DJP Prepares New Rules on Cross-Border Foreign Shipping PPh

The Directorate General of Taxes (“DJP”) of the Ministry of Finance (“Kemenkeu”) is currently finalizing the preparation of a Draft Regulation of the Director General of Taxes on Income Tax (“PPh”) Provisions for Foreign Shipping Company Taxpayers. This technical regulation focuses on refining the special deemed-profit calculation scheme, set at 2.64% (“Article 15 PPh”), as well as providing administrative certainty regarding its application in the cross-border shipping industry.

“This regulation is being prepared to clarify the procedures for tax withholding, the requirements for using a Certificate of Domicile (“Form DGT”), and the classification of types of vessel charter arrangements, in order to prevent double taxation and tax disputes,” said an internal source at the DJP of the Kemenkeu to Hukumonline.

The preparation of this regulation aims to provide clear guidance on the application of the special deemed-profit calculation scheme and its harmonization through Tax Treaties for the Avoidance of Double Taxation (Persetujuan Penghindaran Pajak Berganda - “P3B”). This includes establishing a clear distinction between Bareboat Charter transactions (the chartering of a vessel without crew) and Time/Voyage Charter transactions (the chartering of a vessel together with its crew), while also aligning the automatic withholding mechanism in the Unification e-Bupot system and the Coretax System portal.