tax preparation

BRIEF REVIEW ABOUT "RELATED PARTIES"

Rule Section 18 sentence ( 4) Income tax [Code/Law]

Problem " related parties" tightly of its(the relationship with proper price pixing problem ( arm's length price), if an transaction of indication contains atypical conditions as have done party(sides that is is not is influenced " related parties". Therefore jargon " related parties" need to be given constrain as bottom to fiskus does proofreading to transaction happened between the party(sides in the case of its(the transaction not arm's length.

Cognition " related parties" formulated in Section 18 sentence ( 4) Income tax [Code/Law], which its(the formula is as follows:

"4. Related parties as referred to at sentence ( 3), Section 18 sentence ( 4), Section 9 sentence ( 1) letter f, and Section 10 sentence ( 1) assumed there is if:

a. Taxpayer has indirect or direct investment equal to 25% or more at other taxpayer, or relation between taxpayer with investment of 25% or more at two taxpayers or more, and so do relation between two taxpayers or more so-called last; or

b. Taxpayer masters other taxpayer or two or more taxpayer below the same domination either direct and also indirect; or

c. There is blood relation either as of blood and also matrineal in right descendant and/or kesamping one degrees."

Related parties as mentioned in above c letter will not be discussed in this article. Solution will be dititikberatkan to rule of letter an and b.

Sentence rule ( 4) letter a requires existence of investment of legal capital equal to 25% or more, and from the aspect of its(the applying approach this thing is enough transparents.

Sentence ( 4) letter ( b) applies test " domination ( control)" which in explanation of from the section include;covers two things that is pengusaan through management and technology usage. However cognition " domination through management" and " technology usage" is not elaborated furthermore. This thing will cause the happening of difference of interpretation between taxpayers with fiskus.

OECD ( Organization for Economic Cooperation and Development) Model

OECD MODEL formulates this related parties in the relation with proper price pixing ( arm's length) by giving directive that there is participation in management area, control and legal capital either directly and also indirect. However the jargons is not given constrain that is clear. For sharpness let us corrects reading rule sound arranged in OECD Model Pasal 9:

“Article 9 – Associated enterprises

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or
(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then .......”

Requiring above rule existence of participation in management area, control or legal capital, either directly and also indirect.

Participation is area " management" as formulated to be above also invites some questions. Does test to detect existence of related parties requires that the " manager" is involving in a transaction is being in research must same. Or can be told that if two or more company is assumed to has related parties if the its(the managers having blood relation, for example its(the old fellow and children, or you contains.

Jargon " domination" ( control) cans be in the form of " de facto control" atau"de jure control". De facto control is not difficult is diditeksi by its(the measuring rod explains that is level of investment in other company.

While " de jure control" covers authority owned by one of company to determine policy and decisions related to monetary policys and operational. Becoming problem is determine limits " de jure control" this.

In context Perjanjian Penghindaran Pajak Berganda ( P3B), jargon Used in by depth, which is not is given [by] definition hence the jargon is given [by] meaning pursuant to domestic of state executing P3B [ Section 3 sentence ( 2) Model OECD]. Rule Section 3 sentence ( 2) from OECD Model is as follows:

“2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaningunder the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.”
In OECD MODEL cognition " management" and " control" is not given definition.

If corrected reading [by] above rule hence in the case of there is P3B referring to the determining existence of related parties, hence from the aspect of Indonesia approach, pengeritian about " participate in control and management" must refer definition based on domestic [code/law].

As told above explanation of from Section 18 sentence ( 4) hardly minim, because doesn't elaborate furthermore cognition from the jargons.

Based on explanation of the sentence is domination through technological usage also is indication there is of related parties. Goods has of course this test must be applied together with other test because technological usage in a transaction which arm's length earns is just happened.

Comparison with other nations

It is better is corrected reading rule embraced in some states in the relation with cognition about " related parties", the always tightly related to fair price pixing to transactions happened between the party(sides.

" Australian:

i. the relation of domination is not required,

ii. order transfer of pricing also applicable to transactions with aim to tax evasion tax avoidance or.

" Brasil:

i. not necessarily there are investment; exclusive agent, distributor or dealer for purchasing or sale of merchandise property of company, services and rights;

ii. relationship done is continuous with company livinging in nations with lower rate from 20%.

" Dutch: follows formula Section 9 sentence ( 1) OECD MODEL.

" Germany:

i. Investment which substansial ( minimum of 25%);

ii. Has influence to do control;

iii. Having importance to income from other company.

