RDJ ADVISORY - Tax and Advocate

Arbitration in Indonesia: A Framework for Efficient Dispute Resolution Arbitration in Indonesia is governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution, providing a comprehensive legal framework for resolving disputes outside the court system through independent arbitrators. It is commonly employed in commercial disputes, including business contracts, construction projects, and international trade agreements. One of arbitration's key advantages is its private and binding nature, with arbitral awards considered final and not subject to appeal except in limited procedural circumstances. Prominent institutions like the Indonesian National Board of Arbitration (BANI) offer professional services and facilities for parties opting for arbitration as their preferred dispute resolution mechanism. However, arbitration in Indonesia must adhere to established legal principles. For instance, an arbitration clause must be explicitly stipulated in the contract to bind the parties effectively. Furthermore, arbitral awards must be registered with the relevant district court to be enforceable. For disputes involving international elements, Indonesia's status as a signatory to the 1958 New York Convention allows for the recognition and enforcement of foreign arbitral awards within its jurisdiction, subject to certain procedures. As such, arbitration in Indonesia serves as an effective and efficient solution for businesses, provided that the process aligns with the applicable regulations. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #BANI

Competition Law: Promoting Fair Business Practices Competition law aims to establish a fair business environment by preventing anti-competitive practices such as monopolies, cartels, and abuse of dominant market positions. In Indonesia, this is governed by Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition, which prohibits agreements on price fixing, market allocation, and production control that harm consumers. The law seeks to foster healthy competition, thereby encouraging innovation, efficiency, and greater choices for consumers. The enforcement of competition law in Indonesia is overseen by the Indonesia Competition Commission (Komisi Pengawas Persaingan Usaha or KPPU), which has the authority to investigate violations and impose administrative sanctions. Globally, frameworks like the Digital Markets Act (DMA) in the European Union offer valuable insights into regulating competition in the digital economy. In Indonesia, aligning regulations with technological advancements remains a challenge, particularly in addressing the dominance of major digital platforms. Effective competition law enforcement is essential for maintaining market fairness and driving sustainable economic growth. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #Law

Tax and Legal Update | No. 42/2024 Highlights of PMK-80/2024 on Procedures for Granting Value-Added Tax (PPN), Luxury Goods Sales Tax (PPnBM) and Income Tax (PPh) Facilities in the Implementation of Government Projects Financed by Grants or Foreign Loans, Issued on 14 October 2024 and effective starting 18 October 2024 For further information please contact: RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #VATFacility

The Indonesian Ministry of Finance has issued Regulation No. 172/2023, which updates the guidelines for transfer pricing in the country. This regulation consolidates existing rules to ensure compliance with the arm's length principle and business norms in related-party transactions. It also introduces detailed requirements for transfer pricing documentation, transfer price adjustments, and the procedures for resolving disputes through Mutual Agreement Procedures (MAP) or Advance Pricing Agreements (APA). The updated regulation reflects Indonesia’s commitment to aligning with global best practices while addressing local tax challenges. These revised guidelines aim to provide greater clarity and legal certainty for multinational corporations conducting cross-border transactions. By integrating these measures, the Ministry seeks to enhance tax compliance, minimize disputes, and promote a fair taxation system. With the implementation of PMK-172/2023, businesses operating in Indonesia are encouraged to review their transfer pricing policies to ensure adherence to the new standards. This will help mitigate compliance risks and strengthen their positions during audits or dispute resolution processes. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #TransferPricing

The Constitutional Court of Indonesia (Mahkamah Konstitusi) has issued Decision Number 26/PUU-XXI/2023, transferring the supervision of organizational, administrative, and financial aspects of the Tax Court from the Ministry of Finance to the Supreme Court. This transition aims to enhance the independence and integrity of the Tax Court, ensuring a more impartial approach to resolving tax disputes. The phased transition is set to be completed no later than 31 December 2026, signifying a significant restructuring in the governance of tax dispute resolution in Indonesia. This decision underscores the importance of maintaining an independent judiciary, particularly in the realm of taxation, where neutrality and objectivity are paramount. By placing the Tax Court under the Supreme Court, the move seeks to eliminate potential conflicts of interest inherent in the previous arrangement, where the Ministry of Finance served both as the executor of tax administration and the overseer of tax dispute resolution. Stakeholders, including tax consultants and businesses, are encouraged to adapt to these changes promptly, ensuring compliance and readiness to operate under the new legal framework. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #TaxCourt

