Constituent Entities Exempted from GloBE Rules under PMK 136/2024

To implement the global minimum tax provisions, the Indonesian government has issued Minister of Finance Regulation (PMK) No. 136 of 2024 (PMK 136/2024).

This regulation is part of an international effort to prevent tax avoidance practices by Multinational Enterprise (MNE) Groups.

However, not all entities within an MNE Group are subject to these rules. Certain constituent entities are exempted from the application of the Global Anti-Base Erosion (GloBE) Rules, which aim to create a fairer and more transparent global tax system.

List of Exempt Entities

Some constituent entities within a Multinational Enterprise (MNE) Group are subject to GloBE Rules. Six types of constituent entities are exempt, namely Government Institutions, International Organizations, Non-Profit Organizations, Pension Funds, Investment Funds as an Ultimate Parent Entity, and Real Estate Investment Vehicles as an Ultimate Parent Entity.

1. Government Institutions

Government institutions exempt from GloBE Rules are entities that do not engage in business or trade and meet the following criteria:

• Established under legislation or fully owned by the national or local government, either directly or indirectly.
• Responsible for performing governmental functions or managing and investing state assets.
• Accountable to the government and required to submit annual reports.
• If dissolved, all assets are transferred to the government, and net income is used solely for government purposes.

2. International Organizations

International organizations exempt from GloBE Rules include intergovernmental organizations, supranational organizations, or entities fully owned by an intergovernmental organization. To qualify for exemption, these organizations must:

• Originate from the government.
• Have an agreement with the host country granting privileges and immunities.
• Have regulations preventing the organization's income from being used for the benefit of parties other than the government.

3. Non-Profit Organizations

Non-profit organizations exempt from GloBE Rules are entities that operate without a profit motive and do not conduct business outside their founding purpose.
These organizations are established exclusively for purposes such as religion, charity, science, arts, culture, sports, education, or other social interests. They may also include business associations, chambers of commerce, labor unions, or organizations promoting social welfare.

Non-profit organizations must meet four additional criteria as stipulated in Article 3, Paragraph (4) of PMK 136/2024.

4. Pension Funds

Pension funds are exempt from GloBE Rules due to their unique characteristics. These entities must primarily operate to manage or provide pension benefits, where the beneficiaries must meet one of the following two conditions:

• Be regulated by the government.
• Have pension benefits guaranteed by national regulations and supported by assets specifically managed to ensure pension obligations remain fulfilled, even if the MNE Group goes bankrupt.

Additionally, pension service entities that manage investments or other activities related to the operations of pension funds within the same group are also included in this category.

5. Investment Funds as an Ultimate Parent Entity

Investment funds exempt from GloBE Rules are entities designed to pool financial and non-financial assets from multiple investors based on established investment policies. These entities must meet five additional criteria as stipulated in Article 3, Paragraph (7) of PMK 136/2024.

6. Real Estate Investment Vehicles as an Ultimate Parent Entity

Real estate investment vehicles classified as an Ultimate Parent Entity are also exempt from GloBE Rules. These entities are taxed once at the entity level or at the stakeholder level with a maximum deferral of one year. Another requirement is that the entity must have the majority of its assets in immovable property and have widely distributed ownership.

Other Exempt Entities

In addition to the six types of entities mentioned above, PMK 136/2024 also exempts entities that are at least 95% owned by an exempt entity (excluding pension services). Furthermore, these entities operate to manage assets or make investments for the benefit of the exempt entity.

Another criterion is that the entity only conducts ancillary activities supporting the operations of an exempt entity or entities, is at least 85% owned by one of the six exempt entity types (excluding pension services), and its income consists of exempt dividends or equity gains/losses that are excluded from the GloBE profit or loss calculation.

The percentage of ownership in an entity is calculated based on the most recent value change.

For example:

PT A, a newly established entity, issues 200 common shares (EUR 1.00 per share) and 100 preferred shares (EUR 2.00 per share). Then, A Co, a tax resident of Country X and an exempt entity, owns 200 common shares and 90 preferred shares. The total value of PT A is 400, and A Co owns 95% (380/400) of PT A’s value. The ownership value calculation table for an entity owned by an exempt entity is presented as follows:

	Nilai
Ownership Value (200 lembar saham biasa x EUR1,00) + (90 preferred shares x EUR2,00)	380
Entity Value (200 common shares x EUR1,00) + (100 preferred shares x EUR2,00)	400
Ownership Percentage (380 / 400 x 100%)	95%

Based on the table above, PT A is exempt from GloBE Rules because 95% of its ownership interest is directly held by one of the six exempt entity types.

Exempt entities are still included in the MNE Group’s total revenue calculation. Additionally, Reporting Constituent Entities have the option to elect not to treat an entity as an exempt entity by making a Five-Year Election, which is exercised by submitting the election through the GIR (GloBE Information Return) by the Reporting Constituent Entity.