" India:

i. Produces and process goods by a company, a real depends on to usage of intelectual property property of other company;

ii. 90% or more raw material and goods used by dipasok by other company, also determines the price.

" Japan:

i. There is ownership of either direct and also indirectly minimum 50% from its(the stock.

ii. One of company senentukan company policy can be other in substansial.

In OECD MODEL cognition " management" and " control" is not given definition.

If corrected reading [by] above rule hence in the case of there is Acceptance of Doubled Tax Avoidance referring to the determining existence of related parties, hence from the aspect of Indonesia approach, pengeritian about " participate in control and management" must refer definition based on domestic [code/law].

As told above explanation of from Section 18 sentence ( 4) hardly minim, because doesn't elaborate furthermore cognition from the jargons.

Based on explanation of the sentence is domination through technological usage also is indication there is of related parties. Goods has of course this test must be applied together with other test because technological usage in a transaction which arm's length earns is just happened.

Comparison with other nations

It is better is corrected reading rule embraced in some states in the relation with cognition about " related parties", the always tightly related to fair price pixing to transactions happened between the party(sides.
 
   * Australian *

the relation of domination is not required,
order transfer of pricing also applicable to transactions with aim to tax evasion tax avoidance or.

   " Brasil *

not necessarily there are investment; exclusive agent, distributor or dealer for purchasing or sale of   merchandise property of company, services and rights;
relationship done is continuous with company livinging in nations with lower rate from 20%.

* Dutch: follows formula Section 9 sentence ( 1) OECD MODEL.

    " Germany *

Investment which substansial ( minimum of 25%);

Has influence to do control;
- Having importance to income from other company.

    * India *

Produces and process goods by a company, a real depends on to usage of intelectual property property of other company;
90% or more raw material and goods used by dipasok by other company, also determines the price.

   " Japan *
There is ownership of either direct and also indirectly minimum 50% from its(the stock.
One of company senentukan company policy can be other in substansial.

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Prevention of double non-taxation in P3B Indonesia

a) Treatment of tax to loss from form of permanent business

Prevention the happening of double non-taxation is concerning " form of permanent business" can be met in P3B with Belgia. Like known Belgia to embrace method " exemption with progression" to eliminate imposition of doubled tax. On that account in the case of a " form of permanent business" is residing in Indonesia from company Belgia, suffers lost hence the loss must be make-good in Indonesia to operating margin from its(the activity. Treatment of this operating margin based on legislation rule of tax [shall] no longer obtain special treatment ( exemption) since have already been make-good with loss before all.

b) Retired and alimoni

In P3B with Denmark is mentioned in Section 18 ( 3) that payment of alimoni from one of state to other state tax subject only taxed in that other state, as long as receiving it is the state tax subject. The rule arranges that based on P3B with Denmark, freehold asset pemajakan to alimoni paid from one of state only be hit tax is state [by] where its(the receiver livings, on the promise that receiving is tax subject. With other word, if simply alimoni receiver is non tax subject hence state source of [is] entitled to synchronized of tax. This thing to prevent the happening " double non-taxation".

The same rule also is met in P3B with Canada.

c) Professor and teacher

In P3B Australia it is arranged that ordinary professor or teacher, livinging in one of state, does activity to teach it in other state, struck from imposition of tax in that other state for a period of 2 year. However exemption in the source state applied if in the fee domicile state is hit [by] tax. Thereby, if in fee domicile state from teaching is not hit tax hence state source of [is] entitled to synchronized of tax to the fee.

The same rule can be met in P3B Denmark in Section 21(1) and P3B Selandia Baru in Section 20(1).

Conclusion

a) Problem double non-taxation arises, in the relation with a P3B, because law and regulation of one of state doesn't synchronized of tax to a production type. If in a P3B it is arranged that freehold asset pemajakan to a production type only be given to domicile state, hence state source of may not synchronized of tax to the production. If domicile state gives special treatment to the production that is struck from imposition of tax hence in P3B need to be given covenant that production obtained from state source of freed [by] only if in production domicile state of sulfur is hit [by] tax.

b) Double non-taxation can happened because that thing of course becomes policy of one of state. Example for this problem is if one of state give taxation incentives in the form of tax holiday. This incentives will be enjoyed by investor only if tax freed in state source of also is freed in domicile state. In the case of that way of course happened double non-taxation.

