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The Indonesian Director General of Taxation on 1 June 2005 issued Circular Letter SE-17/PJ.2005 establishing under the 2002 Indonesia-Netherlands tax treaty on income a withholding tax of 10% on interest paid to Netherlands residents.

|Treaty Development|Indonesia-Netherlands
Indonesia-Netherlands

Art. 11(4) of the treaty regulates that interest paid on a loan with a term of more than 2 years or paid in connection with the sale on credit of any industrial, commercial or scientific equipment is only taxable in the state of residence of the beneficial owner. After the treaty became effective, the Indonesian government found that many companies were avoiding the withholding tax on interest.

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