Indonesia: Global Minimum Tax Implementation in Indonesia: Key Impacts and Insights

Global Minimum Tax (GMT) Implementation in Indonesia: Key Impacts and Insights

Starting January 1, 2025, Indonesia will implement a 15% Global Minimum Tax (GMT) under PMK No. 136/2024, aligning with the OECD/G20 Pillar Two framework to prevent tax avoidance by multinational enterprises (MNEs).

Background and Objectives

The GMT aims to address Base Erosion and Profit Shifting (BEPS) practices by ensuring MNEs pay a minimum 15% tax globally under the Global Anti-Base Erosion (GloBE) standard.

Key Provisions of PMK 136/2024:

• Scope: Applies to MNEs with global revenue ≥ EUR 750 million (approx. IDR 12.7 trillion) over two of the last four fiscal years.
• Minimum Effective Tax Rate (ETR): 15% per jurisdiction, with a top-up tax for those below this threshold.
• Top-up Tax Mechanisms:
  
  • Income Inclusion Rule (IIR): Parent entities pay additional taxes on low-taxed subsidiaries.
  • Under-Taxed Payment Rule (UTPR): Additional taxes apply if IIR is ineffective.
  • Qualified Domestic Minimum Top-up Tax (QDMTT): Indonesia collects the top-up tax locally.
• Reporting Requirements: GloBE Information Return (GIR) submission within 15 months (18 months for the first year).
• Safe Harbour: Temporary relief to simplify initial compliance.

Impact on MNEs in Indonesia:

• Tax Compliance: MNEs must adhere to global reporting standards, with non-compliance resulting in sanctions.
• Tax Strategies: Reassessment of ownership structures and transfer pricing policies to meet the 15% ETR.
• Investment & Cash Flow: Additional taxes may affect cash flow, shifting focus from tax rates to regulatory environments.

MNEs may require the following services to assist them in GMT compliance matters:

• Tax Planning: Evaluate compliance, simulate potential impacts, and adjust transfer pricing.
• Reporting Support: Assist with GMT reporting under OECD standards.
• Business Strategy Consulting: Provide guidance on investment restructuring and system upgrades.

Conclusion:

PMK 136/2024 introduces significant changes to Indonesia's tax landscape, requiring MNEs to assess their structures and strategies. 

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Reference/ Citation

• Kementerian Keuangan RI. (2024). PMK No. 136 Tahun 2024.
• Fiskal Kemenkeu. (2024). Penerapan Pajak Minimum Global di Indonesia.
• DDTC. (2024). Peraturan Menteri Keuangan 136 Tahun 2024.
• Hukumonline. (2024). Sah! Indonesia Terapkan Pajak Minimum Global.

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