Executive TaxBrief
In This Issue:
1. Implementing Regulation on Procedures for Withholding, Payment and Reporting of
Income Tax on Bonds Interest
2. Tax Treaty Between Indonesia and Iran is Effective
3. Donation can be Treated as Deductible Expenses for Income Tax Calculation
Purposes
4. Procedures for Exemption of Branch Profit Tax
5. Adjustment on the Non-Taxable Sales Value of Land and Building Tax Object
IMPLEMENTING
REGULATION
ON
PROCEDURES FOR WITHHOLDING,
PAYMENT
AND REPORTING
OF
INCOME TAX ON BONDS INTEREST

On 23 May 2011, The Minister of Finance
issued a regulation PMK No. 85/
PMK.03/2011 regarding the procedures
for withholding, payment and reporting of
income tax on bonds interest.
The above interest is exempted from tax if
the recipient are pension fund that
authorized by Minister of Finance and
Indonesian or branch of foreign bank.
While, a different tax rate will be imposed
on interest income and/or discount bonds
received and/or obtained by Taxpayers
Mutual funds which are listed on the
Capital Market and Financial Institution
Supervisory Agency (“BAPEPAM”) is
subject to 0% tax for 2009 – 2010, 5%
final tax for 2011 – 2013 and 15% final tax
for 2014 – onwards.
Interest arise from bonds with twelve
months period term (can be in the form of
interest bearing debt securities and noninterest bearing debt securities) is subject
to final tax.
The final tax of 15% is imposed on
payment to resident taxpayer and
Permanent Establishment, while the final
tax of 20% (reduced tax treaty rate) is
imposed on payment to offshore taxpayer.
This final tax is imposed on the:


Gross
amount
of
interest
in
accordance with the period of
ownership (holding period) bonds for
interest bearing debt securities with
coupon;
Excess of the selling price at the time
of the transaction or the par value at
maturity on the bonds cost, excluding
current year interest (accrued interest)
for interest bearing debt securities with
premium;
Executive TaxBrief
Crowe Horwath™ – Indonesia
Excess of the selling price at the time
of the transaction or the par value at
maturity bonds over cost bonds for
non-interest bearing bonds.
Following taxpayer should be the
withholding tax agent on interest in the
event of:

Bonds issuer or custodian as payment
agent for discount or premium paid on
due date of interest;

Brokers, dealers or bank, as an agent
for discount or premium received by
bonds issuer at the time of transaction;

Brokers, dealers, banks, pension
funds and mutual funds as the direct
buyer of bonds without using agent for
interest and/or discount bonds derived
by bonds issuer at the time of the
transaction;
June 2011
Page |1
The payment and reporting deadline for
interest on bonds withholding tax is due
on 10th and 20th of the following month,
respectively.
TAX TREATY BETWEEN INDONESIA
AND IRAN IS EFFECTIVE
On 20 May 2011, the Director General of
Taxes (DGT) issued a Circular Letter No.
SE-33/PJ/2011 concerning the notification
of the effectiveness of the Tax Treaty
between Indonesia and Iran.
The following donation can be treated as
deductible expenses:

Donation for national disaster;

Donation for research and development activities held in Indonesia;

Donation for education facility;

Donation for sports development;

Donation for development of social
infrastructure for public benefit and
non-profit purposes.
Donation may be in form of cash
and/or in-kind, except for social
infrastructure donation for public
benefit should be given in the form of
facilities. Donation in form of goods
should be recorded using the following
value:
This letter basically stipulates that starting
1 January 2011, the tax treaty between
Indonesia and Iran has become effective.
Further, the letter also states that the
following income will be taxed by the
source country where the income is
originated:

Dividend : withholding tax rate is 7%

Interest : withholding tax rate is 10%

Royalty : withholding tax rate is 12%


Acquisition cost, if the goods have not
been depreciated, or

Fiscal book value, if the goods have
been depreciated, or

Cost of goods sold, if the goods are
the donor’s product.
However, under this new MOF regulation,
the donation above can only be claimed
as deductible expense if the following
conditions are met:

The donor shall generate a fiscal net
income which is shown in its previous
year Corporate Income Tax Return
(CITR);
Branch Profit Tax : withholding tax rate
is 7%

