The Minister of Finance issued guidance (Regulation No.93/PMK.03/2019—PMK-93) to amend earlier guidance (Regulation No.107/PMK.03/2017—PMK-107) and to provide greater clarity regarding the taxation of distributions from controlled foreign corporations (CFCs).
PMK-93 is also relevant to Indonesian groups with foreign business activities. However, there are several other items of concern to CFCs that have yet to be clarified. For instance, the new guidance did not modify the definition of a CFC (as set out in PMK-107).
The guidance is effective retroactively beginning with fiscal year 2019.
Types of taxable income
PMK-93 modifies PMK-107 by restricting deemed profits largely to “passive” income, in contrast to the former “commercial profit after tax” approach. PMK-93 considers the following income as being passive:
Taxable base of deemed dividends
Consistent with PMK-107, the taxable base of “repatriable income” is dependent on the nature of the resident taxpayer’s control of the CFC. The repatriable income is calculated proportionally to the resident taxpayer’s effective ownership of the CFC:
Calculation of taxable income
Repatriable income is the “net income after tax”—i.e., the passive income (as defined above) after the following deductions:
Read a September 2019 report [PDF 1 MB] prepared by the KPMG member firm in Indonesia
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