INCOME TAX

ARTICLE 24
 INTRODUCTION

Article 24 income taxes is the tax payable or paid abroad on

income derived from abroad may be credited against the tax payable

on total income of the taxpayer of the State. Crediting of foreign

taxes is carried in combined income in the taxable year of such

foreign income in Indonesia.

LEGAL BASIS :
Law. 7 of 1983 on income tax, most recently by Law no. 36 of
2008.

CREDITING INCOME TAX PAID ABROAD

Taxes on income paid or payable in foreign countries can be
credited against tax payable in Indonesia is a direct tax imposed
on income received or accrued taxpayer.
IMPLEMENTATION OF THE PROVISIONS
OF ARTICLE 24 OF THE INCOME TAX
FOREIGN TAX CREDIT
Tax on total income
Merging income
Loss
Tax Article 24 can be credited
against income tax payable in
Indonesia
The amount of tax credit
Certain amount
Tax credit for each country
PKP does not include income
subject to income tax final
The amount of tax paid in LN
exceeds the allowed
Foreign tax credit application
Extension of period for
submission of application
attachments
Changes in income from LN
with SPT revision
SPT revision not be penalized
for underpayment interest
SPT revision overpayments
compensated with tax debt
 EXAMPLE 1
PT Mandiri received and earn neto from abroad in 2009 as follows:

1. The business results in the Germany in the year of tax on 2009 amounting to Rp 700.000.000,-

2. In Netherlands, it gets dividends on its stock holdings in “ABC Corp” Rp 1,000,000,000,-that coming

from the profits in 2007 set the GMS in 2007 and recently paid in 2009.

3. In the United Kingdom, obtained a dividend on stock investment by as much as 75% on “DEF Corp”

amounted to Rp 2.000.000.000,-. The shares are not traded on the stock exchange. The dividends

derived from 2008 stock profits upon decision of the Minister of Finance set retrieved in 2009.

4. Income in the form of interest 2nd semester on 2009 is Rp 500.000.000,- from Bangkok Bank in

Thailand. The new revenue will be received in April 2010.

The income from foreign sources that coupled with an income of PT Mandiri in the country in the year of

2009 is the tax revenue on numbers 1,2 and 3. While earnings at number 4 combined with earnings of PT

Mandiri from domestic taxes in the year 2010.

 TAX CREDIT LIMIT

A maximum tax credit that lowest taken between 3

elements or the following calculation:
Amount of tax payable or paid overseas.
(Foreign income : the entire taxable income) X income
tax imposed on the entire tariff chapter 17.
Amount of tax payable for the entire taxable income (in
the case of taxable income is less than the foreign
income).
EXAMPLE 2
PT Cemara earn net income in the year 2009 as follows:

- Income from abroad Rp5.000.000.000,00 with a tax rate of 40 %.

- Income Rp3.000.000.000,00 business in Indonesia

Then the amount of net income is:

Rp5.000.000.000,00 + Rp3.000.000.000,00 = Rp8.000.000.000,00

The maximum limit of the lowest tax credits taken from the 3 elements or the following

calculation:

- Income tax due or paid abroad are :

40 % X Rp5.000.000.000,00 = Rp2.000.000.000,00

(Rp5.000.000.000,00 : Rp8.000.000.000,00) x Rp2.240.000.000,00=Rp1.400.000.000,00

- Income tax payable ( under tariff article 17 ) = Rp8.000.000.000,00 x 28 % =

Rp2.240.000.000,00

Thus the tax credit is allowed in point 2 of Rp1.400.000.000,00

 PROCEDURES FOR CREDITING
FOREIGN TAX

The procedure for calculating foreign tax credit:

