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Withdraw foreign investment through LPI to get tax relief

Sri Mulyani About Tax
Sri Mulyani

JAKARTA – Finance Minister Sri Mulyani plans to set an income tax rate (PPh) of Article 26 on dividends received. By foreign partners from the Investment Management Institution (LPI) at 7.5 percent. The amount, which is smaller than the usual rate, is intend to attract foreign investors to invest in Indonesian projects.

The plan will be regulation in the Draft Government Regulation (RPP) onTax Treatment LPI. Which is part of Law Number 11 of 2020 concerning Job Creation.

“The goal is to provide incentives so that these investors are interest in becoming partners with the LPI,” said Sri in a virtual working meeting with Commission XI of the DPR on Monday (1/2).

Policy Only for Foreign Tax Subjects

This Tax policy applies to investments in Foreign Tax Subjects (SPLN) during the ownership and period exit. The Period exit is when the subsidiary resulting from the joint venture between LPI and foreign investors must be liquidated.

So far, Sri explained, dividends on SPLN investment are subject to a rate of 20 percent or adjusted to the rate stipulated. In the double tax avoidance agreement (P3B). It is recorded that of the 71 P3B agreements that Indonesia has had with other jurisdictions to regulate dividends, the average rate is 10 percent. These rates apply to 51 countries.

Meanwhile, other countries apply tariffs above that, namely 12.5 percent to 15 percent. On the other hand, there are also countries with dividend tax rates of five percent and zero percent. But this is limited to three countries and one country.

Sri gave a bigger incentive to SPLN who decided to reinvest in Indonesia even though they had entered the period exit. This means that they still choose to hold dividends in Indonesia and decide to invest again in a new subsidiary.

For this step, Sri will waive the dividend transaction to the SPLN. “The goal is that the SPLN does not bring out the funds obtained, but reinvest it in Indonesia,” he said.

 

Also, read too another news article about Economy Indonesia Has Strong Capital to Recover This Year

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