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Oct 16, 2010

Indonesia Certificate of Domicile (COD)

Certificate of Domicile (COD) is used in relation to the Double Taxation Avoidance Agreement (Tax Treaty). COD is used to prove that a particular taxpayer is a residence of a State who signed Tax Treaty. Thus, COD shall be issued by the State in which a person or entity registered as domestic taxpayers (residence). Meanwhile, another country as a source country will tax with treaty rate if the person or entity can show COD from the partner countries.

The following example can illustrate the position of COD in the context of international taxation. Suppose that country A has a tax treaty with country B. The tax rate on dividends in country B for example 20%. Meanwhile, according Tax Treaty between country A and country B, the rate on dividends is 10%. If Company A in country A earn income from Company B in country B. Company B would withold taxes by 20% (domestic tariff) if Company A can not show the SKD. Instead, Company B will impose a tax of 10% (treaty rate ), if Company A to indicate SKD from state tax authorities A.

Well, in Indonesia itself, the provisions of the COD for Domestics Taxpayers is regulated by the Directorate General of Tax Number PER-35/PJ/2010 about Certificate of Domicile For Indonesia Domestic Tax Subject in the Framework of Implementation of Double Taxation Avoidance Agreement.

COD Issuer

COD issued or endorsed by the Director General of Taxes through local Tax Office based on Taxpayers application. Local Tax Office is the tax office whose jurisdiction covers the place of residence or domicile of registered individual or corporate taxpayers.

Local Tax Office issued COD in no later than 5 (five) working days after receiving the complete application from taxpayers. COD form issued is form DGT-7 as set out in Annex II PER-35/PJ/2010 or use a special form used by the Tax Treaty partner country.

Taxpayer Aplication

Taxpayers who can obtain COD is a taxpayer that meets the following three qualifications:
  1. has Indonesia Resident Taxpayer status as referred to in Article 2 paragraph (3) Income Tax Act;
  2. have a Indonesia Taxpayer Identification Number; and
  3. not as Non Resident Taxpayer , including permanent establishments referred to in Article 2 paragraph (4) Income Tax Act.
Taxpayer aplication then filed with a form DGT-6 according to annex I PER-35/PJ/2010 and submitted to the Director General of Taxes through local Tax Office. DGT-6 of this Form must be filled out properly, clear and complete. In addition, the application also must meet the following requirements:
  1. contains the name of the treaty partner country / jurisdiction where the income derived;
  2. contains a description of the income and tax will be imposed in treaty partner country
  3. signed by the Taxpayer, and
  4. enclosed with the Special Power of Attorney referred to in Article 32 of General Provisions adan Tax Procedures Law, in case the application is not signed by the taxpayer.

Request Denied

Taxpayer aplication rejected if it does not meet the requirements as described above. The application also may be denied if the taxpayer has not submitted its annual tax return despite submission deadline has passed and the taxpayer fails to submit notification of the extension of the submission of the Annual tax return.
Rejection of application for Taxpayers must be notified in writing to the taxpayer no later than 5 (five) working days after the request is received from Taxpayer.

COD Validity Period

The validity period of COD issued by the local tax office is (one) year from date of issue except for bank Taxpayers along this bank has the same address with the COD which have been issued.

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