ASIATODAY.ID, JAKARTA – Minister of Finance of the Republic of Indonesia, Sri Mulyani Indrawati signed the Multilateral Instrument Subject to Tax Rule (MLI STTR) together with leaders from 42 countries and other jurisdictions.
MLI STTR is one of the instruments for implementing Pillar 2 which is part of a global agreement to minimize unhealthy tax rate competition.
MLI STTR allows a country to impose an additional tax of up to 9% on certain income, such as royalties, interest, and certain types of services paid to a Double Taxation Avoidance Agreement (P3B) partner country if it applies a tax rate of less than 9%.
However, this provision only applies to intragroup income with a value above 1 million euros in one tax year (materiality threshold). Meanwhile, for income other than interest and royalties, the payment value must exceed the basic cost plus a margin of 8.5% (mark-up threshold).
Indonesia’s participation in the MLI STTR shows the country’s commitment to increasing fairness and transparency in global economic cooperation. STTR also encourages the creation of a level playing field between local and multinational companies, thereby ensuring local companies are able to compete in the market.
Apart from that, STTR also plays a role in strengthening anti-tax avoidance provisions in the Indonesian tax system and creating wider fiscal space for the Government to overcome other macroeconomic challenges.
This commitment reflects the Indonesian Government’s efforts to maintain a balance between investment development and providing healthy fiscal space, to support Indonesia’s sustainable development.
In this way, Indonesia’s joining this initiative is in line with preparations for Indonesia’s membership process to the Organization for Economic Cooperation and Development (OECD).
“Domestic resource mobilization is very important for a country and STTR provides a way for countries to protect their tax base,” said Sri Mulyani.
The MLI STTR provisions will be carried out systematically and simultaneously without going through bilateral negotiations. However, in its implementation, this instrument is expected to have an impact on 29 Indonesian P3Bs with partner countries, so the implementation of the MLI STTR still requires a ratification process by the Government. (AT Network)
Follow Us at Google News and WA Channel