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Legal Updates

Payment Mechanism on Dividends' Income Tax

The Minister of Finance has issued the implementation regulation of Article 3 of Government Regulation No. 19 of 2009 regarding Tax on Dividend Receipts and Dividend Payments (the “Regulation”). The regulation, issued on 14 June 2010, is Minister of Finance Regulation No. 111/PMK.03/2010 regarding Procedures for the Withholding, Payment and Reporting of Income Tax on Dividend Received by Domestic Individual Tax Payers (“Regulation No. 111”).

Regulation No. 111 basically sets forth the rate of the income tax, which is 10%. The rate is final and is applicable to all kinds of dividends, including dividends paid by cooperatives as well as by insurance companies. The parties paying the dividends are obliged to withhold the tax amount for forwarding to the tax office. The regulation, being implementing regulation, stipulates in detail the mechanics for the calculation of the tax amount as well as the manner for the reporting and for the payment.

Regulation No. 111 has been in force since the day of its issue.

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