tax Treaty, hereinafter abbreviated to P3B, is an agreement between the Government of Indonesia and the government of a treaty partners or partner jurisdictions to prevent double taxation and tax evasion.

5.

Deemed dividend, hereinafter referred to as Deemed Dividend, is the dividend that is determined to be accrued by resident Taxpayers for capital participation in directly held Controlled Foreign Corporations.

6.

Annual Income Tax Return, hereinafter referred to as the Annual SPT PPh, is an Income Tax Return for a particular Tax Year or a Fraction of a Tax Year.

 

 

 

 

 

(1)

Resident Taxpayers that:

 

a.

have direct capital participation of a minimum of 50% (fifty percent) of the total share deposits in CFCs; or

 

b.

jointly with other resident Taxpayers have direct capital participation of a minimum of 50% (fifty percent) of the total share deposits in CFCs, are determined to have direct control of the CFCs.

(2)

Non-listed Foreign Corporations that are directly controlled by the Taxpayers referred to in paragraph (1) constitute directly held Controlled Foreign Corporations.

(3)

Resident Taxpayers referred to in paragraph (1) are determined to accrue Deemed Dividends for direct capital participation in directly held Controlled Foreign Corporations.

(4)

The amount of direct capital participation referred to in paragraph (1) is determined at the end of the Tax Year of the resident Taxpayers.

(5)

The amount of direct capital participation in directly held Controlled Foreign Corporations is determined as per the examples listed in Appendix letter A which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

 

(1)

When Deemed Dividend is accrued for direct capital participation of a resident Taxpayer in a directly held Controlled Foreign Corporation is determined at the end of the fourth month after the expiration of the filing deadline for annual income tax returns for the directly held Controlled Foreign Corporation for the relevant tax year.

(2)

If a directly held Controlled Foreign Corporation has no obligation to file the annual income tax return or there is no filing deadline for the annual income tax return, when Deemed Dividend is accrued as referred to in paragraph (1) is determined at the end of the seventh month after the tax year concerned ends.

(3)

When Deemed Dividend is accrued as referred to in paragraph (1) is determined as per the examples listed in Appendix letter A which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

 

(1)

The amount of Deemed Dividend is calculated by multiplying the percentage of capital participation of a resident Taxpayer in a directly held Controlled Foreign Corporation by the tax base of Deemed Dividend.

(2)

The tax base of Deemed Dividend referred to in paragraph (1) is the net income after tax of the directly held Controlled Foreign Corporation.

(3)

If a resident Taxpayer has direct control of a directly held Controlled Foreign Corporation and has indirect control of an indirectly held Controlled Foreign Corporation, the tax base of Deemed Dividend referred to in paragraph (1) is:

 

a.

the net income after tax of the directly held Controlled Foreign Corporation; and

 

b.

the net income after tax of the indirectly held Controlled Foreign Corporation multiplied by the percentage of capital participation of the directly held Controlled Foreign Corporation in the indirectly held Controlled Foreign Corporation.

(4)

The indirectly held Controlled Foreign Corporation referred to in paragraph (3) subparagraph b is a Controlled Foreign Corporation that is indirectly controlled by the resident Taxpayer through:

 

a.

the directly held Controlled Foreign Corporation; or

 

b.

the directly held Controlled Foreign Corporation and the indirectly held Controlled Foreign Corporation at the former level of capital participation,

 

with capital participation of 50% (fifty percent) or more than the total share deposits at each level of capital participation.

(5)

Included in the definition of an indirectly held Controlled Foreign Corporation referred to in paragraph (4) is a Controlled Foreign Corporation where 50% (fifty percent) or more of the total share deposits are jointly held by:

 

a.

a resident Taxpayer and:

 

 

1.

a directly held Controlled Foreign Corporation; and/or

 

 

2.

an indirectly held Controlled Foreign Corporation;

 

b.

a resident Taxpayer and another resident Taxpayer through a directly held Controlled Foreign Corporation and/or an indirectly held Controlled Foreign Corporation; or

 

c.

a directly held Controlled Foreign Corporation and/or an indirectly held Controlled Foreign Corporation.

