The implementation of the Global Minimum Tax through PMK 136 of 2024 marks a fundamental shift in Indonesia’s international tax regime. The regulation adopts the Global Anti-Base Erosion Rules (GloBE) as a response to profit shifting and jurisdictional arbitrage conducted by multinational enterprises. A new assessment concept is introduced by reassessing the effective tax rate on a consolidated, cross-border basis, regardless of each entity’s domestic tax compliance. The QDMTT, IIR, and UTPR mechanisms function as instruments to collect additional taxes when the effective tax rate falls below 15 percent. The calculation is performed at the jurisdictional level by considering GloBE income and substance-based exclusions (SBIE). Reporting obligations via the GloBE Information Return are subject to strict deadlines, with a first-year relaxation period. In practice, tax consultants play a crucial role in helping companies assess compliance, simulate financial impacts, and mitigate exposure to top-up taxes. Compliance with this new regime enhances global transparency while strengthening governance and investment certainty.
Analysis of MoF Number 136 Year 2024 within the Framework of Global Anti-Base Erosion Rules (GloBE)
In line with the digital transformation of tax administration discussed in the previous article—ranging from the implementation of the Core Tax Administration System (CTAS), compliance by Individual Taxpayers, Annual Corporate Tax Return reporting, to the preparation of Transfer Pricing Documentation—developments in tax regulations are no longer limited to the domestic level but also occur at the global level. One of the most significant international tax reforms is the implementation of the Global Minimum Tax, which is part of a global initiative to create a more equitable and transparent taxation system amid increasing cross-border capital mobility.
The Global Minimum Tax was introduced within the framework of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) in response to base erosion and profit shifting practices by multinational companies. This policy aims to ensure that multinational corporate groups pay taxes at a minimum effective rate in each jurisdiction where they operate, thereby reducing the incentive to shift profits to countries with low tax rates.
Indonesia adopted these provisions through Minister of Finance Regulation No. 136 Year 2024, which regulates the implementation of the Global Anti-Base Erosion Rules (GloBE) in the domestic taxation regime and will come into effect on January 1, 2025. This regulation is a concrete step in enforcing global fiscal justice by applying a Global Minimum Tax to multinational companies operating across jurisdictions.
The Essence of the “New Assessment” in the Global Minimum Tax
One of the most fundamental characteristics of the Global Minimum Tax is the emergence of a concept that can be understood as a form of new assessment in international taxation. Unlike the conventional corporate income tax system, which is based on the separate entity principle and jurisdiction-based taxation authority, GloBE introduces a complementary approach based on consolidated groups.
In this approach, the focus is no longer solely on whether an entity has fulfilled its tax obligations in accordance with the domestic laws of each country. Instead, a global reassessment is conducted to determine whether, in aggregate, the effective tax rate in a jurisdiction has reached the internationally agreed minimum threshold.
Consequently, the Global Minimum Tax creates an additional layer of assessment regarding tax liabilities that have already been calculated under domestic regulations. If an entity has legally paid the taxes in compliance with national provisions, yet yields an effective tax rate of less than 15 percent based on the GloBE calculations, the resulting shortfall may still be subject to a top-up tax through the mechanisms of the Qualified Domestic Minimum Top-Up Tax (QDMTT), the Income Inclusion Rule (IIR), or the Undertaxed Payment Rule (UTPR).
The essence of the new assessment lies in the fact that formal compliance with domestic tax laws is no longer the sole final parameter. There now exists a global standard that conducts a reassessment on a consolidated basis, thereby creating a more integrated cross-jurisdictional fiscal oversight system.
This concept simultaneously shifts the dynamics of tax planning. Strategies that were previously legitimate and effective in capitalizing on tax incentives or cross-border rate differentials must now be re-evaluated against the global minimum rate standard. In this context, the Global Minimum Tax is not merely an additional revenue-collection instrument, but rather a corrective mechanism for an international tax structure that has long been considered overly fragmented.
