Indonesia-Singapore DTAA: Tax Treaty Guide with Examples
The Singapore–Indonesia Double Taxation Avoidance Agreement (DTAA) is a bilateral treaty that aims to ensure individuals and businesses are not taxed twice on the same income when earning across both countries. It allocates taxing rights between Singapore and Indonesia, reducing or eliminating double taxation through a framework of exemptions, reduced tax rates, and tax credits.
This guide is designed for:
- Individuals who are tax residents of either Singapore or Indonesia and earn income from the other country;
- Companies with operations, service arrangements, or investments across both jurisdictions.
It explains how the DTAA applies to different types of cross-border income such as dividends, interest, royalties, capital gains, business profits, and employment income, and includes practical examples with estimated tax outcomes based on treaty rules.
To explore how to incorporate a business and begin operations in Singapore, refer to our detailed Guide on Singapore Company Registration.
This article covers the following topics of the Singapore-Indonesia DTAA:
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Indonesia-Singapore DTAA: Purpose & Scope
The Singapore–Indonesia Double Taxation Avoidance Agreement (DTAA) is intended to prevent the same income from being taxed in both countries. It also establishes clear rules to avoid tax evasion and ensure fair allocation of taxing rights between Singapore and Indonesia.
What is Covered
The DTAA applies to taxes on income imposed by either country. This includes income such as business profits, dividends, interest, royalties, capital gains, employment income, directors' fees, independent professional services, dependent personal services, as well as government pensions and scholarships.
Who is Covered
The agreement applies to residents of Singapore or Indonesia. This includes individuals, companies, and any other legal entities that are liable to tax in their country of residence.
To apply the DTAA effectively, one must consider how Singapore’s domestic tax laws interact with treaty provisions. Issues such as whether income is deemed received in Singapore, how foreign-sourced income is treated, and whether a taxpayer qualifies for relief or credit depend on the specifics of local tax rules. This includes how Singapore defines tax residency, the types of income subject to tax, and the mechanisms used to prevent double taxation. For a deeper understanding of these aspects, refer to our guides on the Singapore Tax System, Corporate Tax framework, and Personal Income Tax rules.
Indonesia-Singapore DTAA: Key Terms Defined
Person
Defined in Article 3(1)(d) of the treaty, a "person" includes:
- An individual;
- A company;
- Any other body of persons, such as partnerships and associations that are treated as taxable entities.
Tax Resident
As explained in Article 4, a resident of a Contracting State is any person who, under the laws of that State, is liable to tax due to domicile, residence, place of incorporation, management, or other similar criteria. Special tie-breaker rules apply when a person qualifies as a resident of both countries:
- For individuals: factors include permanent home, center of vital interests, habitual abode, and nationality.
- For entities: residency is resolved by mutual agreement between the competent authorities.
Permanent Establishment (PE)
Defined in Article 5, a permanent establishment is a fixed place of business through which the business of an enterprise is carried out wholly or partly. This may include:
- A branch, office, factory, or workshop;
- A construction site or project that lasts more than 183 days;
- Provision of services in the other country for more than 90 days in any 12-month period;
- Agents with authority to conclude contracts on behalf of the enterprise, under certain conditions.
Some activities are excluded from PE status, such as:
- Facilities used only for storage, display, or delivery of goods;
- Activities that are preparatory or auxiliary in nature (e.g. collecting information or advertising).
Withholding Tax
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Indonesia–Singapore DTAA: Tax on Business Profits
How business profits are taxed under the treaty
Treaty Provision
Under Article 7 of the Singapore–Indonesia DTAA, business profits are taxable only in the country where the enterprise is a resident, unless the business is conducted in the other country through a permanent establishment. In that case, the other country may tax only the profits attributable to that PE.
This article applies the arm’s length principle, which is the core concept in transfer pricing. It requires that the profits attributed to a permanent establishment reflect the amount the PE would earn if it operated as a separate and independent enterprise. For more on this topic, refer to our Singapore Transfer Pricing Guide.
Example 1: Singapore company earning from Indonesia (No PE in Indonesia)
A Singapore-based consulting firm provides services to clients in Indonesia but does not have any fixed place of business or staff in Indonesia.
- Taxable in Singapore only, under Article 7(1), since no PE exists in Indonesia.
- Indonesia cannot impose tax on the profit under the DTAA.
- The company pays Singapore corporate tax on the full S$500,000 (at prevailing rate, typically 17%).
