Regulation Update
Sri Mulyani Amends the Income Tax Provisions Related to International Agreements

Tuesday, 19 January 2021

Sri Mulyani Amends the Income Tax Provisions Related to International Agreements

The Minister of Finance Sri Mulyani amended the provisions regarding the treatment of Income Tax (PPh) contained in the international agreements. 

The amendments include, the determination of tax treatment on the basis of international agreements is now carried out through the issuance of a Decree of Minister of Finance (KMK).

This is confirmed in the Minister of Finance Regulation (PMK) Number 236 / PMK.010 / 2020 which took effect on 30 December 2020.

The regulation is an amendment to PMK Number 202 / PMK.010 / 2017, which was previously used as the basis for determining the income tax treatment in international agreements.

Read: Questioning the Inconsistency of Transfer Pricing Policy

With the enactment of the new rules, the list of international agreements attached to PMK 202 of 2017 is still valid until the issuance of the KMK.

The amendment is intended to clarify the tax treatment regulated in international agreements and also provides legal certainty.

Particularly if the provisions of income tax contained in international agreements are different from the Income Tax Law. 

Agreement Criteria

Any tax treatment under an international agreement must meet comply with several conditions in order to be determined.

Certain conditions must be fulfilled including, first, international agreements concluded according to the Income Tax Law. 

Second, in the agreement, there is no reservation or declaration regarding the provisions of income tax treatment.

Third, the agreement has been ratified in the form of ratification, accession, acceptance, and/or approval by law.

Read: Indonesia Ratifies Changes in ASEAN Trade in Goods Agreement

However, such ratification is unnecessary if the agreement does not require ratification and contains technical material for a master agreement.



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