Income Tax Borne by the Government
FALCON SC TAX UPDATE
OCTOBER 2017 EDITION
INCOME TAX BORNE BY THE GOVERNMENT
Summary of MoF Regulation No. 126/PMK.010/2017
On 19 September 2017, the Ministry of Finance has issued its regulation number 126/PMK.010/2017 (PMK 126/2017 or “the Regulation”) on Government-Borne Income Tax on Interest or Yield from Government Securities Issued in International Markets and Third Party’s Income from Services Provided to the Government in the Issuance and/or Repurchase/Exchange of Government Securities in International Markets in the 2017 State Budget. This regulation is effective retroactively from 1 January 2017. This regulation is aimed to encourage both domestic and foreign people to purchase government securities.
Types of Government Securities:
- Sovereign Debt
Sovereign Debt is securities which are letter of debt recognition in foreign currency guaranteed interest and principal payments by the government in accordance with the validity period pursuant to Law Number 24 year 2002 concerning Sovereign Debt Instrument. - Government Sharia Securities/Sukuk Government
Government Sharia Securities/Sukuk Government is Government securities which are issued based on sharia principles, as proof of participation in the government sharia securities, in foreign currency, in accordance with Law Number 19 Year 2008 concerning State Sharia Securities.
Type of Taxes Borne by the Government:
- Payable Income tax earned from interest on government securities issued in international markets (including discounts on government securities issued in international markets). For Expample: Mr. A buys Sovereign Debt, from the purchase Mr. A will earn interest. Based on PMK no. 126/2017 then Mr. A does not need to pay tax on interest income because the tax will be borne by the Government.
- Payable Income tax on third party income services granted to the Government in the issuance and / or repurchase / exchange of government securities in the international market shall be borne by the Government. The above-mentioned issuance means an activity of offering and selling of government securities outside Indonesia (in foreign currency). For Example: seller agents, buyer / exchange agents, foreign stock exchanges, trustees, business agents, paying agents, rating agencies, and international law consultants does not include local law consultants.
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