Page 2 - Newsletter (The Criteria of Permanent Establishments and Tax Service Complaint Channels)

DDTC Newsletter Vol.01 | No.05 I April 2019 Page 2 of 6

The Criteria of Permanent Establishments and Tax Service Complaint Channels

Requirements for a Business to person or a foreign entity to run a business through
be Categorized as a Permanent the internet.
Establishment A place of business is deemed to exist regardless of

whether the foreign person or foreign entity owns or
The Government has recently issued a new regulation rents or whether the foreign person or foreign entity has
pertaining to the criteria of a business to be categorized the legal right to use the place of business.
as a permanent establishment (bentuk usaha tetap/
The next criteria as a permanent establishmet is a fixed
BUT). Such criteria are set forth in the Minister of
place of business. A place of business is determined as
Finance Regulation No.35/PMK.03/2019 concerning
a fixed place of business by the authority provided that
the Determination of Permanent Establishments (MoF
it is used continuously and is in a certain geographical
Regulation No. 35/2019).
location.
The underlying reason for the issuance of MoF Regulation
Moreover, the place of business must be available for
No. 35/2019 by the Government is to provide legal
use hence the foreign person or the foreign entity has
certainty for businesses in that this policy affirms the
unlimited access. They also run businesses or conduct
business sectors included in the permanent establishment
activities through such place of business.
category. The regulation which has come into force since
1 April 2019 regulates all business sectors carried out by
The requirements regarding the place of business are not
non-residents (subjek pajak luar negeri/SPLN).
fulfilled in the event that the business place in Indonesia
The regulation sets forth that a permanent establishment is solely used by the foreign person or foreign entity
is a form of business used by a foreign individual or foreign for storing data and/or managing data electronically. In
entity to conduct business or activities in Indonesia. The addition, the requirements are also not fulfilled in the
criteria as a permanent establishment are divided into event that the foreign person or foreign entity has limited
three groups, as below: access to operating the place of business.
1. the existence of a place of business in Indonesia;
Additionally, there exist other forms of business which
2. a fixed place of business; and are considered as permanent establishments despite
3. the place of business is used by a foreign individual not fulfilling the three criteria. The regulation sets forth
or a foreign entity to run a business or conduct 4 types of forms of business considered as permanent
activities. establishments without having to meet the criteria, as
below:
Article 5 paragraph (1) of MoF Regulation No. 35/2019
1. construction, installation or assembly projects;
states that the place of business includes all types of places,
2. the supply of services in any form by employees or
spaces, facilities, or installations, including machinery or
other people provided that such supply is carried
equipment, which are used by the foreign individual or
out for more than 60 (sixty) days in a period of 12
entity to run businesses or conduct activities.
(twelve) months;
The regulation stipulates 12 forms of place of business,
3. a person or an entity acting as an independent agent;
namely:
and
1. place of effective management;
4. an agent or an employee of an insurance company
2. a branch of the company; that is not established and does not domicile in
3. representative office; Indonesia that receives insurance premium or bears
risks in Indonesia.
4. office building;
5. factory; Article 6 paragraph (1) of MoF Regulation No. 35/2019
6. workshop; stipulates that a business that meets the criteria, but only
7. warehouse; carries out preparatory or auxiliary activities is excluded
from the definition of a permanent establishment for the
8. space for promotion and sales;
implementation of a tax treaty (perjanjian penghindaran
9. mining and the extracting of natural resources;
pajak berganda/P3B).
10. the working area of oil and gas mining;
11. fisheries, farming, agriculture, plantation, or Preparatory activities are preliminary activities for
forestry; and the essential and significant activities to be ready to
be carried out. On the oher hand, auxiliary activities
12. computers, electronic agents, or automated
equipment owned, rented, or used by a foreign