The Director General of Taxes (DGT) issued guidance regarding the determination of a permanent establishment with respect to foreign taxpayers that provide application or content services via the internet.
The guidance—Circular Letter No. SE-04/PJ/2017—provides an explanation on the determination a permanent establishment (PE) according to the income tax laws and applicable income tax treaties. According to the income tax law, a PE is an establishment used by an individual person who does not reside in Indonesia, and is in Indonesia for not more than 183 days within 12 months; or an entity that is not established and not domiciled in Indonesia. A PE can be in the form of a branch company, representative office, office buildings, factories, workshops, warehouses, space for promotion and sales, mining extraction site, as well as computers, electronic agent, or automated equipment owned, leased, or used by the organizers of electronic transactions to conduct business via the internet.
Based on the guidance, taxation of a foreign taxpayer’s business profits originating from a treaty-partner country is based on the existence of a PE, and may be taxable in Indonesia if the business is conducted through a PT in Indonesia.
Read a 2017 report [PDF 323 KB] prepared by the KPMG member firm in Indonesia
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