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)