The Double Taxation Relief (Taxes on Income) (Indonesia) Order 1994

Made: 15th March 1994

At the Court at Buckingham Palace, the 15th day of March 1994 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Indonesia) Order 1994.

2

It is hereby declared—

• (a) that the arrangements specified in the Agreement set out in the Schedule to this Order have been made with the Government of the Republic of Indonesia with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Indonesia;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Indonesia concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE — AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE REPUBLIC OF INDONESIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Indonesia;

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains;

Have agreed as follows:

ARTICLE 1 — Personal scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2 — Taxes covered

ARTICLE 3 — General definitions

ARTICLE 4 — Fiscal domicile

ARTICLE 5 — Permanent establishment

ARTICLE 6 — Income from immovable property

ARTICLE 7 — Business profits

ARTICLE 8 — Shipping and air transport

ARTICLE 9 — Associated enterprises

• Where: an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State; and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

ARTICLE 10 — Dividends

ARTICLE 11 — Interest

ARTICLE 12 — Royalties

ARTICLE 13 — Capital gains

ARTICLE 14 — Independent personal services

ARTICLE 15 — Dependent personal services

ARTICLE 16 — Directors' fees

ARTICLE 17 — Artistes and athletes

ARTICLE 18 — Pensions

ARTICLE 19 — Government service

ARTICLE 20 — Students

ARTICLE 21 — Elimination of double taxation

ARTICLE 22 — Partnerships

Where, under any provision of this Agreement, a partnership is entitled, as a resident of Indonesia, to exemption from tax in the United Kingdom on any income or capital gains, that provision shall not be construed as restricting the right of the United Kingdom to tax any member of the partnership who is a resident of the United Kingdom on his share of such income or capital gains; but any such income or gains shall be treated for the purposes of Article 21 of this Agreement as income or gains from sources in Indonesia.

ARTICLE 23 — Non-discrimination

ARTICLE 24 — Mutual agreement procedure

ARTICLE 25 — Exchange of information

ARTICLE 26 — Diplomatic agents and consular officials

ARTICLE 27 — Entry into force

ARTICLE 28 — Termination

This Agreement shall remain in force until terminated by one of the Contracting States.Either Contracting State may terminate the Agreement by giving notice of termination, through the diplomatic channel, at least six months before the end of any calender year beginning after the expiration of five years from the date of entry into force of the Agreement.In such event, the Agreement shall cease to have effect:

• (a) in the United Kingdom:

• (i) as respects income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;

• (ii) as respects corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given; and

• (b) In Indonesia:

as respects income derived during any fiscal year beginning on or after 1st January in the calendar year next following that in which the notice is given.

Signed

N. H. Nicholls — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Agreement with Indonesia is set out in the Schedule to this Order.

The Agreement provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence.

Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property may be taxed in the country in which the property is situated (Article 6).

Air transport and shipping profits are generally to be taxed only in the residence state of the operator (Article 8).

The Agreement includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The Agreement provides that where a United Kingdom company pays a dividend to a resident of Indonesia, the recipient will, subject to certain conditions, receive the tax credit to which an individual resident in the United Kingdom and in receipt of such a dividend would be entitled, less tax at at rate not exceeding 15 per cent on the aggregate of the dividend and the tax credit. In the case of a dividend paid by an Indonesian company to a resident of the United Kingdom the tax charged in Indonesia is not to exceed 10 per cent where the dividend is paid to a United Kingdom company which owns at least 15 per cent of the voting power in the paying company. In all other cases the rate of Indonesian tax will not exceed 15 per cent (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is, in general, not to exceed 10 per cent of the gross amount flowing to the other country. Certain categories of interest (eg interest payable to the Government of the other country) will be exempt from tax in the source state (Article 11).

The rate of tax in the country of source on industrial royalties flowing to the other country is 10 per cent. For certain other classes of royalties the rate of tax in the country of source is 15 per cent (Article 12).

Each country may tax capital gains in accordance with its domestic law although gains from the alienation of ships or aircraft operated in international traffic shall be taxable only in the country of residence of the operator (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director (in Indonesia a “pengurus” or a “komisaris”) of a company resident in the other country may be taxed in the latter country (Article 16). Income derived from the activities of artistes and athletes may be taxed in the country in which those activities are performed (Article 17). Occupational pensions (other than those paid in respect of government service) and annuities are to be taxed only in the recipient’s country of residence (Article 18). Government service remuneration and pensions are normally to be taxed only by the paying Government (Article 19). Certain payments made to visiting students, apprentices and business trainees are exempt from tax in the country visited (Article 20).

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. The credit to be given in the United Kingdom for tax imposed in Indonesia includes credit for tax spared under certain provisions of Indonesian law. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in Indonesia where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends (Article 21).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 23), and for consultation (Article 24) and exchanges of information (Article 25) between the taxation authorities of the two countries.

The Agreement will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Agreement is to take effect in the United Kingdom on or after 1st April in respect of corporation tax and on or after 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes

[^f00001]: 1988 c. 1; section 788 is extended by section 277 of the Taxation of Chargeable Gains Act 1992 (c. 12).