Indonesia to Officially Implement Global Minimum Tax Starting 1 January 2025
JAKARTA. The government has officially implemented the Global Minimum Tax provisions of 15%, also known as the Global Anti-Base Erosion (GLoBE) Rules, effective January 1, 2025, as stipulated in Ministry of Finance Regulation (PMK) Number 136 of 2024.
This regulation follows the global agreement established by the OECD/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS), of which Indonesia is a member.
The aim is to close the loopholes enabling tax avoidance practices by multinational companies through profit shifting to certain countries or jurisdictions.
Under this provision, business entities, including companies and permanent establishments (PEs) that are part of a multinational enterprise (MNE) group with a consolidated gross revenue of EUR 750 million per year in at least two of the four tax years prior to testing, are subject to these rules.
Read: Tax Holiday Update: Extended Registration, Global Minimum Tax Clause Regulated
The imposition of the global minimum tax is based on the provisions of the Income Inclusion Rules (IIR), Undertaxed Payment Rules (UTPR), and Domestic Minimum Top-up Tax (DMTT).
IIR is an additional tax applied to the parent entity if other entities within the group pay taxes below the minimum rate. Meanwhile, UTPR is implemented by a country if the country where the parent entity is located does not apply the IIR. Lastly, DMTT is a domestic top-up tax applied to entities paying taxes below 15%.
Excluded Entities
However, these provisions do not apply to government institutions, non-profit organizations, pension funds, and certain investment fund entities.
The pension fund entities referred to are those established and operated exclusively for the purpose of investing funds for the benefit of the pension fund or conducting supplementary activities.
GloBE Information Return Requirements
To ensure that entities covered by these provisions fulfill their obligations, this regulation mandates the submission of an Annual GloBE Corporate Income Tax Return or GloBE Information Return (GIR) no later than 15 months after the end of the fiscal year.
The GIR must include at least information on the identities of constituent entities, the structure of the multinational enterprise group, the calculation of the effective tax rate for each country, the additional tax of joint venture group members, and the allocation of additional taxes based on IIR and UTPR for each country/jurisdiction.
In addition, companies are also required to prepare an Annual GloBE Corporate Income Tax Return, an Annual DMTT Corporate Income Tax Return, or an Annual UTPR Corporate Income Tax Return. (ASP/KEN)
