Page 3 - Newsletter (Latest Provisions on Indonesia’s Tax Allowance)

DDTC Newsletter Vol.03 | No.04 I February 2020 Page 3 of 6

Latest Provisions on Indonesia's Tax Allowance

to the Indonesian government stating that the Tajikistan Affirmation of VAT Exemptions for
government had completed the constitutional formal Marine Transport Companies that
requirements related to the ratification of the tax treaty.
Conduct Overseas Marine Transport
On the part of Indonesia, the government ratified this
tax treaty through Presidential Regulation Number 76 of Activities
2019 concerning the Agreement between the Republic
of Indonesia and The Republic of Tajikistan for the The government has released a provision confirming
Avoidance of Double Taxation and the prevention of Fiscal that recipients of certain port services are entitled to VAT
Evasion with respect to Taxes on Income (Presidential exemption facilities in the context if those companies
Reg. 76/2019) on 12 November 2019. operate vessels for overseas marine transport activities.
The regulation also emphasizes that VAT exemptions are
Under these conditions, the Government of Indonesia
only granted if the vessel used does not carry passengers
subsequently submitted a notice in the form of a
and/or goods from one port to another within Indonesia’s
diplomatic note on 13 December 2019 to the Government
territory. Thus, VAT exemptions only apply to overseas
of Tajikistan outlining a notification that the Indonesian
transport activities. In addition, these marine transport
government had completed the formal procedures or
companies must record the cost of ship services and
requirements based on the Indonesian constitution for
cargo services as the form of their expenses.
the tax treaty ratification.
The second scope of the regulation contains a notification The affirmation is outlined in the Director General of
about the entry into force and the effective dates of the Tax Circular Number SE-4/PJ/2020 concerning the
Indonesia-Tajikistan tax treaty. The Indonesia-Tajikistan Affirmation of Value Added Tax Treatment for the Supply
tax treaty has come into force as of 13 December 2019. of Certain Port Services to Marine Transport Companies
Moreover, the treaty has been effective on taxes withheld that Conduct Overseas Marine Transport Activities (DGT
at the source as well as other taxes on income as of 1 Circular No. SE-4/PJ/2020). The government issued this
January 2020. regulation to provide uniformity in the interpretation and
treatment of VAT on the supply of certain port services to
Furthermore, the third scope of DGT Circular No. 03/
marine transport companies.
PJ/2020 clarifies the notification related to several
provisions in the Indonesia-Tajikistan tax treaty. The Under this regulation, in the event that a vessel is operated
circular sets forth that the source country’s taxing rights based on a consortium or vessel sharing agreement by
on income in the form of dividends, interest, and royalties several foreign marine transport companies, the recipient
are subject to a maximum rate of 10% of the gross amount of port services entitled to VAT exemptions is the vessel
received by the beneficial owner. A maximum rate of 10% operator stated in the shipping or port documents.
also applies to branch profit tax. Certain port services that are subject to VAT exemptions
The maximum rate provision for branch profit tax, include two types of services. First, ship services, namely
however, does not apply to production sharing contracts docking services, pilotage services, tug-boat services,
for oil, gas, and mining sectors agreed upon the and mooring services. Second, cargo services, namely
Government of Indonesia, government agencies, state- container loading and discharging services from the
owned oil and gas companies, or other entities with vessel to the container yard and/or from the container
persons or body who are residents of Tajikistan. yard to the vessel.
Furthermore, container loading and discharging
Finally, the fourth scope of DGT Circular No. 03/PJ/2020
services include stevedoring and cargodoring services.
contains administrative provisions for the utilization
Stevedoring services are services of unloading or loading
of the Indonesia-Tajikistan tax treaty. The circular
of goods from the vessel to the dock/barge/truck into
emphasizes that a person or entity that is a resident of
the vessel until the goods are loaded in the vessel hatch,
Tajikistan may utilize the Indonesia-Tajikistan tax treaty
either using a crane vessel or a land crane. In contrast,
in connection with the income received or obtained
cargodoring services are services to release goods from
from Indonesia provided that they have a certificate of
ropes/nets (ex-tackle) at the dock to be transported from
domicile (surat keterangan domisili/SKD).
the dock to warehouses/container yard and vice versa.
Containers used repeatedly, however, are not included in
the definition of goods. As such, the vessel carrying such
containers is still entitled to VAT facilities. In further
detail, the fulfillment of the above requirements can
be detected by the Port Business Entity (Badan Usaha
Pelabuhan) based on information from the integrated
information system of the Ministry of Transportation