Pajak Internasional | MOOC | Materi Pengantar Perpajakan Seri 14

Main ideas / lessons conveyed

• Purpose of international tax law

  • Countries apply different principles for taxing income, so the same income can be taxed by two countries or possibly by no country.
  • This situation is discussed as:
    • Double taxation
    • Double non-taxation (referred to in the subtitles with similar wording)

• Three national tax imposition principles

  • Source principle
  • Domicile principle
  • Citizenship principle
  • Because of these principles, a country may tax not only its residents but also people based on where they are domiciled or where they are citizens.

• International tax law (as described from a textbook)

  • International tax law has two dimensions:
    1. Taxation of domestic taxpayers’ income earned abroad
    2. Taxation of foreign taxpayers’ income sourced within the country

• How international issues are addressed: tax treaties (P3B / “P3P” mentioned)

  • The subtitles reference the Vienna Convention 1969 as the basis for countries entering treaties.
  • To reduce problems of double taxation and double non-taxation, countries conclude Double Taxation Agreements (DTA), called P3B in the subtitles.

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Detailed list of concepts: Tax subjects and tax objects (as presented)

A) Tax subjects (Subjek Pajak)

The subtitles classify tax subjects into individuals and entities (bodies), and into resident vs non-resident categories.

1) Individual tax subjects

• Indonesian tax residents (domiciled/residing in Indonesia under conditions stated)
• Foreign individuals / non-residents
  • Includes foreign nationals present in Indonesia no more than 183 days in a 12-month period, and other criteria described.

2) Entities / bodies (Badan)

• Bodies established or domiciled in Indonesia
• Foreign bodies
  • Not established in Indonesia and not domiciled in Indonesia.

3) Indonesian citizens treated as foreign tax subjects

• The subtitles describe Indonesian citizens (WNI) who may be considered foreign tax subjects if multiple tests/conditions are satisfied.

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B) “Living in Indonesia” / definition of residing in Indonesia (for individuals)

An individual is treated as residing in Indonesia if they meet conditions including:

• Has a place in Indonesia that can be controlled/used at any time
• The place is:
  • Owned, rented, or available for use
• The presence is not merely as a stopover
• Has a main activity center in Indonesia used as a center for:
  • activities and/or personal socio-economic/financial affairs in Indonesia
• The person carries out daily activities in Indonesia, including activities such as hobbies

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C) Intending to reside in Indonesia

An individual is treated as intending to reside if intention can be shown by documents such as:

• Permanent residence permit card (Kartu izin tinggal tetap / referenced as “KITAS”/“us” in subtitles)
• A limited stay visa (VITAS) with validity more than 183 days
• A limited stay permit (ITAS) with validity more than 183 days
• Work/business/activity contract or agreement expected to last more than 183 days
• Other supporting documents, e.g.:
  • Residential rental contract for more than 183 days
  • Documents showing transfer of family members

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Tax object (Objek Pajak) — what income is taxed (as described)

The subtitles list tax objects including income and other items such as:

• Income received in Indonesia
• Income received by foreign residents (WPLN) other than Indonesia, but the subtitles indicate “in Indonesia” for certain items (some phrasing is unclear due to auto-caption errors)
• Transfer of assets by foreign taxpayers (WPLN)
• Transfer of shares by WPLN
• Foreign insurance company items
• Branch profits
• International shipping and aviation
• Foreign trade representative office

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Tax rates mentioned (Indonesia—based on the subtitles)

A) Individuals

• Resident individuals: progressive rates
  • Minimum 5%
  • Maximum 35%
• Non-resident individuals:
  • Single rate of 20%

B) Withholding-style rates mentioned

For foreign taxpayers (as mentioned for categories like):

• Dividends, interest, royalties, prizes/awards
  • Rate range: 15% down to 2% (as stated, though exact mapping is not fully clear)

C) Services

• Foreign/non-permanent residents:
  • 20% for services (as stated in subtitles)

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Purpose and effect of P3B / tax treaties (as listed)

The subtitles state that the purpose includes:

1. Prevent double taxation
2. Prevent tax humiliation (wording as in subtitles)
3. Prevent double non-taxation
4. Provide the same/equal position in taxation between countries
5. Increase investment and human resources
6. Exchange information to prevent tax avoidance/humiliation
7. Settlement of disputes and tax collection assistance

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Relationship between treaties and domestic law

• The subtitles say the treaty rules act as a lex specialist against domestic laws.
• If there is a conflict between treaty provisions and domestic law:
  • Treaty (P3B) provisions prevail (“are won” in subtitles).

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Methods/types of taxation mentioned

The subtitles identify three methods:

• Unilateral taxation
• Bilateral taxation (typical for double taxation agreements)
• Multilateral taxation

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What is regulated in tax treaties (P3B) — list of topics

The subtitles indicate the treaty commonly regulates:

1. Tax subjects
2. Tax objects
3. Types of taxes and their rates, plus conditions
4. Procedure for Mutual Agreement Procedure (MAP) (referred to with “mutual agreement procedure”)
5. Exchange of information (EOI—mentioned as “Essence of Information or EOOI map”)
6. Assistance in tax collection

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Speakers / sources featured

• Nitami (host/presenter; “with me Nitami”)
• Brian J. and Michael J. (authors referenced for the description of international tax law; full surnames not provided in subtitles)
• Vienna Convention of 1969 (referenced as the basis for treaty-making)