Knowing What The Indonesian-Singapore Tax Treaty Is: Definition And Provisions

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YOGYAKARTA Do you know what the Indonesian-Singapore tax treatment is? This term refers to a bilateral agreement between the Indonesian and Singaporean governments to avoid the imposition of double taxes.

This agreement has been in effect since 1992 and is an effort by both countries to prevent tax evasion, expand tax bases, and encourage increased bilateral investment.

To better understand it, see an explanation of what the Indonesian-Singapore tax treatment is in the article below.

In the Indonesian tax system, the term tax treatment is known as the Double Tax Avoidance Approval (P3B). This is an agreement between the Government of Indonesia and partner governments or partner jurisdictions to prevent the imposition of multiple taxes and tax imposition, quoted from the Ministry of Finance's JDIH website.

Thus, the Indonesian-Singapore tax treatment can be interpreted as an agreement between the Indonesian government and Singapore in the field of taxation to prevent double taxes (tax impositions more than once) to prevent tax imposition.

Indonesia and Singapore first signed a P3B or tax treatment agreement in 1992. The provisions in the agreement apply to all types of taxes imposed on taxpayer income in one of the two countries of the agreement.

On February 4, 2020, the two countries again signed a revised agreement related to the abolition of double taxes and the prevention of tax evasion, which officially took effect on July 23, 2021.

The governments of Indonesia and Singapore believe that this update will encourage an increase in bilateral trade between the two countries.

According to the Ministry of Finance's Fiscal page, in the latest tax treatment, the Indonesian and Singaporean governments agreed to change eight of the 10 P3B clauses, including:

With the new agreement in P3B Indonesia 'Singapore, especially regarding the reduction in royalty rates and profit tax branches, it is hoped that the flow of investment from Singapore to Indonesia will increase. On the other hand, this agreement also helps the Indonesian government in strengthening efforts to close gaps in tax evasion and management more effectively.

Overall, P3B as a result of this amendment remains in line with similar agreements between Indonesia and other partner countries and supports government policies in the tax omnibus design to attract more investment. This updated agreement will later replace the previous P3B.

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