Double Taxation Avoidance Agreement between Thailand and Indonesia Completed in 2000 This document was downloaded from ASEAN Briefing (www.aseanbriefing.com) and was compiled by the tax experts at Dezan Shira & Associates (www.dezshira.com). Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. AGREEMENT BETWEEN THE GOVERNMENT OF THE KINGDOM OF THAILAND AND THE GOVERNMENT OF THE REPUBLIC OF INDONESIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME The Government of the Kingdom of Thailand and the Government of the Republic of Indonesia, DESIRING to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, HAVE AGREED AS FOLLOWS : Article 1 PERSONAL SCOPE This Agreement shall apply to persons who are residents of one or both of the Contracting States. 2 Article 2 TAXES COVERED 1. This Agreement shall apply to taxes on income imposed on behalf of one of the Contracting States, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. 3. The existing taxes to which the Agreement shall apply are: (a) in Thailand : (i) the Income Tax; (ii) the Petroleum income Tax. (hereinafter referred to as “Thai tax”). (b) in Indonesia: the income tax imposed under the Undang-undang Pajak Penghasilan 1984 (Law Number 7 of 1983 as amended), (hereinafter referred to as “ Indonesian tax”) . 4. The Agreement shall also apply to any identical or substantially similar taxes on income which are imposed after the date of signature of the Agreement in addition to, or in place of, those referred to in paragraph 3. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws. 3 Article 3 GENERAL DEFINITIONS 1. For the purposes of this Agreement, unless the context otherwise requires : (a) the term “Indonesia” comprises the territory of the Republic of Indonesia as defined in its laws and the adjacent areas over which the Republic of Indonesia has sovereignty, sovereign rights or jurisdiction in accordance with international law; (b) the term “ Thailand” means the Kingdom of Thailand and includes any area adjacent to the territorial waters of the Kingdom of Thailand which, under Thai legislation, and international law, falls under the jurisdiction of the Kingdom of Thailand; (c) the terms “a Contracting State” and “the other Contracting State” mean Indonesia or Thailand, as the context requires; (d) the term “person” includes an individual, a company and any other body of persons as well as any entity treated as a taxable unit under the taxation laws in force in either Contracting State; (e) the term “company” means any body corporate or any entity which is treated as a body corporate under the taxation laws in force in either Contracting State; (f) the term “national” means: (i) any individual possessing the nationality of a Contracting State; (ii) any legal person, partnership, association and any other entity deriving its status as such from the laws in force in a Contracting State; 4 (g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively, an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; (h) the term “tax” means Indonesian tax or Thai tax as the context requires; (i) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; (j) the term “competent authority” means: (i) in the case of Indonesia, the Minister of Finance or his duly authorized representative; (ii) in the case of Thailand, the Minister of Finance or his duly authorized representative. 2. As regards the application of the provisions of this Agreement by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting State concerning the taxes to which this Agreement applies. 5 Article 4 RESIDENT 1. For the purposes of this Agreement, 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 incorporation, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State. 2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows : (a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests) ; (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; (c) if he has an habitual abode in both States or in neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting State, the competent authorities of the States shall settle the question by mutual agreement. 6 Article 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term “permanent establishment” includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory ; (e) a workshop; (f) premises used as sales outlet; (g) a warehouse, in relation to a person providing storage facilities for others; (h) a farm or plantation or other place where agricultural, pastoral, forestry or plantation activities are carried on; (i) a mine, an oil or gas well, a quarry or any other place of extraction or exploration of natural resources, drilling rig or ship used for exploration or exploitation of natural resources. 3. The term “permanent establishment” likewise encompasses: (a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue in one of the Contracting States for a period of more than six months; (b) the furnishing of services, including consultancy services by an enterprise through an employee or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than six months within any twelve month period. 4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include: 7 (a) the use of the facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising or for supply of information; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraph (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 5. A person (other than a broker, general commission agent or any other agent of an independent status to whom paragraph 7 applies) acting in a Contracting State on behalf of an enterprise of the other Contracting State shall be deemed to be a permanent establishment in the first- mentioned State, if: (a) he has and habitually exercises in the first-mentioned State an authority to negotiate and conclude contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he habitually maintains in the first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly delivers goods or merchandise for or on behalf of the enterprise; or (c) he habitually secures orders in the first-mentioned State wholly or almost wholly for the enterprise itself or for the 8 enterprise and other enterprises which are controlled by it or have a controlling interest in it.