Singapore – Indonesia Double Tax Treaty
Singapore – Indonesia Double Tax TreatyUpdated on Friday 31st March 2017
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The Singapore – Indonesia double tax treaty was signed in 1990 and came into force at the beginning of 1991. Its provisions apply to individuals and businesses who reside in one or both of the signing jurisdictions. The Singapore – Indonesia double tax treaty is applied to all taxes imposed on income on behalf of the signing state. Our Singapore lawyers can offer further information on the income taxes according to the agreement between Singapore and Indonesia.
For Indonesia, its provisions applied depend on the income tax, the business tax, as well as the tax on dividends, interest and royalties. For Singapore, the treaty applies to the income taxation.
Business income according to the Singapore – Indonesia double tax treaty
According to the Singapore – Indonesia double tax agreement, the business income is taxed as follows:
• The income of a business in one of the two jurisdictions is taxed only in that country, except if the business undertakes activities in the other signing jurisdiction through a permanent establishment. In case the business effectuates its activities as previously mentioned, the income of the business can be taxed in the other jurisdiction, however only the ones which are attributable to that permanent establishment;
• The income gained from the pure purchase of items or merchandise by a permanent establishment for the utilization or sale by the business are not attributable to that permanent establishment. Any income attribution to the permanent establishment has to be effectuated in the same way each year, except if there is a valid reason for differentiation. Our lawyers in Singapore can provide more details on this matter.
Dividend taxation according to the Singapore – Indonesia double tax treaty
In compliance with the above-mentioned tax treaty, dividends issued by a resident business to a resident of the other signing jurisdiction could be taxed in that other country. When the dividend receiver is the beneficial owner and resident of the other signing jurisdiction, the tax applied will not surpass:
• 10% of the gross amount of dividends in the receiver is a business which owns minimum 25% of the issuing company capital;
• 15% of the gross value of the dividends in all the other situations.
If you need to know more about the provisions of the Singapore – Indonesia double tax treaty, we invite you to contact our law firm in Singapore.