TAXES
LAW
10
PT Roedl Consulting
With reference to the Global Forum on Transparency and
Exchange of Information for Tax Purposes and Automatic
Exchange of Financial Account Information/AEOI, sponsored by
OECD and G20, the Indonesian government, issued Government
Regulation in Lieu of Law
(Peraturan Pemerintah Pengganti
Undang-Undang)
No.1/2017 (“Perpu”) on 8 May 2017. This
Perpu is issued to fulfil Indonesia’s commitment to the AEOI by
30 June 2017.
The Perpu removes the long protected bank secrecy rule in
Indonesia. Based on the request of the Director General of
Tax (DGT), the bank is now obliged to provide information for
the purpose of a tax audit, collection or tax crime investigation
of any person. It also eliminates the DGT’s obligation to have
written approval from the Minister of Finance (MoF) to request
the information for the purpose of such tax audit, collection or tax
crime investigation. The Perpu effectively grants the DGT direct
access to the relevant information from financial institutions.
Engineering, Procurement and Construction (EPC) Contracts
are widely adopted by Indonesia customers to govern the
purchase of equipment or machineries required for their
production processes or other industrial purposes. In the light
of the prevailing Indonesian final tax on construction services as
well as the German-Indonesian double taxation treaty, German
suppliers have distinctive benefits in taxation matters pertaining
to EPC contracts with Indonesian customers.
The Protocol of the tax treaty stipulates that
“(...) If machinery or
equipment is delivered from the head office or another permanent
establishment of the enterprise or a third person in connection
to those activities or independently therefrom, there shall not
be attributed to the profits of the building site or construction,
assembly or installation project, the value of such deliveries.”
Based on the above treaty provision, the supply of equipment
(Engineering and Procurement) sourced directly from overseas
shall not be taxable in Indonesia. Installation of equipment
(Construction) might give rise to a permanent establishment
(PE) implication in Indonesia, if onshore installation work lasts
more than six (6) months.
Tomy Harsono
Licensed Tax Advisor
+ 62 537 6225
The exchange of financial information also covers information
of accounts which based on international taxation agreements
are mandatory to be reported. Implementing regulations on the
Perpu have not yet been issued.
The recent enactment of the Construction Service Law provides
various administrative and organizational requirements for a PE
to obtain the proper business registration, being a representative
of a foreign construction company, so called “BUJKA”. The
requirements as well as potential alternative options should
be carefully considered to achieve an optimum tax and legal
structure.
Tomy Harsono
Licensed Tax Advisor
+ 62 537 6225
Tax Crime
Access to Financial Information for Tax Purposes
Cross Border EPC Contracts under
German–Indonesian Tax Treaty
International Tax Law
7
th
Edition | June 2017
