Funds in the form of domestic Collective Investment Contract are considered as corporate taxpayers for domestic tax purposes. This generally means that taxes applicable to income and expenses of corporate taxpayers will apply to funds. There are some exemptions to this rule. For example, interest from bonds received by a mutual fund from 2009 to 2013 will be subject to lower-than-normal withholding tax rate.
Offshore funds will also be equalized with foreign corporate taxpayers. The only applicable tax to offshore taxpayers without a permanent establishment in Indonesia is withholding tax on income received from Indonesia. With the exception of where a tax treaty is applicable, all income sourced from Indonesia is subject to 20 percent withholding tax.
There are currently no special domestic rules differentiating the tax treatments of funds based on the type of funds.
Distribution of income made by funds to resident investors is exempted from tax by virtue of the Income Tax Law. Proceeds from the redemption of the investors’ share in the fund are also exempted from tax. These will be excluded from the recipient income tax calculations. However, expenses incurred by the recipient related to this income will not be deductible for fiscal purposes.
Income received from non-resident fund by resident investors will be included in the investors’ taxable income calculation. The tax rate for corporate investors is 25 percent. Progressive rates of 5 percent - 30 percent apply to individual investors. Taxes withheld by the country of residency of the fund may be credited against tax payable in Indonesia.
Distribution income made by a resident fund to non-resident investors is exempted from tax. This also applies to the proceeds of redemption of the investors’ share in the fund.
Fund management and custodian are taxed at normal corporate rate of 25 percent. Income received by the funds needs to be separated from the income of the fund manager/custodian.
Income entitlement arises to the investors at the time of distribution from the fund. The investors are not directly entitled to the fund’s income prior to distribution.
As of the date of writing, Indonesia has more than 60 tax treaties. Non-resident taxpayers may enjoy applicable treaty benefits. In most cases, the Indonesian Tax Authority requires the furnishing of valid certificate of residency in the prescribed from (form DGT-1) in order for non-residents to enjoy treaty benefits with Indonesia.
There is little tax incentive made available by the Indonesian Tax Authority to investment vehicles.
Stamp duty of IDR6,000 (USD0.70) is payable for documents issued in Indonesia or documents that need to have legal force in Indonesia.
If a fund purchases VAT-able goods/services from VAT-able enterprises, VAT is payable by the fund to the seller. Investment income from securities is exempted from VAT. Distribution income received by unitholders is also not subject to VAT.
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