(6)

The amount of capital participation referred to in paragraph (4) is determined at the end of the tax year of the directly held Controlled Foreign Corporation which ends in the Tax Year of the resident Taxpayer.

(7)

If an indirectly held Controlled Foreign Corporation is jointly held as referred to in paragraph (5) subparagraph a, the amount of Deemed Dividend is calculated in the following methods:

 

a.

participation in the indirectly held Controlled Foreign Corporation through the directly held Controlled Foreign Corporation and/or the indirectly held Controlled Foreign Corporation is calculated pursuant to the provisions referred to in paragraph (1); and

 

b.

direct participation of the resident Taxpayer in the indirectly held Controlled Foreign Corporation is calculated by multiplying the capital participation of the resident Taxpayer by the net income after tax of the indirectly held Controlled Foreign Corporation.

(8)

If capital participation in a Controlled Foreign Corporation is performed through a trust or another similar entity overseas, the said capital participation is deemed to be performed by the party conducting capital participation.

(9)

Net income after tax referred to in paragraph (2) constitutes operating profit, including non-business income according to the financial statements based on financial accounting standards commonly applicable in the country or jurisdiction concerned, after deducted by income tax payable in the country or jurisdiction.

(10)

The calculation of the amount of Deemed Dividend, the calculation of the amount of Income Tax payable on Deemed Dividend and the determination of the amount of indirect capital participation shall be performed as per the examples listed in Appendix letter A which constitutes an integral part of this Ministerial Regulation.

(11)

The amount of Deemed Dividend referred to in paragraph (1) must be filed by resident Taxpayers in the Annual Income Tax Return in the Tax Year Deemed Dividend is accrued as referred to in Article 3.

 

 

 

 

 

The total share deposits referred to in Article 2 paragraph (1) and Article 4 paragraph (4) is:

a.

the total value of shares issued by the Controlled Foreign Corporation; or

b.

the total value of shares with voting rights issued by the Controlled Foreign Corporation.

 

 

 

 

 

(1)

Deemed Dividend may be set off against dividends received from a directly held Controlled Foreign Corporation.

(2)

Deemed Dividend that may be set off referred to in paragraph (1) is Deemed Dividend for the past 5 (five) consecutive years from the year the dividend is received.

(3)

If the received dividend referred to in paragraph (1) is greater than the Deemed Dividend that may be set off, the difference is subject to Income Tax and filed in the Annual Income Tax Return for the Tax Year the dividend is received.

(4)

The Deemed Dividend which may be set off with the dividend received from a directly held Corporate Foreign Corporation is calculated as per the examples listed in Appendix letter A which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

 

(1)

Resident Taxpayers may credit income tax that has been paid or withheld on dividends received from a directly held Controlled Foreign Corporation in the Tax Year the income tax is paid or withheld.

(2)

If the received dividend does not exceed the Deemed Dividend that may be set off referred to in Article 6 paragraph (1), the amount of creditable income tax referred to in paragraph (1) is determined based on the lowest amount of:

 

a.

income tax that should be payable or should be paid overseas on the dividend received from the directly held Controlled Foreign Corporation by taking into account the provisions under the Tax Treaty, if there is an effective Tax Treaty;

 

b.

income tax payable or paid overseas on the dividend received from the directly held Controlled Foreign Corporation; or

 

c.

a certain amount calculated according to the ratio between the dividend received from the directly held Controlled Foreign Corporation and the amount of Deemed Dividend that may be set off multiplied by the amount of Income Tax on the Deemed Dividend that may be set off.

(3)

Income Tax on Deemed Dividend that may be set off referred to in paragraph (2) subparagraph c is a fraction of the Income Tax on Deemed Dividend calculated according to the ratio between the Deemed Dividend and Taxable Income, multiplied by Income Tax payable for a Tax Year or a Fraction of the Tax Year, amounting to a maximum of Income Tax payable in the Tax Year or Fraction of the Tax Year concerned.

