Government Issues More Detailed Tax Treaty Provisions under PMK No. 112 of 2025

Minister of Finance Purbaya Yudhi Sadewa has issued a specific regulation providing more detailed provisions on the implementation of double taxation avoidance agreements or tax treaties (P3B).

P3B, more commonly known as tax treaties, are agreements concluded between the Government of Indonesia and a partner jurisdiction or country. These agreements may be entered into on a bilateral or multilateral basis, with the objective of preventing double taxation and tax avoidance.

The new regulation governing tax treaty provisions is set out in Minister of Finance Regulation (PMK) No. 112 of 2025. This regulation, which was issued and came into force upon promulgation on 30 December 2025, is a derivative regulation of Government Regulation (PP) No. 55 of 2022.

In general, the regulation governs the imposition of Income Tax on Foreign Taxpayers (WPLN) earning income from Indonesia, as well as Domestic Taxpayers (WPDN) earning income from abroad.

To avoid double taxation, the applicable withholding tax must be determined based on the tax treaty concluded between Indonesia and the partner country of the WPLN, or the partner country where the WPDN earns the income.

There are several substantive changes between the previous and the new tax treaty provisions. Previously, the technical rules on the implementation of tax treaties for domestic taxpayers were regulated under the Director General of Taxes Regulation No. PER-28/PJ/2018.

Meanwhile, the tax treaty provisions applicable to foreign taxpayers were previously governed by the Director General of Taxes Regulation No. PER-25/PJ/2018.

Substantive Changes to the Tax Treaty Provisions

Below are several substantive changes to the tax treaty provisions introduced under PMK No. 112 of 2025 compared with the previous regulations.

1. Change in Terminology from SKD SPDN to SKD WPDN

Under PER-28/PJ/2018, domestic taxpayers eligible to apply tax treaty benefits were required to submit an application for a Certificate of Domicile as a Domestic Tax Subject (SKD SPDN). Under the new regulation, the terminology has been changed to Certificate of Domicile as a Domestic Taxpayer (SKD WPDN).

The Certificate of Domicile (SKD) is a document issued by the tax authority of the jurisdiction in which the taxpayer resides, confirming that the taxpayer is registered in that jurisdiction.

2. Changes to the Mechanism and Channels for SKD WPDN Applications

In addition to the change in terminology, the government has revised the mechanism for submitting SKD WPDN applications. Previously, applications could be submitted through the DGT website. Under the new regulation, applications may be submitted through the taxpayer portal and the contact center.

Not only have the submission channels changed, but the required information has also been expanded. Previously, the minimum required information included the name of the counterparty, the counterparty’s taxpayer identification number or address, and an explanation of the income received from the counterparty.

Under the new regulation, an additional item of information is required, namely an email address.

3. Inclusion of Tax Treaty Partner Name in the Special Form

The government has also amended the provisions concerning the special form, which is issued by the tax authority of the tax treaty partner. This form is used to request confirmation of a taxpayer’s status as an Indonesian domestic taxpayer.

Under the previous regulation, the special form had to be prepared in English and include information such as the taxpayer’s name, Tax Identification Number, and the relevant tax year or part of the tax year. The form also required the taxpayer’s domestic tax status to be stated and included a validation column endorsed by the Head of the Tax Office at the taxpayer’s domicile.

Under the new regulation, an additional mandatory item is required in the special form, namely the name of the tax treaty partner jurisdiction or country.

4. Extension of the Approval Period for the Special Form

Under the new regulation, the government has extended the time limit for approving or rejecting applications for the special form. Previously, the approval period was limited to a maximum of 5 days from the date the application was received by the DGT.

Under the new regulation, this period has been extended to a maximum of 10 days from the date the complete application is received.

5. Changes to the DGT Form for Foreign Taxpayers

Updates have also been made to the DGT Form, which is the document used to demonstrate that a foreign taxpayer is a resident of a particular country. The DGT Form also serves as a Certificate of Domicile for Foreign Taxpayers (SKD WPLN).

The changes include the letterhead and title of the form. Previously, the title read “CERTIFICATE OF DOMICILE OF NON RESIDENT FOR INDONESIA WITHHOLDING TAX.” Under the new format, the title has been simplified to “DGT FORM.”

In addition, the old form used the term “Double Taxation Convention,” whereas the new DGT Form uses “Double Taxation Agreement.”

The previous DGT Form consisted of seven sections, while the new form consists of six sections, namely:

• Income Recipient
• Certification by the competent authority or authorized tax office of the country of residence
• Declaration by the income recipient (banking institution and pension fund)
• To be completed if the income recipient is an individual
• To be completed if the income recipient is a non-individual
• Declaration by the income recipient

The section “To be completed if the income recipient is non-individual and the income earned is/are dividend, interest, and/or royalty” in the previous format has now been merged into the section “To be completed if the income recipient is non-individual.”

6. Updated Approach to Beneficial Ownership

Under PMK No. 112 of 2025, beneficial ownership is no longer a formal requirement for foreign taxpayers to obtain tax treaty benefits. Instead, beneficial ownership is used as one of the tools to assess whether a foreign taxpayer is abusing tax treaty benefits.

A beneficial owner is defined as the party that ultimately receives the actual economic benefit of the income.

This change in approach is significant, as it positions beneficial ownership not as a formal eligibility requirement, but rather as a substantive criterion in evaluating the proper use of tax treaty benefits.

Benefits of Tax Treaties (P3B) and the Effective Period of the New Regulation

In general, there are four key benefits that taxpayers may obtain from P3B or tax treaties. First, taxpayers may benefit from lower withholding or collection rates of Income Tax compared to the rates stipulated under the Income Tax Law.

Second, taxpayers may be subject to exclusive taxation in their country of residence. Third, certain income may be exempt from Income Tax in Indonesia. Fourth, tax treaties provide a different threshold period for determining a Permanent Establishment (PE) compared to the provisions under the Income Tax Law.

For information, the issuance of Minister of Finance Regulation (PMK) No. 112 of 2025 constitutes the implementation of Article 50 of Government Regulation (PP) No. 55 of 2022.

Furthermore, all provisions stipulated therein have been effective since the regulation was promulgated on 31 December 2025. (ASP/HFZ/KEN)