The global minimum tax is an international tax policy created to prevent tax avoidance practices by multinational companies. Indonesia has implemented this policy through Regulation of The Minister of Finance Number 136 of 2024 Regarding The Imposition of Global Minimum Tax Based On International Agreements, effective on January 1, 2025. The global minimum tax is imposed on domestic tax subjects and permanent business entity that are constituent entities of the multinational corporation group based on the income inclusion rule (IIR), undertaxed payment rules (UTPR), domestic minimum top-up tax (DMTT). The additional tax for a country or jurisdiction is calculated by multiplying the additional tax percentage by the excess profit, and adding the additional current top-up tax and deducting the QDMTT.
IIR is a regulation that requires the ultimate parent entity of a multinational corporation group to pay additional tax or top-up tax. The ultimate parent entity of a multinational corporation grub that is domiciled in Indonesia and has an ownership interest, either directly or indirectly, in a low-taxed constituent entity must pay IIR top-up tax allocated from that low-taxed constituent entity for a tax year. The top-up tax based on IIR for a tax year is allocated from the low-taxed constituent entities owned directly or indirectly by the ultimate holding entity of the multinational corporation grub. Additional tax under IIR is levied on domestic tax subjects that are constituent entities of the multinational corporation group, including ultimate parent entities, intermediate parent entities, and partially owned parent entities. Additional tax based on IIR is allocated from a low taxed constituent entity to a domestic tax subject that is a constituent entity of a multinational group of company. The allocation of additional tax based on IIR is regulated in article 15 of regulation of the minister of finance number 136 of 2024.
The next is UTPR which will apply on January 1, 2026. UTPR is a provision that imposes additional tax in the event that the IIR provision is not applied and or additional tax has not been fully imposed on a domestic tax subject that is a constituent entity of the multinational corporation grub in the event that another constituent entity of the multinational corporation group is taxed at an effective tax rate less than the minimum rate in the country or jurisdiction where the other constituent entity conducts its business activities. Through the UTPR mechanism, the additional tax known as top-up tax will be equitably distributed to the countries where the entities in the group operate, including the permanent from business of the main entity. However, it should be noted that investment entities are not included in this distribution. The distribution of additional tax through UTPR is based on each country’s economic contribution, as measured by the number of employees and the value of tangible assets held in that country. With this approach, countries that contribute significantly to the company’s economic activity will receive an appropriate proportion of the tax. Indonesia’s UTPR percentage for each the multinational corporation grub is the sum of 50% (fifty percent) of the ratio of the number of employees in Indonesia to the number of employees in all countries or jurisdictions of the multinational corporation grub that apply UTPR and 50% (fifty percent) of the ratio of the total value of tangible assets in Indonesia to the total value of tangible assets in all countries or jurisdictions of the multinational corporation grub that apply UTPR. This is stated in Articles 17 and 18 of regulation of the minister of finance number 136 of 2024.
By Olina Rizki Arizal – Partner TBrights
TBrights is a Tax Consultant in Indonesia which is now an Integrated Business Service in Indonesia that can provide comprehensive tax and business services.
Reference:
- Regulation of The Minister of Finance Number 136 of 2024 Concerning the Imposition of Global Minimum Tax Based on International Agreements
