• New Certificate of Domicile for Foreign Tax Residents
Newsletter:

New Certificate of Domicile for Foreign Tax Residents

27 December 2018

Recently, the Indonesian Directorate General of Tax (“DGT”) has issued Regulation No. PER-25/PJ/2018 (“PER-25”) on 21 November 2018 which revokes DGT Regulation No.  PER-10/PJ/2017 (“PER-10”), effective on 1 January 2019. Previously prepared Form DGT-1 and Form DGT-2 are valid until 31 December 2018.

The new Form DGT is valid for a maximum twelve months and may cover different fiscal years which are not on a calendar basis. For example, the new Form DGT is valid for a twelve-month (12-month) period from February 2019 to January 2020. PER-25 does not require the new Form DGT to be furnished for every transaction and amount of income and type of transaction are not required to be declared on the new Form DGT.

Pursuant to PER-25, the new Form DGT combines both Form DGT-1 and Form DGT-2. The new Form DGT consists of seven (7) parts covering two (2) pages, that must be filled by foreign tax residents in accordance with the criteria set out in the Attachment of PER-25.

Individual foreign tax residents must complete Part I, Part II (must be completed by competent authority or authorized tax office of the country of residence and can be replaced with a Certificate of Residence), Part IV, and Part VII of the Form DGT. Banking institutions and pension funds must complete Part I, Part II and Part III of the Form DGT, while corporate foreign tax residents must complete Part 1, Part II, Part V, Part VI and Part VII of the new Form DGT.

Regarding the anti-tax treaty abuse tests in Part V of the Form DGT, PER-25 has updated to include Question No. 6 which states that “The entity has the same legal form and economic substance either in the entity’s establishment or the execution of its transaction”. In addition, Question No. 11 has been updated which states that “The purposes of the transaction is to directly or indirectly obtain the benefit under the convention that is contrary to the object and purpose of the DTC”. 

Regarding the beneficial ownership tests in Part VI of the Form DGT, PER-25 limits the exception on Question No. 3 which states that “No more than 50 per cent of the entity’s income is used to satisfy claims by other persons”. The exception is limited to giving fair compensation to employees or payments to other parties for costs incurred in carrying out their business.

Form DGT reporting is now available online via website of DGT or certain channels determined by DGT. For the first transaction between the foreign tax resident and the Indonesian tax withholder for the tax period stated in Form DGT, the foreign tax resident must provide Form DGT to the related Indonesian tax withholder. Thereafter, the tax withholder input the information on Form DGT and submit to the DGT. Upon submission, the tax withholder will receive an Electronic Receipt Note which is treated as a Form DGT and forward to the foreign tax resident.

If the foreign tax resident has received the Electronic Receipt Note, only copies are required to be provided to the other Indonesian tax withholders, in accordance with the tax period stated in Form DGT. The Indonesian tax withholder should prepare a withholding tax slip for every transaction made with foreign tax residents and attach the Electronic Receipt Note together with the Monthly Article 26 Income Tax Return for submission.

 

For more information on how BDO – Tax can help you in planning and navigate these major changes, please contact our experts:

IRWAN KUSUMANTO

Managing Director of Tax

ikusumanto@bdo.co.id