Indonesia

Business combinations and splits

Transfers of assets in business mergers, consolidations, splits, or acquisition must generally be dealt with at market value. Gains resulting from this kind of restructuring are assessable, whilst losses are generally claimable as a deduction from income. However, a tax-neutral merger or consolidation, under which assets are transferred at book value, can be conducted but is subject to the approval of the DGT. To obtain this approval, the merger or consolidation plan in question must pass a business-purpose test. Tax-driven arrangements are prohibited, and tax losses from the combining companies may not be passed to the surviving company.

Subject to a similar, specific DGT approval, the same concession is also available for business splits. Registration for an initial public offering (IPO) or additional foreign capital injection may be required for these types of transactions.

Tax information exchange agreements (TIEAs)

Indonesia has TIEAs with San Marino (pending the exchange of ratification documents), Bermuda, Guernsey, Isle of Man, Jersey, and Bahamas. 

Mutual Administrative Assistance in Tax Matters

Indonesia signed the Convention on Mutual Administrative Assistance in Tax Matters on 3 November 2011 and ratified it on 17 October 2014. Indonesia also signed a Multilateral Competent Authority Agreement on Automatic Exchange of:

• Financial Account Information using the Common Reporting Standard.
• Transfer Pricing Documentation in the form of Country-by-Country Report.

Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS)

Indonesia signed and ratified the Multilateral Instrument (MLI) on 7 June 2017 and 13 November 2019, respectively. Indonesia submitted notification to the OECD (as the depositary of the MLI) to confirm the completion of internal procedures on 28 April 2020. This MLI entered into force on 1 August 2020. By 27 November 2023, Indonesia has put 60 tax treaties to be covered by the Convention, whereby the applicability of the MLI is subject to whether or not those jurisdictions also included Indonesia in their notifications.

Multilateral Convention on the Subject-to-Tax Rule 

Indonesia signed the MLI on 19 September 2024 to facilitate the Implementation of the Pillar Two Subject-to-Tax Rule (STTR). Indonesia's provisional position contains the list of 29 tax treaties that Indonesia wishes to be covered and will be confirmed upon the deposit of its instrument of ratification.