The Multilateral Convention (MLI) applies to the Indonesia-Tunisia Double Taxation Avoidance Agreement (DTAA) to eliminate double taxation and prevent tax evasion or avoidance, including treaty shopping.

Principal Provisions of the Convention Applicable to the Indonesia-Tunisia DTAA

1. Preamble Replacement (Article 6, Paragraph 1)
   • The preamble of the Indonesia-Tunisia DTAA is replaced to emphasize that the agreement aims to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through evasion or avoidance, including treaty shopping arrangements.

2. Entitlement to Benefits (Article 7, Paragraph 1)
   • The benefits of the DTAA may be denied if obtaining such benefits is one of the main purposes of a transaction or arrangement, unless granting the benefits aligns with the object and purpose of the relevant provisions.

Adjustments Regarding Taxation of Assets and Entities

1. Taxation of Gains from the Alienation of Shares (Article 9, Paragraph 4)
   • Gains derived by a resident of one contracting state from the sale of shares or similar interests in entities (such as partnerships or trusts) deriving more than 50% of their value from immovable property in the other contracting state (at any time within the 365 days prior to the transfer) may be taxed in that other state.

2. Definition of Permanent Establishment (PE) (Articles 12 & 13)
   • Agency PE (Article 12, Paragraph 1): The definition is expanded to include parties who habitually conclude contracts or play a principal role in concluding contracts on behalf of an enterprise.
   • Dependent Agent (Article 12, Paragraph 2): A party who acts exclusively or almost exclusively on behalf of a closely related company is not considered an independent agent.
   • Exclusion of PE Activities (Article 13, Paragraph 2 Option A & Paragraph 4): Clarifies activities excluded from the definition of a PE and introduces anti-fragmentation rules to prevent the artificial avoidance of PE status.

3. Construction PE Period (Article 14, Paragraph 1)
   • The Convention applies to Article 5 of the Indonesia-Tunisia DTAA, clarifying the period for which a building site, construction project, or installation project constitutes a PE.

4. Definition of Closely Related Party (Article 15 Paragraph 1)
   • The Article defines a closely related individual or entity as one that either controls or is controlled by the other, or both are controlled by the same party, or when one party directly or indirectly owns more than 50% of the rights or shares in the other.

5. Transfer Pricing Corresponding Adjustment (Article 17 paragraph 1)
   • Such Article of the Convention applies to Article 9 of the Indonesia-Tunisia Tax Treaty (DTAA). This means that if there is an adjustment to a company’s profits in one Contracting State under the Indonesia-Tunisia Tax Treaty, the other Contracting State must make a corresponding adjustment to the profits of related parties connected to that company.

These provisions ensure that the Indonesia-Tunisia DTAA is aligned with international standards to prevent tax avoidance and treaty abuse, while providing clarity on the taxation of cross-border transactions and the definition of permanent establishments.