a.

that the 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 have been regulated under the Minister of Finance Regulation Number 107/PMK.03/2017 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;

b.

that to encourage transparency, provide legal certainty and fairness in the imposition of taxes 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 and the calculation basis 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, it is necessary to enact a Minister of Finance Regulation concerning the Amendment to the Minister of Finance Regulation Number 107/PMK.03/2017 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;

 

 

Minister of Finance Regulation Number 107/PMK.03/2017 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 (Official Gazette of the Republic of Indonesia of 2017 Number 1043);

 

MINISTER OF FINANCE REGULATION CONCERNING THE AMENDMENT TO THE MINISTER OF FINANCE OF REGULATION NUMBER 107/PMK.03/2017 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.

 

Several provisions under the Minister of Finance Regulation Number 107/PMK.03/2017 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 (Official Gazette of the Republic of Indonesia of 2017 Number 1043) are amended as follows:

 

1.

The provisions of Article 2 are amended by inserting 3 (three) paragraphs between paragraph (3) and paragraph (4), namely paragraph (3a), paragraph (3b) and paragraph (3c), thereby, Article 2 reads as follows:

 

 

 

 

(1)

Resident Taxpayers that:

 

 

a.

have direct capital participation of a minimum of 50% (fifty per cent) of the total paid-up shares in Controlled Foreign Corporations; or

 

 

b.

jointly with other resident Taxpayers have direct capital participation of a minimum of 50% (fifty per cent) of the total paid-up shares in Controlled Foreign Corporations,

 

 

are determined to have direct control of the Controlled Foreign Corporations.

 

(2)

Controlled 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.

 

(3a)

Deemed Dividend referred to in paragraph (3) is sourced from the certain income of the directly held Controlled Foreign Corporation which includes the following income:

 

 

a.

dividend, except for dividend received and/or accrued by the directly held Controlled Foreign Corporation;

 

 

b.

interest, except for interest received and/or accrued by the directly held Controlled Foreign Corporation held by a resident Taxpayer with a bank business permit;

 

 

c.

rent in the form of:

 

 

 

1)

rent received and/or accrued by the directly held Controlled Foreign Corporation in respect of the use of land and/or buildings; and

 

 

 

2)

rent other than rent referred to in number 1) received and/or accrued by the Controlled Foreign Corporation from transactions with a party related to the directly held Controlled Foreign Corporation;

 

 

d.

royalties; and

 

 

e.

gains from the sales or transfer of property.

 

(3b)

Not included as excluded interest referred to in paragraph (3a) subparagraph b is interest received and/or accrued from a Controlled Foreign Corporation from direct or indirect transactions with a resident Taxpayer related to the Controlled Foreign Corporation.

 

(3c)

The special relationship referred to in paragraph (3a) subparagraph c number 2) and paragraph (3b) is the special relationship stipulated under the Income Tax Law.

 

(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.

 

 

 

2.

The provisions of paragraph (2). paragraph (3), paragraph (7) and paragraph (9) of Article 4 are amended, thereby, Article 4 reads as follows:

 

 

 

 

(1)

The amount of Deemed Dividend is calculated by multiplying the per centage 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 amount after tax of the certain income of the directly held Controlled Foreign Corporation referred to in Article 2 paragraph (3).

 

(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.

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

 

 

b.

net amount after tax of the certain income of the indirectly held Controlled Foreign Corporation multiplied by the per centage 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 per cent) or more than the number of paid-up shares 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 per cent) or more of the total paid-up shares 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 amount after tax of the certain income 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 amount after tax of the certain income referred to in paragraph (2) is the gross amount of the certain income deducted by:

 

 

a.

the costs to derive, collect and maintain certain income; and

 

 

b.

the fraction of income tax payable, paid or withheld on certain income if there is income tax payable, paid or withheld on the certain income.

 

(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.

 

 

 

3.

Appendix letter A number 8, number 9 and number 10 are amended to be as listed in the Appendix which constitutes an integral part of this Ministerial Regulation.

 

 

This Ministerial Regulation shall come into force in the 2019 Tax Year.

 

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

 

Enacted in Jakarta

on 19 June 2019

MINISTER OF FINANCE OF THE REPUBLIC OF INDONESIA,

signed

SRI MULYANI INDRAWATI

 

Promulgated in Jakarta

on 26 June 2019

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 2019 NUMBER 702