Executive summary

Indonesia's Director General of Taxation (the DGT) issued¹ DGT Regulation No. 29/PJ/2017 (PER-29) providing implementing regulations on Indonesian Country-by-Country (CbC) Reporting requirements, effective as of 29 December 2017. PER-29 provides some clarity regarding the implementation of CbC reporting in Indonesia.

The Indonesian CbC reporting rules first apply for the year ended 31 December 2016. Indonesian and foreign headquartered multinational groups need to comply with the new notification (Notification) requirements and determine whether local filing of the CbC report is also required (with the potential filing deadline of 30 April 2018).

The Indonesian rules are now more consistent with the Organisation for Economic Co-operation and Development (OECD) standard.

This Alert summarizes key aspects of PER-29.

Detailed discussion

CbC reporting

Groups with an Indonesian Parent Entity

The Indonesian Parent Entity, an entity which directly or indirectly controls one or more other members within the business group² and is required to prepare a consolidated financial statement under Indonesia's financial accounting standards and/or based on provisions for listed companies in Indonesia, will be required to file the CbC report with the DGT.

The annual group gross revenue turnover test to trigger CbC reporting obligations is 11 trillion rupiah (US$820m). The Parent Entity is not permitted to nominate a nonresident surrogate entity to satisfy the CbC report filing obligations.

Indonesian subsidiaries, branches and permanent establishes of groups with a non-Indonesian Parent Entity

An Indonesian subsidiary (or branch) would be required to file the CbC report locally if any of the following applies:

• The Parent Entity is not required to submit a CbC report.
• The Parent Entity's jurisdiction has no agreement with the Indonesian Government on a tax information exchange. As discussed below, a qualifying competent authority agreement (QCAA) is required and the standard bilateral tax treaty information exchange language is insufficient for CbC reporting purposes.
• There is an agreement with the Indonesian Government, but the CbC report could not be obtained by the Indonesian Government from the respective country or jurisdiction.

Where local filing is required, PER-29 permits the foreign Parent Entity to nominate one of the Indonesian group entities to file the CbC report on behalf of all Indonesian entities.

Under PER-29, the foreign Parent Entity of the group may nominate another foreign entity to file the CbC report in substitution for (as Surrogate of) the foreign Parent Entity. The Indonesian subsidiary will be relieved of the local filing obligation if:

• The Indonesian taxpayer files the required Notification, nominating the Surrogate entity in the required form; and
• The jurisdiction in which the Surrogate is domiciled:
  • Requires the submission of CbC reports; and
  • Has a QCAA with Indonesia and CbC reports can be obtained by the Indonesian Government from that Partner Jurisdiction.

Foreign Parent entities in jurisdictions that do not yet have appropriate QCAA arrangements with Indonesia can explore surrogate filing in jurisdictions which do, in order to relieve local Indonesian filing requirements.

QCAAs

A QCAA is defined as an agreement between the authorities of the Indonesian Government and the Partner Country or Partner Jurisdiction which requires the automatic exchange of CbC reports. This would appear to cover relationships under the Multilateral Competent Authority Agreement (MCAA) as well as any specific CbC reporting bilateral treaty arrangements and appears consistent with the OECD approach.

The regulation states that, when implementing the CbC report submission obligations for Indonesian entities with foreign Parent Entities, the DGT will issue a Partner Country or Partner Jurisdiction list where there is:

• An International Agreement
• A QCAA
• A QCAA in place but where CbC reports could not be obtained

To date, the list has not been released. PER-29 states that the Indonesian entity would have three months to file the CbC report following the DGT's issuance of the Parent Entity jurisdiction list to cover the jurisdictions where CbC reports cannot be obtained.

At present, there is some uncertainty as to the date at which a QCAA needs to be in place to remove the Indonesian local filing obligation.

Notification requirements and new time limits for Fiscal Years

PER-29 introduces a Notification requirement for Indonesian taxpayers that are members of a group covered by the CbC reporting requirements. Those Indonesian taxpayers must file a Notification form, advising the DGT as to the Parent or Surrogate filing the CbC report for the group.

The CbC report for Indonesian Parent Entities requires an additional "Working Paper" table to be filed, while foreign parented groups are exempted from this requirement.

The Notification and CbC reports for FY2016 are due 16 months after the year end, i.e., 30 April 2018 for a calendar year filer. However, for FY2017 and thereafter, filing for both documents will be due 12 months after the year-end.

Actions for multinational enterprises with Indonesian subsidiaries or branches

• Determine whether the group is required to prepare a CbC report under the criteria contained in PER-29.
• Determine whether the existing parent entity CbC report filing in the parent's jurisdiction will remove an Indonesian filing requirement. In cases where the QCAA is not in place or is not yet active, it appears the foreign parent's filing will not relieve the Indonesian obligations.
• Consider nominating another group member as a Surrogate in a jurisdiction where there is a QCAA in place.
• In the absence of a sufficient Parent or Surrogate filing, prepare the local CbC report for filing in Indonesia.

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ENDNOTES

1. The official date of the issuance is not confirmed but it was uploaded to the DGT's website on 15 January 2018.

2. The term includes all entities, branches and permanent establishments that have special relationships under the Indonesian Income Tax Law.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Purwantono, Sarwoko & Sandjaja Consult, Jakarta

• Peter Mitchell
  peter.mitchell@id.ey.com
• Jonathon McCarthy
  jonathon.mccarthy@id.ey.com
• Sui Fun Chai
  chai.sui.fun@id.ey.com
• Peter Ng
  peter.ng@id.ey.com

Ernst & Young LLP, Indonesia Tax Desk, New York

• Ihsan Muttaqien
  ihsan.muttaqien1@ey.com

Ernst & Young LLP, Asia Pacific Business Group, New York

• Chris Finnerty
  chris.finnerty@ey.com
• Kaz Parsch
  kazuyo.parsch@ey.com
• Bee-Khun Yap
  bee-khun.yap@ey.com

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ATTACHMENT

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