Indonesia: Protocol to tax treaty with Netherlands

Indonesia: Protocol to tax treaty with Netherlands

A new Protocol to the income tax treaty between Indonesia and the Netherlands was signed 30 July 2015 and will be effective 31 days after formal approval and ratification by both governments. Among the measures contained in the Protocol are revisions to the withholding tax rates on dividend payments.

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The tax treaty currently provides withholding tax at a rate of 10% applies to dividends paid or payable by an Indonesian tax resident taxpayer to a shareholder tax resident in the Netherlands. Under the Protocol, the withholding tax rate on dividend payments will be, as follows:

  • 5% if the shareholder owns at least 25% of the capital of the dividend paying company
  • 10% if the dividend is paid to a pension fund
  • 15% in all other situations 

The Protocol also confirms that no mutual agreement is required between the Competent Authorities on the mode of application of the tax treaty articles regarding dividends, interest, and royalties.

 

Read an October 2015 report prepared by the KPMG member firm in Indonesia: New Protocol to the Indonesia – The Netherlands Tax Treaty

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