In­done­sia to Re­vise Tax Reg­u­la­tions on For­eign Com­pa­nies

Indonesia Expat - - BUSINESS PROFILE -

The Direc­torate Gen­eral of Tax­a­tion is look­ing to re­vise a rule on con­trolled for­eign com­pa­nies (bet­ter known as CFC) in a bid to pre­vent tax losses for lo­cals with con­trol­ling in­ter­est in a for­eign busi­ness.

The pro­posed amend­ment re­lated to Fi­nance Min­is­te­rial Reg­u­la­tion No. 256/ PMK.03/2008 which seeks to put the spot­light on tax­pay­ers who did not re­port their dividend earn­ings from for­eign in­vest­ments. This much is true ac­cord­ing to the Direc­torate Gen­eral of Tax­a­tion re­form team chair­man Suryo Utomo. "We are con­cerned about the dividend in­come re­port. Some tax­pay­ers have al­ready had in­vest­ments in for­eign com­pa­nies for more than 15 years but never re­ceived dividends – that is strange," said Utomo, as quoted by The Jakarta Post. He added that the tax of­fice did not have enough data to know whether tax­pay­ers fal­si­fied their tax forms. He also said tax evaders have started lever­ag­ing a loop­hole in the cur­rent rule, which says the gov­ern­ment can only charges tax on a for­eign com­pany's dividends if a lo­cal cit­i­zen has con­trol­ling in­ter­est.

With this in mind, the chair­man said that his of­fice may change the def­i­ni­tion of what con­sti­tutes “con­trol­ling in­ter­est”. In the end, this would be faster than up­dat­ing the cur­rent tax law, he added.

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