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Side that, there are still one covenants again which must be fulfilled in the case of applying P3B, that is body or people tax subject must in one of state ( resident). Doube non-taxation there will be if there is certain tax subject struck from by imposition of tax. Pursuant to which now applies, Income tax [Code/Law] doesn't give Iiberation to certain tax subject. The in inviting Income tax is someone is not be obliged to pay [for] income tax if(when its(the production doesn't exceed storey " production doesn't hit tax".

If a certain body struck from imposition of tax pursuant to [code/law] a state hence the body shouldn't enter in category " resident" as arranged in Section 4 sentence ( 1) OECD MODEL. In the case of that way hence if the body receive Indonesian production and hit [by] tax hence will not happened double non-taxation.

In practicing, to enjoy the rule in P3B someone or body must can show domicile letter ( certificate of residence), as evidence the respected fulfills criterion " liable to tax".

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From the aspect of Indonesia approach, basically the happening of double non-taxation will not happened remembers Synchronized income tax invitors of tax to all production types, except if(when Indonesia still giving incentives in the form " tax holiday". And so do if seen from the aspect of tax subject approach, there is no tax subject struck from by imposition of income tax.

To prevent the happening of double non-taxation, approach gone through in outline P3B in the form of addition of covenant like for example " subject-to-tax provisions".

This article will comment rules in P3B which has applied, with aim to avoid the happening of double non-taxation.

Principal applying in OECD Model to prevent " non-taxation

Like known, one of covenant that personal someone or body [is] entitled to to treatment of tax in P3B is if people or the body

be man which is mandatory pays [for] tax in its(the state ( liable to tax). Interpretation from " liable to tax" must be given widely. Mean if a body build in Indonesia then in a year book suffers hit, the body still entering in category " liable to tax", as according to criterion arranged in inviting Income tax. Hit suffered in a year can be make-good with income in the next year. This thing indicates that the body fulfills criterion " liable to tax".

tax table

PROBLEM " DOUBLE NON-TAXATION" IN ACCEPTANCE of DOUBLED TAX AVOIDANCE INDONESIA

Problem double non-taxation in the relation with Persetujuan Penghindaran Pajak Berganda ( P3B), closely related with law and regulation rule in one of state, what gives special treatment to a certain production type. Like known, intention from signed [by] it a P3B is prevent imposition of doubled tax, do not create situation that to enable the happening of double non-taxation.

The happening of double non-taxation, usually in consequence of treatment of tax to a production type which its(the pemajakan freehold asset resides in domicile state, while domicile state x'self doesn't synchronized of tax to the production. This thing is not quit of of taxation policy of each state. For example, in some pension states received by the state subject was not hit tax again. If for example the relation of job(activity during the before pension entangles two states and in state source of of from the pension doesn't synchronized of tax, although paid to the order of overseas tax subject hence which there will be is double non-taxation. Sometimes double non-taxation designedly is given by with reference to incentives given to investor for the agenda of pushing investment. Double non-taxation can happened if one of state to give tax facility in the form " tax holiday", and state where investor livings gives " tax sparing".

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RECOMMENDATIONOECD FISCAL COMMITTEE CONCERNING "CONDUIT COMPANIES"


Usage " conduit companies" by multinational corporations has become part of tax its(the planning. Usually " conduit companies" build in nations tax haven or state which its(the tax rate is low relative. In the relation with tax planning, conduit companies might possibly be build in nations having treaty net work, as a mean to obtains benefit from a tax treaty. Like known [by] law and regulation in some states enables conduit companies considered as taxpayer in country ( resident taxpayer) in its(the state. If conduit companies resides in state having treaty net work which is wide enough hence conduit companies can be exploited by company or people for the agenda of tax planning. In the case of that way " conduit companies" can be conceived of " stepping-stone companies".

This problem has become attention from OECD Fiscal Committee in its(the relationship with effort prevents the happening " harmful tax practice".

How is it preventable passed acceptance of doubled tax avoidance ( P3B)? Which during the time has been done in the effort preventing them which shouldn't [is] entitled to to treatment based on P3B, be by applying concept " beneficial owner" what applied to production in the form of interest, dividend and royalty, although still have not adequate.

Some approachs to the problem has on the market by OECD Fiscal Committee, shortly is elaborated hereunder.

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Look-through approach

Prevents that conduit companies cannot enjoy facility Acceptance of Doubled Tax Avoidance, basically is gone through by adding additional covenant that company livinging in state P3B to have shareholder which is state tax subject ( resident taxpayer).

