- The Chairman of the Fiscal Policies Body (Badan Kebijakan Fiskal/BKF) at the Minister of Finance, Febrio Kacaribu ("Chairman"), has affirmed that the government is currently preparing a number of regulatory frameworks that will address the implementation of the Multilateral Instrument ("MLI") Subject to Tax Rule ("STTR"). These new frameworks will be introduced at the Regulation of the President and Regulation of the Director-General of Tax ("Director-General") level.
- Upon the completion of the drafting process for these regulatory frameworks, the government will notify the Organization for Economic Cooperation and Development (OECD). The regulatory frameworks will then subsequently come into force shortly after this notification has been sent.
- It should be noted that the above-mentioned STTR comprises a dedicated framework that is set to be enforced based on inter-group payments (e.g. interest, royalties and other payments that include services). Under the STTR, any Indonesian company that engages in an inter-group payment transaction will be subject to the imposition of a 9% tax rate in the area in which the receiving company is located. However, if the receiving country applies a tax rate of less than 9%, then Indonesia, as the source of the payment, may ultimately impose an additional tax on the relevant transaction.
- It should also be noted that the above-mentioned additional tax will only be imposed after the relevant tax year has elapsed due to certain materiality thresholds that must be fulfilled. As such, STTR should only be applied in relation to inter-group payments that exceed €1 million during a single tax year. Meanwhile, for non-interest and non-royalty incomes, said payment values must exceed the basic costs and should be added to a margin of 8.5% (mark-up threshold). (ANT)
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