Recognition of Permanent Establishment under the China-Indonesia Tax Agreement丨Indonesia Tax Guide 2025 (53)
China-Indonesia Tax Agreement
Permanent Establishment
2025-03-28 09:10:13
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This issue's introduction
Determination of permanent establishment under the China-Indonesia tax treaty
China-Indonesia Tax Agreement and Mutual Consultation Procedure
(2) The term "permanent establishment" includes in particular:
① a place of management;
② a branch;
③ an office;
④ a factory;
⑤ a place of work;
⑥ a warehouse providing storage facilities for others;
⑦ a place of business for sales;
⑧ a farm or plantation;
⑨ a mine, oil or gas well, quarry or other place where natural resources are extracted.
(3) The term "permanent establishment" also includes:
① a construction site, a construction, assembly or installation project, or supervisory and management activities related thereto, only if the site, project or activity continues for more than six months;
② services, including consulting services, provided by an enterprise of one Contracting State through its employees or other employed persons in the other Contracting State for the same or a related project, only if the services continue or the aggregate exceeds six months;
③ a drilling rig or work vessel used for the exploration or extraction of natural resources, only if the services continue or the aggregate exceeds six months.
(4) Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:
① Facilities used exclusively for the purpose of storing or displaying goods or merchandise of the enterprise;
② Stocks of goods or merchandise of the enterprise kept exclusively for the purpose of storage or display;
③ Stocks of goods or merchandise of the enterprise kept exclusively for the purpose of processing by another enterprise;
④ A fixed place of business established exclusively for the purpose of purchasing goods or merchandise or gathering information for the enterprise;
⑤ A fixed place of business established exclusively for the purpose of advertising or providing information;
⑥ A fixed place of business established exclusively for the purpose of carrying on other preparatory or auxiliary activities of the enterprise;
⑦ A fixed place of business established exclusively for a combination of activities from items 1 to 5, if as a result of such combination all the activities of the fixed place of business are of a preparatory or auxiliary character.
(5) Notwithstanding the provisions of Articles (1) and (2), where a person (other than an independent agent to whom paragraph (7) applies) carries on activities in a Contracting State on behalf of an enterprise of the other Contracting State, the enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person performs for the enterprise if that person:
i) has the authority and regularly exercises that authority to conclude contracts on behalf of the enterprise, unless the activities of that person carried on through a fixed place of business are limited to the provisions of paragraph 4 in which case that fixed place of business shall not be deemed to be a permanent establishment for the purposes of that paragraph;
ii) does not have that authority but regularly keeps in the first-mentioned Contracting State a stock of goods or merchandise and regularly makes deliveries from that stock on behalf of the enterprise.
(6) An insurance enterprise of a Contracting State, other than reinsurance, shall be deemed to have a permanent establishment in the first-mentioned State if it collects premiums or carries on insurance business in the first-mentioned State through employees or representatives other than independent agents as referred to in Article (7).
(7) An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or other independent agent acting in the ordinary course of its own business. However, if the activities of such an agent are wholly or almost wholly on behalf of the enterprise, such agent shall not be deemed to be an independent agent within the meaning of this paragraph.
(8) The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other State (whether through a permanent establishment or otherwise) shall not of itself constitute either company a permanent establishment of the other.
The excitement continues in the next issue…