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)