With other word, if company in one of state ( what has P3B) owned or mastered by people or body which is not tax subject one of state hence the company [have] no business be considered as tax subject ( tax resident) as referred to in Article 4 ( Resident) from Acceptance of Doubled Tax Avoidance, that is rule arranging about people or body included by the P3B. Formula from Article 4, based on OECD Model and also United Nations Model ( UN MODEL) be as in under this:

virginia 760py tax form

Resident

For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital therein.”

Rule is upper meant to ensure that tax subject becoming coverage in P3B is they paying tax in the state on the basis of its(the domicile or similar other criterion. However this thing has not guaranteed that the body of course the state tax subject, mean is not conduit companies.

Therefore, hence need to be applied approach " look-through" to assure that badan/perusahaan livinging in one of state of course pure the state tax subject.

In this relationship need to be considered addition of rule limiting that body tax subject fulfilling just certain criterion of which [is] entitled to enjoy rules in P3B, like this beikut:

“A company that is a resident of a Contracting State shall not be entitled to relief from taxation under this Convention with respect to any item of income, gains or profits if it is owned or controlled directly or through one or more companies, wherever resident, by persons who are not resident of a Contracting State.”

Approach through " look-though" very acurate if applied to P3B with nations having low tax rate.

arizona sales tax rate

Subject-to-tax approach

" Look through approach" as elaborated to be above is approach from side " tax subject". prevention of Usage of conduit company also can be gone through by applying approach from the aspect " its(the tax object", be through is so-called " subject-to-tax provisions". Concerning rule " subject-to-tax" basically is that production type obtaining facility pursuant to in a P3B, arising in source state, applied if the production is hit [by] tax in domicile state.

This principle basically in line with a Acceptance of Doubled Tax Avoidance to avoid imposition of doubled tax.

However approach " subject-to-tax" still must be equiped with covenant that ( badan/perusahaan) what receives the production has shareholder which is the state tax subject. In the case of some of its(the shareholder is not the state tax subject, and its(the investment in the company enables it to master the company ( substantial interest), hence exemption or imposition of lower rate based on P3B, applied to production which based on domestic [code/law] in domicile state tax in the state. In this relationship in the Acceptance of Doubled Tax Avoidance need to be given a limit to is so-called with " substantial interest".

tax shelter incorporating

Channel approach

Approach through " subject-to-tax" still have not guaranteed to inveterate strategy is called " stepping-stone strategy". Therefore approach by applying rule " subject-to-tax" must be equiped with " channel approach". Main principle in " channel approach" be that production obtained a company in domicile state from source state, is not used to fulfill obligation to third party livinging in third state. In recommending it OECD to give benchmark that production used for the exceeds 50% from production.

The approachs is upper that there are still need equiped with some rules so that the facility in Acceptance of Doubled Tax Avoidance really enjoyed by second tax subject of state. Based on recommendation from OECD addition of rule for approachs elaborated under, called as with " bona fide provisions", basically a company build in one of state is not solely with a view to enjoys rule in P3B.

In this relationship P3B Indonesia-Amerika has loaded the rules is upper, concerning two things that is i) to ensure that badan/perusahaan receiving production is company which its(the shareholder consisted of combination from tax subject from both states and ii) production obtained from state source of is not applied to close obligation to tax subject in third state. The order is loaded in Article 28(6) ( General Rules of Taxation), which its(the formula is as follows.

federal tax forms

General rules of Taxation

Except as provided in paragraph 7, a person (other than an individual) which is a resident of a Contracting State shall not be entitled under this Convention to relief from taxation in the other Contracting State unless:

more than 50 percent of the beneficial interest in such person (or in the case of a company, more than 50 percent of the number of shares of each class of the company’s shares) is owned directly or indirectly by any combination of one or more:

• individuals who are residents of the United States;
• citizens of the United States;
• individuals who are residents of Indonesia;
• companies as described in paragraph (7)(a); and
• the Contracting States; and

the income of such person is not used in substantial part, directly or indirectly, to meet liabilities (including liabilities for interest or royalties) to persons other than those enumerated in subparagraphs (1) through (5).”

Sentence ( 6) letter ( a) for arranging about whosoever tax subject ( in this case is badan/perseroan) which [is] entitled to enjoy rule in P3B. Shareholder from copartnership is intended must be up to standard specified in sentence ( a). Letter ( b) from sentence ( 6) above is covenant that most of the production is not utilized to fulfill obligation to tax subject apart from mentioned in sub-ayat ( i) up ( vanadium).

Example of similar also can be met in P3B with English concerning payment of interest, arranged in Article 11(9), which its(the formula is as follows:

what is taxes

Interest

The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.”

