Indonesia and U.S. sign bilateral tax protocol

Indonesia and U.S. sign bilateral tax protocol

JAKARTA (JP): Indonesia and the United States have signed a
bilateral agreement reducing the withholding tax on interest,
royalties and dividend payments for businesses in the two
countries.

The agreement was signed yesterday by Indonesian Minister of
Foreign Affairs Ali Alatas and U.S. Secretary of State Warren
Christopher after their bilateral luncheon.

"This is a well-balanced agreement, because the standpoint of
Indonesia is to provide an important incentive to increase
participation in their major projects," Christopher said at the
signing ceremony.

He noted that the protocol serves as "an example of good
cooperation between our two governments and provides new
opportunities for cooperation between our industries and
businesses".

Under a convention on the avoidance of double taxation signed
in 1978, U.S. companies doing business in Indonesia and
Indonesian companies doing business in the United States were
subject to a 15 percent withholding tax.

The tax applied to interest payments, royalties and dividends.
The new agreement reduces the tax to 4 percent by amending the
convention.

For Indonesia, Alatas said, the protocol complements a series
of its deregulation measures which aim to create a more favorable
economic climate for doing businesses here.

"With this protocol in force, I am confident that the business
community in the United States can look toward Indonesia as a
place where investment can grow in a setting of stability in the
years to come," Alatas said.

"The Indonesian private sector could explore investment
possibilities in the United States with increased confidence," he
said. (rid)