This regulation is enacted to implement the provisions of Article 50 paragraph (2) of Government Regulation Number 55 of 2022 concerning Adjustments to Regulations in the Field of Income Tax, and therefore, it is necessary to establish a Minister of Finance Regulation regarding the Procedures for the Implementation of Double Taxation Avoidance Agreements.
The following are the main provisions of Minister of Finance Regulation Number 112 of 2025:
General Provisions
- In the event that there is a Double Taxation Avoidance Agreement (“DTA”) between Indonesia and a DTA Partner, the imposition of income tax on:
- Domestic Taxpayers (“DTP”) who earn income sourced from outside Indonesia;
- Non-Resident Taxpayers (“Non-Resident”) who earn income sourced from Indonesia and are residents of a DTA Partner for tax purposes, evidenced by a DGT Form certified by the Competent Authority.
Shall be carried out in accordance with the provisions of the applicable DTA.
- The benefits of implementing a DTA may include:
- A lower withholding or collection tax rate than the rate stipulated in the Income Tax Law;
- Exclusive taxation in the country of residence;
- Exemption from income tax imposition in Indonesia; or
- A determination period for a permanent establishment that differs from that stipulated in the Income Tax Law.
Procedures for the Implementation of Double Taxation Avoidance Agreements by Domestic Taxpayers
- The Director General of Taxes (DGT) is authorized to:
- Issue a Domestic Taxpayer Certificate of Domicile (CoD/SKD) electronically and automatically through the core tax administration system;
- Conduct a review of applications for the approval of Special Forms, which must meet the following requirements:
- Accompanied by the Special Form for which approval is requested; and
- Signed by the Domestic Taxpayer, their representative, or their authorized proxy.
- Approve the Form or reject the application for approval of the Special Form in the context of implementing a DTA in the DTA Partner that is the source of income; the approval or issuance of a rejection letter shall be carried out no later than 10 (ten) calendar days from the date the complete application for approval of the Special Form is received.
Procedures for the Implementation of Double Taxation Avoidance Agreements by Non-Resident Taxpayers
- Non-Resident Taxpayers submit a DGT Form stating that the Non-Resident has fulfilled the requirements that:
- Is not a domestic taxpayer of Indonesia;
- Is a resident of a DTA Partner for tax purposes; and
- Does not engage in abuse of the DTA, meaning the Non-Resident includes:
- Has economic substance in the establishment of the entity or in the execution of transactions;
- Has a legal form that corresponds to the economic substance in the establishment of the entity or in the execution of transactions;
- Conducts business activities managed by a management team with sufficient authority to carry out the transactions;
- Owns fixed and non-fixed assets that are sufficient and adequate to conduct business activities in the DTA Partner country, excluding assets that generate income from Indonesia;
- Employs a sufficient number of personnel with expertise and skills appropriate to the business field;
- Engages in active business activities beyond merely receiving income in the form of dividends, interest, and/or royalties sourced from Indonesia;
- Conducts transactions that do not have, directly or indirectly, the principal purpose of obtaining DTA benefits;
- Is the party that genuinely receives the benefit of the income.
- After reviewing the DGT Form, the Withholding or Collecting Party submits the information in the DGT Form and uploads the DGT Form electronically through the taxpayer portal, receives the DGT Form receipt via the taxpayer portal, provides the DGT Form receipt to the Non-Resident, and withholds or collects Income Tax in accordance with the provisions of the DTA.
Implementation of Provisions for the Prevention of Abuse of Double Taxation Avoidance Agreements
- In order to prevent the practice of DTA abuse, the DGT is authorized to examine compliance with the withholding or collection of tax. The provisions for preventing DTA abuse carried out under a DTA concern:
- The party that genuinely receives the benefit of the income;
- The minimum shareholding percentage and period required to apply the reduced withholding or collection tax rate on dividends;
- The period and fulfillment of the immovable property threshold as a proportion of total assets to determine the right to tax gains from the transfer of shares or rights in an entity;
- Prevention of avoidance in the determination of a permanent establishment;
- Limitation on DTA beneficiaries; and/or
- The principal purpose test.
In the event that, based on the compliance examination, the withholding or collecting party does not meet the provisions, the DGT shall determine the amount of tax payable in accordance with the provisions of the Income Tax Law.
Minister of Finance Regulation Number 112 of 2025 was enacted on 30 December 2025 and came into effect on 31 December 2025 upon its promulgation.
For Tax Service assistance, please contact:
Rani Widianti
T. (+6221) 2222-0200
Alvina Oktavia
T. (+6221) 2222-0200
E. alvina.oktavia@shinewing.id
