On July 26, 2017, the Minister of Finance issued a regulation, PMK 107/PMK.03/2017, for determining Deemed Dividend earned by a resident taxpayer owning controlled non-stock exchange foreign company. This regulation is effective on July 27, 2017.
Generally, if you or your company as an Indonesian resident taxpayer has direct investment of not less than 50% of the total paid up shares in a non-stock exchange foreign company (NSE BULN), OR you or your company with another Indonesian resident taxpayer have direct investment of not less than 50% of the total paid up shares in a NSE BULN, you or your company shall be stipulated to obtain a Deemed Dividend from the direct investment.
The base for calculating the Deemed Dividend is the NSE BULN’s net profit after tax of a given year. If the directly-controlled NSE BULN has an obligation to file Annual Income Tax Return, then the Deemed Dividend is considered to be received at the end of the 4th month after the NSE BULN’s Annual Tax Return filing deadline. Otherwise, it is considered to be received at the end of the 7th month after the NSE BULN’s fiscal year end. Therefore, if the conditions stipulated in this PMK 107 are applicable to you or your company, there is a high probability that you or your Company will need to declare Deemed Dividend in your FY 2017 financials.
Should you have any questions or would like to discuss with us further on how this regulation may personally impact your personal or business taxes, please do not hesitate to contact our office or the associate in-charge of your account.
PMK 107.2017 – CFC Rules & Deemed Dividend