The profits of a partnership are taxed at the partnership level. The flow-through income is exempt at the partner level.

Trusts
Trusts (including unit trusts) do not exist under Indonesian law. Non-profit organizations will generally be established in the form of a foundation (Yayasan). A foundation is subject to the normal taxation rules and tax is payable on business activities, subject to limited exceptions.

Mutual funds
Investment funds may be established in the form of a limited liability company (closed end fund) or a collective investment contract (open-ended fund or mutual fund).

The tax treatment of a mutual fund is similar to the tax treatment for a partnership. Special rules apply with regard to bond interest earned by certain mutual funds but these will be phased out by 2014.

Withholding taxes – Transactions between Residents
Withholding tax is imposed on various amounts payable either by a resident corporation, a PE of a foreign company or certain individuals appointed as withholding tax collectors, to other residents. In most cases, the withholding liability arises when the expense is incurred, not when the payment is made.

The regulations are numerous and the following is a summary of the main types of transactions subject to withholding tax:

Amounts payable to resident individuals:

• Compensation for work or services (including pensions)
• Dividends : 10 percent (final)
• Royalties – 15 percent
• Interest
  -bank interest: 20 percent (withholding tax is final on interest from local banks)
  -bonds and certain other securities:15 percent (final)
  -other interest: 15 percent
• Rental and other income relating to the use of real property – 10 percent (final)
• Prizes and awards – lotteries: 25 percent.

Amounts payable to resident companies and PEs: ● Royalties – 15 percent

• Interest
  – bank interest: 20 percent (withholding tax is final on interest from local banks)
  – bonds and certain other securities:15 percent (final)
  – other interest: 15 percent
• Rental and other income relating to the use of real property – 10 percent (final)
• Rental of equipment and vehicles: 2 percent
• Services: 2 percent (includes technical services, management services, other services)
• Amounts payable to local banks are exempt from withholding tax
• Dividends – 15 percent unless the following conditions are satisfied for which the dividend should then be exempt from withholding tax:
  – The dividend is sourced from retained earnings
  – The shareholder company owns at least 25 percent of paid up capital

The purchase of goods is generally not subject to withholding tax, except for:

• Distribution by manufacturers or other agencies of various types of goods, including cement, paper, steel, sugar, wheat flour and certain types of fuel and lubricants
• Private aircraft with sales value of more than IDR 20 billion, yachts with sales value of more than IDR 10 billion, land and buildings with sales value of more than IDR 10 billion and the building is more than 500M²
• Imported goods which are subject to withholding tax at the rate of two and a half percent if the importer has an importer identification number, or seven and a half percent if the importer does not have an importer identification number
• Goods paid for by the Government are subject to a one and a half percent withholding tax.

Disposal of Property
Tax is also imposed at source on proceeds of disposal of property:

• Shares listed on the Indonesian stock exchange – 0.1 percent (final)
• Founders shares are subject to an additional 0.5 percent (final) on listing
• Transfer of title of land and buildings – five percent income tax (final) and five percent title transfer tax (duty)
• Sale of unlisted shares held by a foreign shareholder in an Indonesian company – 5 percent of proceeds (final), unless protected by DTA.

Exemption
Where the withholding tax is a prepayment of the recipient’s income tax liability, the recipient may be able to apply for an exemption from withholding in certain circumstances. In most cases, the withholding liability arises when the expense is incurred, not when the payment is made.