Rule is upper meant to prevent them which [have] no business enjoy rules arranged in P3B by the way of doing assignment to receivables.
Similar rule also can be met in Article 12(7) ( Royalties), which its(the formula is as follows:

tax deductible items

Royalties

The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the right or property in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.”

list of tax deductions

Conclusion

Time has come policy of Acceptance of Doubled Tax Avoidance Indonesia adapted for development happened beyond the sea in the relation with prevention the happening of abuse Acceptance of Doubled Tax Avoidance. This thing very relevant especially if process is being run entangles state with low tax rate.

That need to be done is apply principle elaborated upper so that creation of conduit companies to enjoy rule of P3B can be prevented.

For Acceptance of Doubled Tax Avoidance yabg there [are] and still applying need to be studied again with what particular state that need to be equiped with rule of anti-abuse in the relation " conduit companies". This thing needs dijajagi possibility that his(its through " mutual agreement procedure" what requires process which more simple than if having to renegotiates.

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Acceptance of Doubled Tax Avoidance with Mexico
Have been in Ratification

Common

P3B with Mexico has been ratified with Keputusan Presiden Nomor 67 The year 2004, date of 10 Augusts 2004.

Negotiation process from P3B requires twice turkey turn, with chronology completely is presented in tables of hereunder.

Negotiation process  
I. 1-5 Septembers 1997, Mexico City

II. 28-31 Marchs 2000, Jakarta

Initialed Jakarta, 31 Julies 2000

Signed Kiosk Cabos, 6 September 2002

Ratification KEPPRES NO. 67/2004, tgl. 10 Augusts 2004

At the time of this article prepared information concerning continuation of process to P3B has not is exist, including inter alia date of notification by the Government of Indonesia to the Government of Mexico that the side of Indonesia has finalized ratification procedure.

So if before 31 Decembers 2004 each state has is each other inform that formality based on constitutional in both states has been fulfilled, hence Persetujuan will apply strarting 1 January 2005.

Some important rules

a. Double domicile

If someone is considered to be [by] tax subject by two states, its(the status is determined [by] through applying from inveterate tests called as tie breaker rule, what applied sequentially that is : center vested interest ( centre vital of of interests), then habit resides ( habitual abode). If both the tests doesn't solve problem domicile doubled hence people is assumed to livings in state where s(he becomes citizen. If s(he became


citizen from both states hence its(the status will be determined based on acceptance with between both official functionaries.

In the case of someone or body in relation to a production acts as hali remainder or a foundation, will not be considered as tax subject, except to the in debt production of tax.

b. Definition " form of permanent business"

Cognition " form of permanent business" covers inter alia:

" management locus;

" office of branch;

" office building;

" plant;

" workshop;

" warehouse applied for outlet sale;

" agriculture four p’s or plantation;

" mining four p’s, earth oilwell or earth gas, or place of dig or place of mining of other natural resources, bridge or drilling ship;

" project of taking place construction more than 6 month;

" vesting of service taking place for a period of more than 91 days within 12 months;

" people or body acting for company livinging in other state, what has authority to sign up for company represented by it.

Cognition " form of permanent business" doesn't cover things mentioned hereunder:

" place of menyimpan and demonstrates merchandise;

" management of commercial stock of property of company solely with a view to is kept, on display or sent;

" management of commercial stock of property of company solely with a view to diolah by other company;

" management of sautu place of permanent business solely with a view to does purchasing of goods or merchandise, or collect information for the sake of his own company;

" management a place of permanent business solely with a view to does activity having the character of preparation or supporter for company importance;

" does activitys pool mentioned before all, along the length of is supporter or preparation for company importance.

c. Production from permanent possession

Freehold asset pemajakan to production from possession constantly within state hand where the located permanent possession. Definition " permanent possession" refers to legislation rule of state where the possession is located, including objects accompanying possession do not move, livestock and equipments applied in effort for agriculture and forestry, rights to such rules of public law concerning soil;land;ground to apply, freehold asset collects result to possession do not move, and freehold asset to payment of either erratic and also permanent as fee to do or freehold asset does dig material source of nature energy?powers. Cognition of permanent possession not be including boat, boat and plane.

d. Operating margin

Imposition bottom of tax from a " form of permanent business" in agreement this embraces is so-called " force of attraction rule ( limited)", that is operating margin which is tax object from a " form of permanent business" be:

" operating margin obtained from activity done by " form of permanent business" the; and

" sale of or the same merchandise is conspecific sold by " form of permanent business".

