Page 2 - Newsletter (Latest Provisions on Indonesia’s Tax Allowance)

DDTC Newsletter Vol.03 | No.04 I February 2020 Page 2 of 6

Latest Provisions on Indonesia's Tax Allowance

The Implementation of Tax First, information requests have been made by
Examination Abroad for Information authorized officials in the partner jurisdictions to the
Director of International Taxation but the information
Exchange received is inadequate thus additional information is
needed. Second, information requests have been made by the
The government has issued provisions concerning authorized officials in partner jurisdictions to the Director of
tax examination abroad (TEA) in the exchange of International Taxation but expedited information is required.
information on request (EoIR) scheme. These provisions
are outlined in the Director General of Tax Regulation Entry into Force and Effective Dates of
Number Per-02/PJ/2020 concerning the Procedures of
Tax Examination Abroad for the Exchange of Information the Indonesia-Tajikistan Tax Treaty
Based on International Agreements (DGT Reg. No. Per-
02/PJ/2020). The Director General of Taxes has issued a circular
concerning the implementation of the tax treaty
TEA is the presence of a representative of the Directorate (persetujuan penghindaran pajak berganda/P3B)
General of Taxes (DGT) for the purpose of searching
between Indonesia and Tajikistan. The circular refers
and/or gathering information carried out by the tax
to the Director General of Taxes Circular Number SE-
authority of the partner jurisdiction or vice versa based
03/PJ/2020 concerning the Notification of the Entry
on both parties’ agreement This process is a follow up
into Force of the Agreement between the Republic of
to the exchange of information referring to Article 13 of
Indonesia and the Republic of Tajikistan for the Avoidance
the Minister of Finance Regulation No. 39/PMK.03/2017
of Double Taxation and the prevention of Fiscal Evasion
concerning the Procedures of Exchange of Information
with Respect to Taxes on Income (DGT Circular No. 03/
Based on International Agreements (MoF Reg. No.
PJ/2020).
39/2017).
The regulation was issued as the government had
There are at least three benefits of the TEA policy. First, the
DGT may obtain complete information on the profile completed the ratification procedure required by both
countries. In general, Figure 1 shows the steps of a bilateral
of taxpayers whose data is requested. Second, as the
means of cooperation between tax authorities on tax tax treaty implementation. Through this regulation, the
government provides notification concerning the entry
issues pertaining to the same taxpayer/group to avoid
the potential duplication of examinations. Third, an into force and effective dates of the Indonesia-Tajikistan
tax treaty and the provisions contained therein. The
expedited process of obtaining information and data is
required. notification is outlined in four scopes of the regulation
that was promulgated on 24 January 2020.
The DGT has the authority to implement TEA reciprocally
with authorized officials in partner jurisdictions. The Figure 1 – General Process for Implementing Bilateral Tax
Treaty
TEA includes overseas TEA and domestic TEA.
Overseas TEA is carried out based on a request from
Step 1: Step 2: Step 3: Step 4:
the head of the unit within the DGT to the Director of
Initial Negotiation Initialling Signature
International Taxation. A request is made for a TEA to be
Contact
conducted on a taxpayer, in which TEA is performed on
examination activities, the examination of preliminary
evidence, or investigation of tax crime in violation of said
taxpayer’s tax obligations. Step 8: Step 7: Step 6: Step 5:
Termination Effective Entry into Ratification
In addition, the request may be submitted if there Date Force
is significant potential tax revenue and other two
requirements are met. First, the DGT has requested
information to the authorized officials in the partner country
or vice versa but the information received is inadequate Source: Darussalam et al (2010).
thus additional information is needed. Second, the DGT
has requested information to the tax authority of the partner In the first scope, this regulation coherently sets out the
country or vice versa but expedited information is required. process of signing, ratification, and notification in the
context of the Indonesia-Tajikistan tax treaty ratification
Further, domestic TEA is carried out based on requests before the enforcement of this agreement. The Indonesia-
from authorized officials in partner jurisdictions to the Tajikistan tax treaty was signed by authorized officials
DGT’s Director of International Taxation. Two conditions from both countries in Jakarta on 28 October 2003.
must be met to implement this type of TEA. Furthermore, the Government of Tajikistan submitted a
notice in the form of a diplomatic note on 8 May 2014