PMK-112/2025

The Ministry of Finance (“MoF”) has issued MoF Regulation No. 112 of 2025 (“PMK-112/2025”), which establishes a comprehensive administrative framework governing the application of Double Taxation Avoidance Agreements (“DTAAs”) for both Domestic Taxpayers (Wajib Pajak Dalam Negeri or “WPDN”) seeking treaty benefits abroad and Non-Resident Taxpayers (Wajib Pajak Luar Negeri or “WPLN”) claiming treaty benefits on Indonesian-sourced income. The regulation aligns DTAA application with Indonesia’s Core Tax Administration System to enhance legal certainty, consistency, and transparency in treaty implementation, while strengthening safeguards against treaty abuse.

For Non-Resident Taxpayers, PMK-112/2025 introduces a revised DGT Form that places greater emphasis on substantive eligibility rather than formal documentation. While the form requires clearer declarations regarding treaty residence, beneficial ownership, and the absence of treaty abuse, certain administrative requirements are simplified and streamlined compared to previous regulations. The regulation also explicitly incorporates the definition and interpretation of Permanent Establishment (“PE”), clarifying when activities conducted in Indonesia may constitute a PE and thereby affect entitlement to treaty benefits.

Treaty benefits are available only to taxpayers with genuine economic substance, including an appropriate legal structure, active business operations, adequate assets and personnel, and independent management authority. Transactions must not be structured primarily to obtain treaty benefits, and the taxpayer must be the true beneficial owner rather than an agent, nominee, or conduit. The DGT Form must be properly completed and supported by a Certificate of Domicile or competent authority endorsement and is generally valid for up to 12 months. Indonesian withholding agents are required to verify and upload the documentation through the tax portal, with treaty rates applicable only where all substantive conditions are met.

For Domestic Taxpayers, PMK-112/2025 requires Indonesian tax residents to apply electronically for a Certificate of Domicile (“CoD”) when claiming treaty benefits in treaty partner jurisdictions. Each CoD is limited to one treaty partner, one tax year (or part thereof), and one counterparty. The appendices to PMK-112/2025 also provide illustrative examples of treaty-related transactions, including income characterization and Permanent Establishment scenarios, to support consistent interpretation and application of the regulation in practice.