Net operating margin ( laba-kena-pajak) from a " form of permanent business", from company dimiciling in Mexico, beside hit [by] PPh as according to rate Section 17 Income tax [Code/Law], also is added with PPh Pasal 26 sentences ( 4) with rate 10%.

e. Transportation in international line

Operating margin from sea transportation carriage and air in international line can only be hit tax in domicile state. This treatment also applies for company from both states participating in a consortium.

f. Related parties

If a company livinging in one of state, does transaction with company livinging in other state, and both having related parties, and the transaction doesn't express transaction which " arm's length" ( transaction done by party(sides that is is not has related parties) hence one of state can do proofreading to the transaction.

If one of state do proofreading to transaction as mentioned upper, hence other state is obliged to do continuation proofreading, if state so-called latter agreed to proofreading by state so-called first.


g. Dividend, interest and royalty

Truncation rate of PPh from dividend, interest and royalty is as presented in tables of under this.

Production type

  Truncation rate

Dividend 10%

Interest 10%

Royalty 10%

The concerned jargon " interest" here not be including penalty?fine because delay in payment of interest.

Definition " royalty" covers copyrights, patent right, trade mark, design or model, plan, secret formula or way of processing and information about experience of in industrial area, commerce or science, the right to apply industrial equipment, commerce or science, including supply of help which is complement or additional from the rights is upper.

Besides, definition of royalty also covers the right to apply cinema film, or films or ribbon or record video applied for radio broadcast or telecast, including the right to receive picture or money voice is sent [by] through satellite or through cable, optical fiber or similar technology.

h. Gain from transfer of possession

Principle division of freehold asset pemajakan to gain from transfer of possession follows principle from OECD. If possession transferred is permanent possession hence tax to gain from the alienation is collected in state where the located possession.

Gain from transfer of boat or plane operated in international line is hit [by] tax in state where company operating it is dimiciling.

Gain from transfer of motion possession becoming part of a " form of permanent business" freehold asset pemajakan stays hand [by] state where form of the permanent business stays.

While possession that is is not included in category to imposition of tax to gain from its(the alienation is hit [by] tax in state where its(the seller livings.

i. Production from the relation of job(activity

Time test for employee from one of state working in other state that only hit [by] tax in its(the country of origin is 183 days in a period of 12 months. Mean if an employee from PT Indonesia assigned to Mexico, employed it will only be hit tax in Indonesia if fulfilling 3 covenant that is:

i. the employee resides in Mexico less than 183 days in a period of 12 months; and

ii. its(the salary paid by tax subject that is is not livinged in Mexico; and

iii. its(the salary is not charged upon " form of permanent business" from Indonesia company residing in Mexico.

j. Production from free work

Production from free work by tax subject from one of state also will be hit tax in other state if its(the activity is done [by] through a the permanent place in that other state. Or the resided in other state of that is for a period of exceeding 91 days in a period of 12 months.

The concerned free work is medical doctor, lawyer, engineer, dentist, architect and accountant.

k. Director salary

Salary received by a director from a company livinging in other state, can be hit tax in the other state. The concerned jargon " director" in this context is member of board of directors or commissary keeping off in everyday activity manages the company.

If the director undertake manages company routinely hence treatment of its(the tax bows to rule Section 15 ( Production from the relation of job(activity).

l. Artist and athlete

Fee received by artist or atlet in other state, hit tax in the other state, without seeing duration of its(the activity is done. From the aspect of invitors approach PPh, fee received by Mexican artist for the agenda of show in Indonesia will be collected PPh equal to 20% from gross amounts.

This not applicable treatment if the show is part of culture exchanges program between both states.

m. Retired

Pension received by someone from one of state referring to the work is old world in the state will only be hit tax in source state.

n. Governmental officer

Salary, similar other fee and fee, what received by personal people referring to the service ketatanegaraan given will only be taxed in domicile state unless people the person is other citizen or state resident.

o. Professor and periset

People person doing activity to teach or does research in other university or education institute in other state, which is instituting nir income, struck from imposition of tax in the other state for the duration of 2 year since its(the arrival is for the first time.

p. Student and pemagang

Decent received by student or pemagang executing learning program or apprentice in other state, struck from imposition of tax in the other state, along the length of its(the fund comes from outside state where learning process or apprentice is done.

q. production of Others

Other production, was production besides than production mentioned in the face of only hit [by] tax in state where its(the receiver livings.