The Global Anti-Base Erosion (GloBE) Rules
GloBE aims to ensure that multinational corporate groups with a consolidated gross turnover of at least €750 million are subject to a minimum effective tax rate of 15 percent in each jurisdiction where they operate. This threshold is determined based on the consolidated financial statements of the ultimate parent entity in a specific period prior to the tax year of application.
The objectives of this policy encompass the prevention of profit-shifting practices to low-tax jurisdictions, the creation of a level playing field in global investment competition, the protection of domestic tax bases, and the enhancement of fairness within the international tax system through the imposition of taxation that aligns more closely with the locations of economic activities and value creation.
Subjects and Exemptions
The GloBE Rules apply to constituent entities within a multinational enterprise group that meets the consolidated gross revenue threshold. Nevertheless, exemptions exist for certain entities, such as governmental entities, international organizations, non-profit organizations, pension funds, specific investment funds functioning as an ultimate parent entity, and real estate investment fund entity that are ultimate parent entities.
Although exempted from the imposition of the top-up tax, these entities are still considered when determining whether the group’s consolidated gross revenue threshold has been met. However, in calculating the effective tax rate per jurisdiction, the excluded entities are not included in the calculation base.
QDMTT, IIR, and UTPR Mechanisms
The GloBE structure is built upon three main mechanisms. The Qualified Domestic Minimum Top-Up Tax allows a country to levy an additional domestic tax if the effective tax rate in its jurisdiction falls below the minimum threshold. The Income Inclusion Rule grants the parent entity the authority to impose a top-up tax on subsidiaries in other jurisdictions that are subject to low taxation. The Undertaxed Payment Rule serves as a residual mechanism if the tax shortfall has not been fully collected through the two preceding instruments. The combination of these three instruments creates a multi-layered system that minimizes the possibility of tax avoidance based on jurisdictional arbitrage.
The Calculation of the Effective Tax Rate and the Role of SBIE
The effective tax rate is calculated on a jurisdictional basis by comparing the adjusted covered taxes against the GloBE income. GloBE income refers to the financial accounting net income or loss used in the preparation of consolidated financial statements, subject to certain adjustments in accordance with GloBE standards.
Prior to determining the amount of the top-up tax, the Substance Based Income Exclusion (SBIE) is calculated, which provides a reduction based on payroll costs and the carrying value of tangible assets. This provision reflects the recognition of the existence of real economic activities, ensuring that the GloBE approach is not entirely mechanical, but rather continues to take business substance into consideration.
Deadline for Calculation and Reporting
An equally important aspect in the implementation of the Global Minimum Tax is certainty regarding the deadlines for calculation and reporting. Under the GloBE framework, reporting obligations are fulfilled through the submission of a GloBE Information Return, which contains information on the calculation of effective tax rates and additional taxes in each jurisdiction where a multinational enterprise group operates.
In general, the GloBE Information Return must be submitted no later than fifteen months after the end of the relevant Tax Year. However, for the first Tax Year of GloBE implementation, a relaxation in the form of an extension of the deadline to eighteen months from the end of the Tax Year is granted. This relaxation is intended as a transition period to provide sufficient time for multinational corporate groups to adjust their systems, consolidate data across entities, and harmonize reporting processes.
In practical implementation, the role of tax consultants is crucial in assisting multinational companies in assessing their level of compliance with Global Minimum Tax provisions. The process of calculating the effective tax rate based on GloBE requires cross-jurisdictional data integration, consolidation of financial statements, and a thorough understanding of the complex mechanisms of QDMTT, IIR, and UTPR.
Tax consultants also play a role in ensuring that companies have accurately identified potential additional tax exposures and simulated the impact of the Global Minimum Tax on the group’s tax structure. Through professional assistance, companies can mitigate the risk of non-compliance while ensuring that their reporting systems are ready to fulfil their GloBE Information Return obligations accurately and on time. SW Tax Consulting’s international tax team takes on this role to assist multinational company investors in Indonesia.
Compliance with Global Minimum Tax provisions is ultimately not only a regulatory obligation, but also a good corporate governance strategy. By meeting applicable global tax standards, multinational companies can enhance their credibility, minimize the risk of cross-jurisdictional disputes, and create business certainty that supports the sustainability of investment and business development in the future.