Merging all income
Losses can’t be compensated
The maximum limit for foreign tax credit
Foreign income sourced from several countries
WP obtain final income subject to income tax
 INCOME DERIVED FROM THE
INCORPORATION OF STATE
Income from business conducted in the
year earned income tax.
Income in the form of dividends, made in
the tax year on acquisition dividends.
Other income, made in the tax year the
income received.
Losses incurred abroad should not be
combined in calculating taxable income
taxed in Indonesia.
Foreign income derived
from several countries
PT. Elok in Jakarta in 2009 earning net income as follows:
Income from domestic Rp2.000.000.000,00

Income of Singapore (the tax rate 40%) Rp1.000.000.000,00

Income from Malaysia (with a 30% tax rate) Rp2.000.000.000,00

Total net income Rp5.000.000.000,00

If the net income equal to the taxable income, how much the
amount of tax
If the net income equal to the taxable income, the amount of tax
Income is payable at the rate of article 17:
28% x Rp5.000.000.000,00 = Rp1.400.000.000,00
The maximum limit for foreign taxes credit for each state are:
a. For Singapore
Rp1.000.000.000,00 x Rp1.400.000.000,00 = Rp280.000.000, 00
Tax payable in foreign countries amounted to Rp400.000.000,00 greater than the maximum tax
credit that can be credited, the amount of credit that allowed only Rp280.000.000,00
b. For Malaysia
Rp2.000.000.000,00 x Rp1.400.000.000 = Rp560.000.000,00
Tax payable in foreign countries for Rp600.000.000,00 is greater than
maximum tax credit that can be credited, then the amount of tax credit
which allowed Rp560.000.000, 00

The amount of foreign tax credit:

Rp.280,000,000.00 + Rp560.000.000,00 = Rp840.000.000,00

Losses Abroad
30% x Rp1.484.160.000,00 = Rp 445.248.000,00
Total Rp540.248.000,00

In calculating taxable income, losses suffered outside the country may not be combined / compensated
by the revenue derived from Indonesia.
Counting foreign tax credit taxpayer
business entities
PT. Abadi in Jakarta earn net income in the year 2009 as follows :
- Income in the country Rp 1.000.000.000,00
- Income of Foreign Affairs (with a 20 % tax rate) Rp1.000.000.000,00
Calculation of the maximum amount of foreign tax credits are:
- Foreign income Rp1.000.000.000,00

- Domestic income Rp1.000.000.000,00

- The amount of net income Rp2.000.000.000,00

If the net income equal to the amount of taxable income , then in accordance
with Article 17 rates , big tax payable :
28 % x Rp2.000.000.000,00 = Rp560.000.000,00
The maximum limit foreign tax credits are :
Rp560.000.000,00 x Rp1.000.000.000,00 = Rp280.000.000,00
Therefore, the maximum limit of foreign tax credits amounting to
Rp280.000.000,00 greater than the amount of foreign tax payable or paid
abroad is Rp200.000.000,00 (20 % x Rp1.000.000.000,00), then the amount
of the foreign tax credit allowed is Rp200.000.000,00.
Counting foreign tax credit for
taxpayers a private person
Net income of Rp2.000.000.000,00
PTKP (TK / 0) (Rp15.840.000,00)
Taxable income of Rp1.984.160.000,00

