Tax Structuring Considerations – Indonesia
October 10, 2017Despite the increased focus across the globe on tax issues in recent years, many companies still fail to consider the full impact of tax regulations and procedures when entering into a new investment or transaction.
Tax planning does not need to mean devising intricate structures with fancy names. It can be as simple as ensuring that the timing of transactions is correct or that all options available are thought through.
In many cases this can save considerable cost.
Issues to be considered in optimizing structures from a tax perspective will very much depend on the individual circumstances. Generally, considerations include the following:
| ISSUE | CONSIDERATION | OPTION | BENEFIT |
| Profit extraction (sale by foreign investor) | “Capital Gain” – 5% of deal price (unlisted) | Utilise available DTA | Exemption from 5% |
| Profit extraction (local listing) | “Capital Gain”- 0.1- 0.6% deal price (listed) | IPO or convertible bonds (subject to limitations through disclosure requirements etc) | Minimal tax. In theory may be exempted |
| Profit extraction (after tax profits) | Dividend flow – 20% | Utilise DTA | possible 5% WHT |
| Profit extraction (financing) | Interest flow – 20% Consider DER | Utilise DTA | possible 5% WHT |
| Profit extraction (IP) | Royalty flow – 20% | Utilise DTA | possible 5% WHT |
| Profit extraction (shared costs etc.) | Services flow – 20% Consider PE issues | Utilise DTA | Possible reduction or exemption |
| The above will also involve Transfer Pricing Considerations | |||
| Investment in Real Estate | Impact of taxes on property transfers | Take advantage of new “REIT’ regulations | Possible elimination of double taxation and accelerated VAT refund |
| Special tax regimes | Impact of investment in certain business sectors on effective tax rates | Consider whether investment can be split or re-structured | Reduction in effective tax rates |
| Tax incentives | Eligibility – sector and area | Investment allowances, accelerated depreciation, withholding tax reductions, extended loss c/f | Reduction in overall tax cost |
| Tax holidays | Significant investment, sector specific | Apply for tax holiday | Up to 100% reduction in corporate income tax 5-15 years |