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Tax efficient operation: Indonesia - Hong Kong

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  • Tax efficient operation: Indonesia - Hong Kong

    Dear forum members

    I am sure some of you have (or had) the similar questions before. I really hope you can help me out with this:

    • I am founder and 50% shareholder (Chairman) of a PT here in Indonesia; the other 50% are held by my local partner/Director
    • we quote, produce, invoice etc. all our business currently via our PT
    • therefore, all our profits will be subject to 25% corporate tax in Indonesia
    • moreover, my salary/share of the profit is subject to personal income tax in Indonesia

    • Can a Hong Kong Ltd. company (owned by myself) legally hold my 50% of the shares instead?
      • my share of the profit would therefore go to HK, where I personally am subject to lower income tax

    • what implications/consequences do I have to expect?
    • FYI: I am HK resident, therefore I can establish a Ltd. there any time

    • what if we would invoice all projects here in Indonesia via the Ltd. company in HK
      • for the HK-company this would be "business generated outside the territory of HK" and therefore not subject to corporate tax
      • the local PT could invoice its expenses (local salaries, office rent...) back to the HK-company
      • the local PT would not make any or just little profit
      • most of the profit would be made in the HK-Ltd.

    • what consequences does a foreign invoice have
      • for the client in Indonesia?
      • for the HK-company? (is there any tax to be paid in Indo?)

    • in how far does the HK-Indo double-taxation agreement help?

    It is obvious that my major goal is to structure the organization as tax efficient as possible. Legal of course!

    I welcome all your experiences, thoughts and recommendations!

    Thank you very much
    Best regards


  • #2
    Hi daggle,

    Better to ask lawyer/tax consultant about this. But let me help you a little bit.

    Question 1:
    1. yes, you can
    2. better ask lawyer/tax consultant. I think the amount of tax will also be different.

    Question 2:
    1. I think it would called international transaction. You have to pay attention to the use of Rupiah requirements in invoicing matters.
    again, please refer to the lawyer/tax consultant.

    I know I dont help much. But better than leave your thread in blank post :P


    • #3
      Hi saw this tread just now, I had some similar challenges with invoices from a Singapore entity to Indonesia. There is a Witholding Tax complication, for most invoices from outside Indonesia to an Indonesian entity, the later one has to withold 20% WHT, so to say as agent for the Indonesian governement. To avoid this, you need to use a special form called DGT1 for each invoice, get it stamped by the Indonesian authorities and provide it together with your invoice to the Indonesian entity, then they can pay your invoice in full. It's a bureaucratic nightmare...