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ARTICLE 23
Relief from Double Taxation
(1) Tax shall be determined in the case of a resident of the Federal Republic of Germany as follows:
- (a) Unless foreign tax credit is to be allowed under sub-paragraph (b), there shall be exempted from German tax any item of income arising in the Republic of Indonesia and any item of capital situated within Indonesia, which, according to this Agreement, may be taxed in the Republic of Indonesia. The Federal Republic of Germany, however, will take into account in the determination of its rate of tax the items of income and capital so exempted.
- In the case of dividends exemption shall apply only to such dividends as are paid to a company (not including partnerships) being a resident of the Federal Republic of Germany by a company being a resident of the Republic of Indonesia at least 25% of the capital of which is owned directly by the German company.
- There shall be exempted from taxes on capital any shareholding the dividends of which are exempted or, if paid, would be exempted according to the immediately foregoing sentence.
- (b) Subject to the provisions of German tax law regarding credit for foreign tax, there shall be allowed as a credit against German income, corporation and capital tax payable in respect of the following items of income arising in the Republic of Indonesia and the items of capital situated there the Indonesian tax paid under the laws of Indonesia and in accordance with this Agreement on:
- (aa) dividends not dealt with in sub-paragraph (a);
- (bb) interest;
- (cc) royalties and fees for technical services;
- (dd) directors fees;
- (ee) income in the meaning of Article 21 paragraph (2).
- (c) For the purpose of credit referred to in letter (bb) of sub-paragraph (b) the Indonesian tax shall be deemed to be 10% of the gross amount of the interest, if the Indonesian tax is reduced to a lower rate according to domestic law, irrespective of the amount of tax actually paid.
- (d) The provisions of sub-paragraph (a) shall not apply to the profits of, and to the capital represented by movable and immovable property forming part of the business property of a permanent establishment and to the gains from the alienation of such property; to dividends paid by, and to the shareholding in, a company; provided that the resident of the Federal Republic of Germany concerned does not prove that the receipts of the permanent establishment or company are derived exclusively or almost exclusively:
- (aa) from producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within Indonesia or
- (bb) from dividends paid by one or more companies, being residents of Indonesia, more than 25% of the capital of which is owned by the first-mentioned company, which themselves derive their receipts exclusively or almost exclusively from producing or selling goods or merchandise, giving technical advice or rendering engineering services, or doing banking or insurance business, within Indonesia.
In such a case Indonesian tax payable under the laws of Indonesia and in accordance with this Agreement on the above-mentioned items of income and capital shall, subject to the provisions of German tax law regarding credit for foreign tax, be allowed as a credit against German income or corporation tax payable on such items of income or against German capital tax payable on such items of capital.
(2) Tax shall be determined in the case of resident of the Republic of Indonesia as follows:
- (a) the Republic of Indonesia, when imposing tax on residents of the Republic of Indonesia, may include in the basis upon which such tax is imposed the items of income which may be taxed in the Federal Republic of Germany in accordance with the provisions of this Agreement;
- (b) where a resident of Indonesia derives income from the Federal Republic of Germany and such income may be taxed in the Federal Republic of Germany in accordance with the provisions of this Agreement, the amount of the German tax payable in respect of the income shall be allowed as a credit against the Indonesian tax imposed on that resident. The amount of credit, however, shall not exceed that part of the Indonesian tax which is appropriate to the income.