Tax Treaty (P3B / Double Tax Agreement)
A Tax Treaty (P3B) is a bilateral agreement between two countries to avoid double taxation and prevent fiscal evasion on income sourced in either country. Governed by Article 32A of the Income Tax Law. Indonesia has tax treaties with over 70 countries. Treaties cover: taxation rights over business income, dividends, interest, royalties, and capital gains; PE definitions; and Mutual Agreement Procedure (MAP) for dispute resolution. Foreign taxpayers must present a Certificate of Residence (SKD) to claim treaty benefits.
This article is for education, not tax advice.
Example
A Singapore company receives dividends from PT Indonesia. Normal withholding tax on dividends is 20%. Under the Indonesia-Singapore tax treaty, the rate is only 10%, provided the Singapore company submits a valid Certificate of Residence.
Source: Article 32A UU PPh No. 36/2008
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