Mutual Agreement Procedure (MAP) in Indonesia Based on the The Law on Harmonization of Tax Regulations (Undang-undang HPP) for Foreign Investors

If the implementation of the mutual agreement procedure has not resulted in an agreement until the Indonesian Appeal Decision or Review Decision is pronounced, the Director General of Taxes continues to negotiate, in the event that the disputed material decided in the Appeal Decision or Review Decision is not the same material submitted for the mutual agreement procedure.

Based on the Law on Harmonization of Tax Regulations, there are some articles that explains the Mutual Agreement Procedure to resolve problems in the implementation of Tax Treaties or P3B as follows:

  • The Director General of Taxes is authorized to carry out a mutual agreement procedure to prevent or resolve problems arising in the application of the tax treaties.
  • The mutual consent procedure itself may be proposed by: Domestic Taxpayers; Director General of Taxes; The authorized officer of the partner country or partner jurisdiction agrees to the avoidance of double taxation; or Indonesian citizens through the DGT are concerned with discriminatory treatment in partner countries or consent partner jurisdictions.
  • Requests for the implementation of the mutual agreement procedure can be submitted simultaneously with the application of domestic taxpayers to submit: Objections; Appeal; or reduction or cancellation of an incorrect tax decree.
  • In the event that the implementation of the mutual agreement procedure has not produced a mutual agreement until the Appeal Verdict or Review Decision is pronounced, the Director General of Taxes will:
  1. continue the negotiations, in the event that the material of the dispute decided in the Appeal Verdict or the Judicial Review is not the same material submitted by mutual agreement procedure; or
  2. use the Appeal Verdict or Judicial Review as a position in the negotiations or to stop the negotiations, in the event that the material of the dispute decided is not the material submitted by the mutual agreement procedure.

The Director General of Taxes follows up on the results of the implementation of the mutual agreement procedure with issuing a decree on mutual consent. The decree on mutual consent includes the basis for the tax refund or the basis for tax collection.

Global Taxation Consensus

The government is authorized to form and/or implement agreements and/or agreements in the field of taxation with the governments of partner countries or partner jurisdictions bilaterally or multilaterally in order to:

  1. avoid double taxation and prevention of tax evasion;
  2. prevent erosion of the taxation base and shifting of profits;
  3. exchange of tax information;
  4. tax collection assistance; and
  5. other taxation cooperation

 

By Olina Rizki Arizal

TBrights | Partner

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