Indonesia, Singapore Sign Double Tax Avoidance Agreement
Indonesian Minister of Finance Sri Mulyani Indrawati has said that Indonesia and Singapore had signed a Double Tax Avoidance Agreement.
“This is an amendment to the Double Tax Avoidance Agreement signed in 1990,” the Minister said during a press conference after a Limited Cabinet Meeting at the Bogor Presidential Palace, West Java, Tuesday (4/2).
Sri Mulyani said that since 2015, President Joko “Jokowi” Widodo has requested a review for the Double Tax Avoidance Agreement.
The new Agreement, according to the Minister, reduces the royalty tax rate to two layers, namely 10% and 8%.
“The branch profit tax rate is also reduced from 15% to 10%. The lower royalty tax and branch profit tax rate is in line with many Double Tax Avoidance Agreements that have been signed by the Republic of Indonesia with its partner countries,” Sri said, adding that the lower tax rate is expected to boost investment from Singapore to Indonesia.
Sri went on to say that Indonesia got positive results from the elimination of “most favored nation” clause in production sharing agreement and also more detailed agreement regarding tax avoidance, anti-tax avoidance, capital gains, and exchange of information in accordance with international standards.
“Therefore, Indonesia can reduce the occurrence of tax avoidance conducted by our companies which use Singapore as their base,” she said.
The Indonesian Government, the Minister added, ensures that Government institutions from the two countries will get an interest tax exemption.
Sri also said that Indonesia imposes an exchange of notes related to Agreement and the abolition of the benefits of Tax Avoidance of Indonesia-Singapore for Permanent Business Entities located in the third countries.
The Agreement, she added, also aims to eliminate the existing tax loopholes which weaken Indonesia’s position in collecting tax.
Sri Mulyani further said that the Government will continue to monitor the implementation of the Agreement and that Indonesia and Singapore have also signed Memorandum of Understanding between Customs and Excise and the Police Coast Guard in order to combat the smuggling that occurred in the two countries.
Sri Mulyani also said that the Government is committed to combatting smuggling in trade routes between Indonesia and Singapore. (IFR/EN)
Translated by: Ridwan Ibadurrohman
Reviewed by: Mia Medyana