DONATION CAN BE TREATED AS
DEDUCTIBLE EXPENSES FOR INCOME
TAX CALCULATION PURPOSES
Donation shall not cause a loss to the
donor in the fiscal year when the
donation is given;

The donation shall be supported by
valid documentation;

The recipient must have a tax ID
number (NPWP) except that the
recipient which are non-subject to tax
under the income tax law;

The donation shall not be given to a
related party;

The maximum donation is 5% of the
previous year’s fiscal net income of the
donor;
Minister of Finance (MOF) regulation No.
PMK-76/PMK.03/2011 dated 5 April 2011
as an implementation regulation of the
Government Regulation No. 93/2010
concerning the procedure of recording and
reporting donation that can be treated as
deductible expenses.
Executive TaxBrief
Crowe Horwath™ – Indonesia
June 2011
Page |2

The donation shall be recorded as
expenses in fiscal year when the
donation is provided.
This regulation becomes effective starting
in the fiscal year of 2010.
PROCEDURES FOR EXEMPTION OF
BRANCH PROFIT TAX
Recently, the DGT has issued and
implementation regulation on MOF No.
14/PMK.03/2011
concerning
the
procedures for Exemption of Branch Profit
Tax.
Basically, in addition to the Corporate
Income Tax, a Permanent Establishment
(PE) should pay a Branch Profit Tax
(BPT). BPT is a tax at the rate of 20% (or
a reduced rate under a tax treaty)
applicable to the taxable income after
deducted from income tax. Further, this
BPT might be exempted if the profit is
reinvested in Indonesia in the following
form:

Shares of an entity established in
Indonesia, or

Purchase of fixed asset to be used for
conducting business in Indonesia, or

Investment in the form of an intangible
asset for conducting business in
Indonesia.
The notification should be attached to the
Corporate Income Tax Return in the fiscal
year when the profit is reinvested and
shall cover the following information:

Form of the reinvestment in Indonesia;

Realization of the reinvestment;

Effective
date
of
commercial
production if the investment in form of
shares in a new entity established in
Indonesia.
The absence of such notification will
cause the exemption is not granted.
ADJUSTMENT OF THE NON-TAXABLE
SALES VALUE ON LAND AND
BUILDING TAX OBJECT
Effective 1 January 2012, the non-taxable
sales value of land and building tax object
will be increased from Rp. 12 million to
Rp. 24 million (at the maximum). This new
non-taxable sales value was stipulated by
Ministry
of
Finance
Decree
No.67/PMK.03/2011 dated 4 April 2011.
Based on the prevailing tax regulation,
Land and Building Tax (commonly known
as Pajak Bumi dan Bangunan/PBB) will be
imposed to anybody who own, control
and/or benefits from a Land and/or
Building. Currently, the effective rate of
Land & Building tax is 0.1% or 0.2% of the
sales value of taxable object.
Under this new DGT regulation, in order to
obtain the above exemption the PE should
submit a written notification to the Tax
Office where the PE is registered as a Tax
Payer.
Executive TaxBrief
Crowe Horwath™ – Indonesia
June 2011
Page |3
Contact Information:
Name
Wilmar Sidabutar
Army Djatiprasetya
Serep H. Lumbantoruan
Munir Ali
E-mail
wilmar.sidabutar@crowehorwath.co.id
army.djatiprasetya@crowehorwath.co.id
serep.lumbantoruan@crowehorwath.co.id
munir.ali@crowehorwath.co.id
Title
Partner
Director
Director
CEO
Center for Investment and Business Advisory
Member Crowe Horwath™ International
Cyber 2 Tower, 21st Floor
Jl. H.R. Rasuna Said Blok X-5
Jakarta 12950, Indonesia
Tel +62 (21) 2553 5699
Fax +62 (21) 2553 5698
www.crowehorwath.co.id
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International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity.
Center for Investment and Business Advisory / Kosasih, Nurdiyaman, Tjahjo & Rekan and its affiliates are not responsible or
liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.
© 2011 Center for Investment and Business Advisory / Kosasih, Nurdiyaman, Tjahjo & Rekan
Executive TaxBrief
Crowe Horwath™ – Indonesia
June 2011
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