2012-04-23-KPMG_China-香港和印度尼西亚达成的全面性避免双重征税协定生效_3页_101kb

Hong Kong-Indonesia DTA Analysis Summary

Key Information

1. Agreement Date & Effectiveness:

   • Signed on March 23, 2010.
   • Entered into force on March 28, 2012.
   • Applicable for income years beginning on or after April 1, 2013.

2. Reduced Withholding Tax Rates:

   • Dividends:
     • 20% standard rate reduced to 5% if the recipient holds at least 25% of the paying company's capital.
   • Interest:
     • 20% standard rate reduced to 0% for specific recipients, including the HK SAR government, HKMA, statutory bodies, or financial institutions mutually agreed upon by tax authorities.
   • Royalties:
     • 20% standard rate reduced to 5%.

3. Other Benefits:

   • Capital Gains: Full exemption from withholding tax on private share transfers (subject to limitations).
   • Competition Advantage: More favorable than Indonesia's DTAs with Singapore or the Netherlands (e.g., 5% vs. 10% dividends; 5% vs. 15% royalties).

Important Considerations

• Substance Requirement: Companies must ensure investments include 'substance' to avoid denial of benefits.
• Uncertainties Regarding Dividends:
  • The reduced rates may not apply if dividends are not subject to tax in Hong Kong.
  • The HK Inland Revenue Department is seeking clarification with Indonesian authorities on this issue.

Conclusion

The DTA offers significant tax savings and enhances Hong Kong's attractiveness for investments into Indonesia, but its full benefits depend on resolving the dividend applicability issue.