Tax procedure on dividends paid to foreigners eased
Tax procedure on dividends paid to foreigners eased
JAKARTA (JP): The government has eased the procedure for the
collection of the withholding tax imposed on dividends paid by
publicly listed companies to their foreign shareholders whose
home countries have double taxation agreements with Indonesia.
Custodians representing the foreign shareholders of the
publicly listed companies, under the new procedure, are no longer
required to obtain an exemption letter from the local tax office.
Previously, such a letter was a requirement to qualify for an
income withholding tax assessment.
The simplification was issued in response to a letter from the
chairman of the Capital Market Supervisory Agency, who argued
that the requirement to obtain an exemption letter from the tax
office often delayed or hindered the distribution of the
dividends to foreigner shareholders.
The new procedure will be effective beginning next month.
Under the existing regulation, the tariff of the withholding
tax imposed on dividends is set at 20 percent of their gross
value. But the tariff for foreigners whose countries have signed
a double taxation treaty with Indonesia could be adjusted to
those applied in their own countries, which usually results in
tax obligations lower than the standard 20 percent.
Under the old procedure, local custodians handling the
interests of foreign shareholders of publicly listed companies
should first obtain an exemption letter from the local tax office
in order to obtain lower tax assessments.
Tax Director General Fuad Bawazier said yesterday that the
simplification of the procedure is essential in encouraging
foreign investors' trading activities on the local stock market.
Fuad said that custodians, under the new procedure, are
required only to provide a letter of notification about the
domiciles of foreign shareholders of publicly listed companies,
which have been authorized to collect the withholding tax.
If the information about the domiciles of the foreign
taxpayers is misleading or manipulated, the custodians would be
sanctioned according to the existing regulation, Fuad said. (hen)