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4.1. Foreign PE of a Domestic Entity

An Indonesian entity may be deemed to have a PE in other jurisdictions in accordance with their internal tax law. If a treaty is applicable, the determination of the existence of a PE will be made in accordance with the treaty provisions.  

Foreign PE’s income is included in the worldwide income of resident taxpayers. Any tax paid in relation to the profits incurred outside Indonesia should be creditable on a per country basis. The maximum allowable tax credit is up to the corporate income tax rate in Indonesia (currently 22%) on the relevant income.

On the other hand, the Indonesian Income Tax Law does not allow any foreign PE’s losses to be claimed in Indonesia.