Indonesia Singapore Tax Treaty: Rates, Service Fees and Claims

The Indonesia Singapore tax treaty (P3B, Persetujuan Penghindaran Pajak Berganda) in force today is the double tax agreement signed on 4 February 2020, and Indonesia applies it to tax withheld on amounts paid or credited from 1 January 2022 (Article 29(2)). It caps the 20% that Indonesia otherwise withholds from dividends, interest and royalties paid to Singapore, under PPh 26 (Pajak Penghasilan Pasal 26, income tax under Article 26 of the Income Tax Law). A fee for services, other than one that is really a royalty, is taxable only in Singapore, unless the Singapore company has a permanent establishment (PE) in Indonesia (Article 7(1)).

If you are a Singapore company with a customer or subsidiary in Indonesia, or the Indonesian company paying one, this is what applies. Article numbers refer to the 2020 agreement.

The rates under the Indonesia Singapore tax treaty

Each cap on dividends, interest and royalties needs the Singapore recipient to be the beneficial owner (Articles 10(2), 11(2) and 12(2)). The rates without a treaty come from the Income Tax Law, Article 26(1) and (4), as amended by Law No. 6 of 2023.

Singapore then credits the Indonesian tax against its own tax on the same income, under its own law (Article 23).

Which treaty applies, and since when

1. 1
   4 February 2020

   Signed

   The new agreement is signed to replace the one of 1990.

2. 2
   23 July 2021

   In force

   It enters into force, as IRAS, Singapore’s tax authority, records.

3. 3
   1 January 2022

   Applies

   Indonesia applies it to withholding on amounts paid or credited from this date.

The 2020 agreement replaced the one signed in 1990, for every case it covers, from the date it took effect (Article 29(3)). Two caps changed. Royalties were a single 15% and are now 10% or 8%, and branch profit tax fell from 15% to 10%. The caps on dividends and interest are the same as before. Check any royalty or branch profit calculation that still uses the old figures.

Service fees and a permanent establishment

A Singapore company’s business profits are taxable only in Singapore unless it carries on business in Indonesia through a PE, and then Indonesia may tax only the profits attributable to it (Article 7(1)). A PE is a fixed place of business, such as a branch, an office or a factory (Article 5(1) and (2)). So a fee an Indonesian company pays a Singapore company for services, other than one that is really a royalty, is taxable only in Singapore, unless that company has a PE here. It also has one when its activity in Indonesia passes one of these time tests (Article 5(2)(h) and (i), and 5(4)):

The services test counts work done through employees or other personnel, other than an independent agent. Indonesia’s own tests, for a country with no treaty, are set out in our guide to permanent establishment in Indonesia.

A payment for the use of industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience (know-how), is a royalty at the 8% cap, not a service fee (Article 12(3)(b)). Even where nothing is due in Indonesia, the payer still needs the recipient’s treaty form, still reports the payment and still issues a withholding slip (Peraturan Menteri Keuangan, a Minister of Finance regulation, PMK 112/2025, Articles 10 and 14(2)).

Selling shares in an Indonesian company

Under the treaty’s general rule, a gain a Singapore resident makes on selling shares in an Indonesian company is taxable only in Singapore (Article 13(6)). Indonesia’s own rules are in our guide to capital gains tax on shares. Indonesia may tax the gain in two cases that concern shares:

• Shares in a land-rich company. Indonesia may tax the gain on shares that are not traded on an approved stock exchange and draw more than 50% of their value, directly or indirectly, from immovable property in Indonesia, if the seller owned at least 50% of the company’s issued shares. This does not apply where the company carries on its business in that property, or to shares sold or exchanged in a reorganisation, merger or similar operation (Article 13(4)).
• Shares listed on the Indonesia Stock Exchange. Indonesia may tax the gain under its own rules for share sales on the exchange (Article 13(5)).

Who can claim the lower rates

The lower dividend, interest and royalty caps go only to a Singapore resident that is the income’s beneficial owner. The treaty also has its own principal purpose test. It refuses a benefit where it is reasonable to conclude that obtaining it was one of the principal purposes of an arrangement or transaction, unless it is established that granting it would be in line with the treaty’s object and purpose (Article 28).

For the 10% dividend cap, the treaty asks for a company holding at least 25% of the capital directly (Article 10(2)(a)).

The tax office may check the holding, and how long it has been held, when a lower dividend rate is claimed (PMK 112/2025, Article 18(3)). Whether a Singapore company should own the Indonesian one at all is a wider question, covered in our guide to holding company structures.

How the treaty rate is claimed

The Singapore recipient gives the Indonesian payer a Directorate General of Taxes (DGT) Form, certified by the authority in Singapore. The payer checks it and uploads it in Coretax, the tax office’s online system (PMK 112/2025, Articles 8 to 10). Our guide sets out how a treaty rate is claimed, step by step.

Payments to Singapore sit alongside the company’s other payments abroad, covered in our guide to PPh 26. Dividends are covered in our guide to dividend tax.

Questions people ask

How we help

Within our corporate tax service, we take care of PPh 26 on payments to Singapore each month. Send us the list of outgoing invoices, and we will say which line of the table fits each one.