Income tax rates payable in accordance Article 17

5 % x Rp50.000.000,00 = Rp2.500.000,00
15 % x Rp200.000.000,00 = Rp30.000.000,00
25 % x Rp250.000.000,00 = Rp62.500.000,00
30 % x Rp1.484.160.000,00 = Rp445.248.000,00
Total Rp540.248.000,00
The maximum limit for foreign tax credit :
Rp1.000.000.000,00 x Rp540.248.000,00 = Rp272.280.461,00
Tax payable or paid abroad Rp200.000.000,00 was still smaller than the
maximum limit (Rp272.280.461,00). Therefore, the amount of foreign tax
credit (Article 24) which is allowed for Rp200.000.000,00
Loss of business in the country
PT. Tugu Indah in Jakarta earn net income in the year 2009 as the following:
Income from business abroad Rp1.000.000.000,00
The operating loss in overseas (Rp200.000.000,00)
Tax on overseas income such as 40 % to Rp400.000.000,00
Calculating the maximum foreign tax credit and the tax payable is as follows:
Income from overseas ventures Rp1.000.000.000,00
Operating loss in the country (Rp200.000.000,00)
Net income amount of Rp800.000.000,00
If the net income equal to the amount of taxable income, then the corresponding the rate of
article 17, income tax payable:
28 % x Rp800.000.000,00 = Rp224.000.000,00
The maximum limit for foreign tax credit:
Rp1.000.000.000,00 x Rp224.000.000,00 = Rp280.000.000,00
Because of the tax paid abroad (Rp400.000.000,00) and maximum tax credit that can be
credited Rp280.000.000,00 still greater than the amount of tax payable (Rp224.000.000,00)
the tax paid abroad be allowed to be credited in the calculation of income tax is equal to the
tax payable of Rp224.000.000,00
Loss of business in the abroad
PT. Kita net income in fiscal year 2009 as follows:

In A State derives income (profit) Rp1.000.000.000,00 with a tax rate of 35 % (Rp350.000.000,00).

On the State B derives income (profit) Rp3.000.000.000,00 with a tax rate of 20 % (Rp600.000.000,00).

In the C State suffered a loss of Rp2.000.000.000,00.

Income Rp.4.000.000.000,00 businessin Indonesia.

Foreign tax credit calculation is as follows:

Foreign income

Profit in state A Rp1.000.000.000,00

Earnings in StateB Rp3.000.000.000,00

Loss in State C Rp -

The amount of foreign income Rp4.000.000.000,00

Domestic income Rp4.000.000.000,00

The amount of net income or its taxable income is :

Rp4.000.000.000,00 + Rp4.000.000.000,00 = Rp8.000.000.000,00

Income tax due ( according to article 17 tariff ) = Rp8.000.000.000,00 x 28 % = Rp2.240.000.000,00

The maximum tax credit limit for each is :

For Country A :

(Rp1.000.000.000,00 : Rp.8.000.000.000,00) x Rp2.240.000.000,00 = Rp.280.000.000 , 00

A tax payable in the State of Rp350.000.000,00 the maximum tax credit that can be credited =Rp280.000.000,00

For Country B:

(Rp3.000.000.000,00 : Rp8.000.000.000,00) x Rp2.240.000.000,00 = Rp840.000.000,00

Tax payable in State B of Rp600.000.000,00 then the maximumtax credit that can be credited Rp600.000.000,00

In country C PT Fiscal suffered losses of Rp2.000.000.000,00. This loss can’t be included in the calculation of taxable income. This loss can’t be compensated as foreign tax credits.

The amount of the foreign tax credit is allowed:

Rp280.000.000,00 + Rp880.000.000,00 + Rp600.000.000,00 = Rp880.000.000,00

 REDUCTION / FOREIGN
TAX CREDIT REFUND

As stated in the explanation of Article 24, paragraph 5 of the

Income Tax Act, if there is a reduction or refund of income tax
paid abroad so the amount of tax to be credited in Indonesia to
be smaller than the size of the original calculation, then the
difference is added to the Income Tax payable on total income of
the taxpayer of the Interior in the reduction or refund is done.
 THE MAGNITUDE OF
CHANGES IN FOREIGN
INCOME

In case of any change in the amount of income derived from

abroad, Taxpayers need to revise the Annual Tax Return for Year
Taxes are concerned with attaching documents relating to changes.
REFFERENCES

Soemitro, Rochmad. Dasar-Dasar Hukum Pajak Dan

Pajak Pendapatan 1994. PT. Eresco Bandung. 1992.

Brotodiharjo R., Sentosa. Pengantar Ilmu Hukum Pajak.

PT. Eresco. Bandung. 1989.

Kertasasmita, Husein. Penjelasan dan Komentar Pajak

Penghasilan1984. Yayasan Bina Pajak. Jakarta. 1985.