New Regulation Forces Indonesians to Sell Their Foreign Shell Companies

As an example, he said if an Indonesian company gave a Rp100 million (US$7,374) dividend to the foreign shell company, the government would impose a 30 percent international withholding tax.

On the back of the Indonesian government’s issuance of its new controlled foreign company (CFC) regulation on July 26, many Indonesians are likely to sell their foreign shell companies because of the enforcement of double tax payments.

The CFC regulation authorizes the government to charge a dividend tax on foreign companies that are controlled by Indonesians even though the companies are formed in tax heaven countries.

Consultancy firm Deloitte’s Indonesia tax partner Dionisius Damijanto said on Monday if an Indonesian investor indirectly owned an Indonesian company through a foreign company, the government would charge taxes on each dividend payment.

“The government will charge tax on dividend payments from the Indonesian company to the foreign shell company and impose another tax on dividend payments from the foreign shell company to the investor,” he said during a Deloitte-Indonesia Stock Exchange (IDX) joint event in Jakarta on Monday.

As an example, he said if an Indonesian company gave a Rp100 million (US$7,374) dividend to the foreign shell company, the government would impose a 30 percent international withholding tax.

“If the investor owns the Indonesian company directly, the government will only charge a 10 percent dividend tax or Rp10 million,” Dionisius said. (bbn, Anton Hermansyah, The Jakarta Post)