Ministry of Finance Prepares New Regulation on the Avoidance of Double Taxation

The Ministry of Finance, through the Directorate General of Taxes (DJP), is currently drafting Regulation of Minister of Finance (Rancangan Peraturan Menteri Keuangan- “ RPMK ”) on Procedures for the Implementation of Double Taxation Avoidance Agreements (Persetujuan Penghindaran Pajak Berganda- “ P3B ”). This regulation serves as a follow-up to Article 50 paragraph (2) of Regulation of the Government No. 55 of 2022 on Adjustment of Regulations in the Field of Income Tax (“ PP 55/2022 ”).

“This regulation is intended to provide legal certainty in the implementation of P3B, while at the same time supporting a healthy investment climate and tax compliance,” said Tio Serepina Siahaan, Head of the Legal Bureau of the Secretariat General of the Ministry of Finance, in an interview with Hukumonline.

The imposition of Income Tax (PPh) on Domestic Taxpayers (Wajib Pajak Dalam Negeri/WPDN) and Non-Resident Taxpayers (Wajib Pajak Luar Negeri- “ WPLN ”) is governed by the provisions of the Income Tax Law and applicable Double Taxation Avoidance Agreements. The application of P3B is available to taxpayers who are residents of a treaty partner country, as evidenced by a DGT Form duly certified by the competent authority of the relevant treaty partner country.

The DGT Form serves as an essential document for Non-Resident Taxpayers, enabling them to obtain the benefits of P3B and ensuring that double taxation is lawfully and transparently avoided. “The harmonization process and conceptual refinement of the RPMK with DJPP are currently underway,” Tio added.