(4)

If the dividend received from the directly held Controlled Foreign Corporation exceeds the Deemed Dividend that may be set off referred to in Article 6 paragraph (3), the amount of creditable income tax referred to in paragraph (1) is calculated as follows:

 

a.

the fraction of the received dividend up to the amount of Deemed Dividend that may be set off referred to in Article 6 paragraph (1) is calculated pursuant to the provisions referred to in paragraph (2); and

 

b.

the fraction of the dividend that exceeds the Deemed Dividend that may be set off, is determined based on the lowest amount of:

 

 

1.

income tax that should be payable or should be paid overseas on the fraction of the dividend exceeding the Deemed Dividend that may be set off by taking into account the provisions under the Tax Treaty, if there is an effective Tax Treaty;

 

 

2.

income tax payable or paid overseas on the fraction of the dividend exceeding the Deemed Dividend that may be set off; or

 

 

3.

a certain amount calculated according to the ratio between the fraction of the dividend exceeding the Deemed Dividend that is set off against Taxable Income, multiplied by Income Tax payable on Taxable Income, amounting to a maximum of Income Tax payable in the Tax Year or the Fraction of the Tax Year the dividend is received.

(5)

If the received dividend is sourced from 2 (two) or more countries or jurisdictions, the amount of creditable income tax referred to in paragraph (2) and paragraph (4) shall be calculated for each country or jurisdiction (per country limitation).

(6)

Income tax crediting is calculated as per the examples listed in Appendix letter A which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

 

(1)

Resident Taxpayers that credit income tax referred to in Article 7 paragraph (1) must submit the calculation of income tax credit that has been paid or withheld on the dividend received from the directly held Controlled Foreign Corporation to the Director General of Taxes by attaching:

 

a.

financial statements;

 

b.

a photocopy of the annual income tax return, if there is an obligation to file an annual income tax return;

 

c.

the calculation or details of net income after tax in the last 5 (five) years; and

 

d.

proof of payment of income tax or withholding tax receipt on the received dividend, from the directly held Controlled Foreign Corporation.

(2)

The calculation referred to in paragraph (1) is submitted simultaneously with the filing of the Annual Income Tax Return.

(3)

The calculation format referred to in paragraph (1) is listed in Appendix letter B which constitutes an integral part of this Ministerial Regulation.

 

 

 

 

 

Provisions on the determination of the time dividends are accrued and the calculation basis by resident Taxpayers for capital participation in foreign corporations other than listed corporations stipulated under the Ministerial Regulation shall come into force in the 2017 Tax Year.

 

 

 

 

 

When this Ministerial Regulation comes into force:

1.

the provisions stipulating the amount of income tax crediting paid or withheld overseas on income in the form of dividends received from directly held Controlled Foreign Corporations stipulated under the Minister of Finance Decree Number 164/KMK.03/2002 concerning Foreign Tax Credits are declared invalid; and

2.

Minister of Finance Regulation Number 256/PMK.03/2008 concerning the Determination of the Time Dividends Are Accrued by Resident Taxpayers for Capital Participation in Foreign Corporations Other Than Listed Corporations (Official Gazette of the Republic of Indonesia of 2009 Number 10), is revoked and declared invalid.

 

 

 

 

 

This Ministerial Regulation shall come into force on the date of promulgation.

 

 

 

 

 

For public cognisance, this Ministerial Regulation shall be promulgated by placement in the Official Gazette of the Republic of Indonesia.

 

 

 

 

 

Enacted in Jakarta
on 26 July 2017
MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA,
signed
SRI MULYANI INDRAWATI

Promulgated in Jakarta
on 27 July 2017
DIRECTOR GENERAL OF LEGISLATION  

MINISTRY OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF
INDONESIA,
signed
WIDODO EKATJAHJANA

OFFICIAL GAZETTE OF THE REPUBLIC OF INDONESIA OF 2017 NUMBER 1043