Embed Size (px)
Citation preview
TaxUpdate
August2017
Indonesian Controlled Foreign Company (“CFC”) Rules TheMinisterofFinance(“MoF”)hasissuedRegulationNo.107/PMK.03/2017dated26July2017(“PMK107”)onCFCrules,whichisapplicablefromfiscalyear2017.PMK107revokesMoFRegulationNo.256/PMK.03/2008(“PMK256”).PMK107isfarmorecomprehensivethanitspredecessoranditincludesanappendixthatprovidesillustrationofCFCdetermination,calculationofdeemeddividends,andcalculationofforeigntaxcredit.SelectedkeyfeaturesofPMK107areasfollows:
No KeyFeatures Descriptions Comments
1
CFCcoverage
Onlyapplicabletonon-publiclylistedCFC.CFCcovers:1. DirectCFC(“D-CFC”):atleast50%
ownedbyanIndonesiantaxpayerorcollectivelybyIndonesiantaxpayers;and
2. IndirectCFC(“I-CFC”):atleast50%ownedbyotherCFC(s)orcollectivelyownedbyotherCFC(s)andtheIndonesianshareholder(s).
NochangefromPMK256.PMK256onlycoversD-CFC.DeterminationofI-CFCignorestheeffectivepercentageofownershipbytheIndonesianshareholder,asitfocuseson50%ormoreownershipineachlayerofshareholding.Forexample:anIndonesianshareholderowns50%ofsharesinALtd,andALtdowns50%sharesinBLtd.Inthiscase,ALtdisaD-CFCandBLtdisanI-CFCdespiteeffectiveownershipof25%(i.e.50%x50%)bytheIndonesianshareholder.
2
No KeyFeatures Descriptions Comments
2
Deemeddividend
Theamountofdeemeddividendisdeterminedbasedon:1. percentageofownershipintheD-CFC
multipliedbythecommercialnetprofitaftertaxoftheD-CFC(onanon-consolidatedbasisiftheD-CFChassubsidiary);and
2. percentageofeffectiveownershipintheI-CFCmultipliedbythecommercialnetprofitaftertaxoftheI-CFC.
DespitethedeterminationofI-CFCignorestheeffectivepercentageofownership(point1above),thedeemeddividendfromI-CFCtakesintoaccounttheeffectiveownershipbytheIndonesianshareholder.ThecommercialnetprofitoftheCFCsubjecttodeemeddividendisexclusiveofshareofprofitinanddividendincomefromthesubsidiaryorassociatedcompany.Unfortunately,thedeemeddividendcalculationdoesnottakeintoaccount:1. anycommerciallossesincurredbythe
CFCinaparticularyear;and2. anyequityreservethatmayneedto
beestablishedbytheCFCunderthelawofthejurisdictionwhereitdomiciles.
Hence,thedeemeddividendcalculationdoesnotconsiderthefactthatdividendisdeclaredfromunrestrictedretainedearningsofCFC(notethatthisisrecognisedundertheIndonesiancorporate/PTLaw).
3 Timing ThedeemeddividendmustberecognisedbytheIndonesianshareholderby:1. theendoffourthmonthfollowingthe
deadlinetosubmitcorporateincometaxreturns(“CITR”)oftheCFC;or
2. theendoftheseventhmonthfollowingtheendofCFC’sfiscalyearinthecasewherethereisnoCITRsubmissionobligationbytheCFC.
NochangefromPMK256
4 Dividenddistributions
ActualdividendreceivedbytheIndonesianshareholderfromCFCmaybeoffsetagainstreporteddeemeddividendsinthepreviousfiveyears.Forexample,dividendreceivedin2022canbeoffsetagainstdeemeddividend
Thisoffsetmechanismmayresultsinamismatchbetweendeemeddividendandtheactualdividenddistributions.Therefore,itisimportanttoplanonactualdividenddistributionstomaximisetheresultsoftheoffset.
3
No KeyFeatures Descriptions Comments
recognisedin2018upto2022.
ThisisasignificantchangefromPMK256,whichgovernsthattheCFCrulesarenotapplicableifactualdividendhasbeendistributedpriortothedeadlinetorecognisethedeemeddividend(refertoPoint3above).
5 ForeignTaxCredit(“FTC”)
PMK107governslimitofFTC,includinganewprovisiontotakeintoaccountforeigntaxpayableundertherelevanttaxtreaty.AspecificattachmentmustbecompletedandcopyofcertaindocumentsmustbeattachedtotheCITRinordertoclaimtheFTC.
PMK107revokestheFTCprovisionsunderMoFDecisionNo.164/KMK.03/2002.
*****
Ali Hermanto Strategic Consulting TamansariParamaBoutiqueOffice,Unit8EJl.K.H.WahidHasyimNo.84-88KebonSirih,MentengJakarta10340,IndonesiaTel/fax+622122346001/6004www.ahsc.co.id
AHStrategicConsulting
Contacts: Hermanto Suparman [email protected]:+628119156003
Ali Mardi Djohardi [email protected]:+628121023818
ThisTaxUpdatepublicationisnotintendedtoprovideacomprehensiveanalysisoftaxlawsandpracticedevelopments.Readersshouldseekindependentprofessionaltaxadvicebeforeapplyingtheinformationcontainedinthispublication.Whisteveryefforthasbeenmadetoensuretheaccuracyofthispublication,AliHermantoStrategicConsulting(“AHSC”)isnotresponsibleforanyinaccuracies,errorsoromissionsinthispublication.AHSCacceptsneitherresponsibilitynorliabilitiestoanypartiesfortheoutcomesorresultsofusingorrelyingonthispublication.