OECD Recommends Tax Reform for Increased Revenue The Organisation for Economic Co-operation and Development (OECD) has recommended that Indonesia undertake comprehensive tax reform to boost state revenues instead of relying solely on the planned Value-Added Tax (VAT) increase to 12%. The OECD estimates that a well-designed tax reform could generate additional revenues exceeding IDR 200 trillion annually. The proposed reforms include broadening the tax base, addressing inefficiencies in the current tax system, and enhancing compliance through digitalization and transparency measures. The OECD emphasized that diversifying revenue sources is critical to ensuring fiscal sustainability while maintaining the competitiveness of the Indonesian economy. These recommendations are expected to provide a roadmap for Indonesia to balance its revenue goals with economic growth priorities. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #OECD

Government Prepares Social Assistance to Mitigate the Impact of VAT Increase The government is planning mitigation measures in the form of social assistance (bansos) targeted at middle-income households and vulnerable groups to counter the impact of the proposed increase in Value-Added Tax (VAT) to 12%. This initiative aims to safeguard household purchasing power, particularly for those significantly affected by the fiscal policy adjustment. The Minister of Finance stated that this social assistance will focus on maintaining economic stability while addressing social inequalities during the implementation of the new tax policy. Additionally, the government is exploring subsidy-based assistance schemes for essential goods, such as food and energy, as an additional buffer. These measures are expected not only to mitigate the direct impact of the VAT increase but also to sustain household consumption, a key driver of the national economy. The implementation of the social assistance program will be carefully designed to ensure its effectiveness and prevent excessive strain on the state budget. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #VAT

Global Tax Deal: OECD’s Commitment to Fair Taxation of Multinational Corporations The OECD remains steadfast in its commitment to finalizing the Global Tax Agreement, aiming to address the tax challenges posed by digitalization and globalization. Despite delays and hesitations from major economies, the initiative seeks to reallocate taxing rights for highly profitable multinational corporations, ensuring a fairer distribution among nations. This ambitious agreement is a crucial step toward tackling profit shifting and tax avoidance by large digital companies operating across borders. For businesses, governments, and professionals, it signals a transformative shift in global tax practices, fostering greater transparency and fairness in the international tax landscape. As the deadline approaches, the OECD’s determination underscores the collective importance of equitable taxation in a rapidly evolving global economy. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #OECD

OECD Recommends Lowering Indonesia's PTKP Threshold to Boost Tax Revenue The Organization for Economic Co-operation and Development (OECD) has suggested that Indonesia reduce its threshold for Non-Taxable Income (PTKP) as part of broader efforts to increase the country's tax base and enhance state revenue. Currently, Indonesia's PTKP threshold is considered relatively high compared to other countries in the region, which limits the number of individuals eligible to pay income tax. By lowering this threshold, the OECD believes the government can capture more taxpayers and strengthen the fiscal position without imposing excessive burdens on high-income earners. This recommendation aligns with the OECD's ongoing support for Indonesia's tax reform agenda, which seeks to address challenges such as low tax compliance and a narrow tax base. Implementing such a policy, however, would require careful planning to balance fiscal needs with potential socio-economic impacts, particularly for low-income earners. Policymakers would need to integrate supportive measures, such as targeted subsidies or income relief, to mitigate potential adverse effects on vulnerable groups. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #OECD

Financial Crises: Opportunities for Growth and Transformation While financial crises are often seen as periods of economic turmoil and uncertainty, they also present unique opportunities for growth, innovation, and systemic improvement. These challenging times force businesses, governments, and individuals to reevaluate their strategies, strengthen their financial resilience, and embrace new solutions to navigate the complexities of the evolving economic landscape. Crises often serve as a catalyst for innovation, as organizations adopt advanced technologies, streamline operations, and explore creative ways to address emerging challenges. From a broader perspective, financial crises provide a platform for economic reforms and stronger regulatory frameworks. They highlight weaknesses in the system, encouraging policymakers to implement measures that promote transparency, accountability, and long-term stability. For businesses, these periods can be an opportunity to identify inefficiencies, improve risk management practices, and position themselves for success in the recovery phase. With the right mindset, financial crises can be viewed not just as setbacks but as stepping stones toward a more resilient and sustainable future. RDJ ADVISORY Tax and Advocate Tax, Transfer Pricing and Legal Services www.rdj-advisory.com #RDJAdvisory #TaxandAdvocate #Financial