Page 4 - Newsletter (The Expansion of Business Classification of Taxpayers Receiving Covid-19 Tax Incentives)

DDTC Newsletter Vol.04 | No.02 I July 2020 Page 4 of 5

The Expansion of Business Classification of Taxpayers
Receiving Covid-19 Tax Incentives

IMEI to the Ministry of Industry. On the other hand, if The ratified tax treaty is also attached with a
the examination results indicate any discrepancy, IMEI protocol that provides a basis for the interpretation
registration cannot be further processed. of three clauses, i.e. provisions regarding permanent
establishments (Badan Usaha Tetap/BUT) in Article
The Ratification of Indonesia– 5, provisions regarding operating profits in Article
Cambodia Tax Treaty 7, and provisions concerning dividends in Article 10
paragraph 5.
The Indonesian government has officially ratified a
Furthermore, despite having been ratified, the tax
tax treaty (Perjanjian Penghindaran Pajak Berganda/
treaty between Indonesia and Cambodia does not
P3B) with the Royal Government of Cambodia. The
automatically enter into force. Pursuant to Article 29
ratification of the treaty is outlined in Presidential
of the bilateral agreement, said tax treaty will enter
Regulation Number 74 of 2020 concerning the
into force on the last date both parties submit written
Agreement between The Government of the Republic
notifications through diplomatic channels regarding
of Indonesia and The Royal Government of Cambodia
the completion of the procedures required by law
for The Avoidance of Double Taxation and The
or legislation for the entry into force of the treaty. In
Prevention of Fiscal Evasion with Respect to Taxes
general, the implementation stages of a tax treaty can
on Income (Pres. Reg. No. 74 of 2020). Promulgated
be seen in Figure 1.
on 3 July 2020, this regulation has come into force
thereafter.
Figure 1 – General Process for Implementing Bilateral Tax
Both countries signed the tax treaty circularly on 23 Treaty
October 2017 in Jakarta and on 13 October 2017 in
Phnom Penh. The tax treaty has been formulated to Step 1:
Step 2:
Step 3:
Step 4:
improve the bilateral relationship between Indonesia Initial Negotiation Initialling Signature
and Cambodia, in particular, economic cooperation Contact
with regard to income taxes.
Pres. Reg. No. 74 of 2020 is attached with the original
Step 8: Step 7: Step 6: Step 5:
text of the treaty, i.e. the tax treaty in Indonesian, Effective Entry into
Termination Ratification
Khmer, and English. In addition, the Indonesian Date Force
version of the copy of the original tax treaty text can be
accessed here and the English version can be accessed
here. In the event of any difference in interpretation, Source: Darussalam et al (2010).
the English tax treaty script shall prevail.

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