Example 2: Singapore company earning from Indonesia (With PE in Indonesia)
A Singapore construction company operates a site in Indonesia that lasts more than 183 days, qualifying as a PE under Article 5.
- Indonesia can tax the portion of profit attributable to the PE.
- Suppose S$300,000 of the total S$500,000 is attributable to the Indonesian PE:
- Indonesia applies its domestic tax rate on S$300,000.
- The remaining S$200,000 is taxed in Singapore.
- Singapore allows a foreign tax credit for Indonesian tax paid, subject to its domestic rules.
Example 3: Indonesian company earning from Singapore (No PE in Singapore)
An Indonesian software firm licenses its product to Singapore clients and earns S$500,000, but does not maintain any presence or agent in Singapore.
- Since there is no PE in Singapore, the income is taxable only in Indonesia under Article 7(1).
- Singapore does not impose corporate income tax on the Indonesian company’s profit.
- The full amount is subject to Indonesian tax.
Example 4: Indonesian company earning from Singapore (With PE in Singapore)
An Indonesian engineering firm establishes a branch in Singapore, which manages several local projects.
- The branch qualifies as a PE under Article 5.
- Singapore may tax profits attributable to the Singapore branch.
- Assume S$400,000 is attributed to the Singapore PE:
- Singapore taxes that amount under its domestic corporate tax regime.
- Indonesia may tax the remaining S$100,000.
- Indonesia would provide tax credit relief for Singapore tax paid on the PE profits.
Indonesia–Singapore DTAA: Tax on Dividends
How dividends are taxed under the treaty
Treaty Provision
Under Article 10 of the Singapore–Indonesia DTAA, dividends paid by a company resident in one country to a resident of the other may be taxed in both countries. However, if the beneficial owner of the dividends is a resident of the other country, the withholding tax in the source country is limited as follows:
- 10% of the gross amount if the recipient company directly owns at least 25% of the capital of the paying company;
- 15% in all other cases.
In addition, Singapore does not impose withholding tax on dividends under its domestic law. This means dividends paid by Singapore companies to Indonesian residents are not subject to any Singapore withholding tax, regardless of ownership percentage.
Indonesia, however, does levy withholding tax on outbound dividends. The DTAA allows a reduced rate if the conditions above are met.
Example 1: Dividends paid by a Singapore company to an Indonesian resident
A Singapore company distributes S$500,000 in dividends to an Indonesian holding company that owns 30% of its shares.
- Singapore imposes no withholding tax on dividends under its domestic law.
- Indonesia taxes the dividend upon receipt, using its domestic law.
- The Indonesian recipient may claim credit for foreign tax paid, but since no tax was withheld in Singapore, the full amount may be subject to Indonesian tax unless other reliefs apply.
Example 2: Dividends paid by an Indonesian company to a Singapore resident
An Indonesian company pays S$500,000 in dividends to a Singapore company that owns 20% of its shares.
- Under the DTAA, the withholding tax is capped at 15%, since ownership is below 25%.
- Indonesia applies a 15% withholding tax, which amounts to S$75,000.
- The Singapore recipient includes the S$500,000 dividend in its taxable income.
- Singapore grants a foreign tax credit for the S$75,000 Indonesian tax, subject to domestic limitations.
- If the Singapore company had owned at least 25%, the rate would have been reduced to 10%.
For more details on how cross-border dividends are taxed under local rules, refer to our Singapore Withholding Tax Guide.
Indonesia–Singapore DTAA: Tax on Capital Gains
How capital gains are taxed under the treaty
Treaty Provision
Under Article 13 of the Singapore–Indonesia DTAA, capital gains are generally taxable only in the country of residence of the seller, except in certain cases. The key rules are:
- Gains from the sale of immovable property may be taxed in the country where the property is located.
- Gains from the sale of movable property that is part of a permanent establishment or fixed base may be taxed in the country where the PE is located.
- Gains from the sale of ships or aircraft operated in international traffic are taxable only in the country of residence.
- Gains from the sale of non-listed shares deriving more than 50% of their value from immovable property in the source country may also be taxed there, if the seller owned at least 50% of the company.
- Gains from the sale of listed shares on the Indonesia Stock Exchange may be taxed in Indonesia according to its domestic rules.
In all other cases, capital gains are taxable only in the country of the seller's residence.
Example 1: Sale of Indonesian shares by a Singapore resident
A Singapore resident sells non-listed shares in an Indonesian company for a gain of S$500,000. The shares derive more than 50% of their value from Indonesian real estate, and the seller owns 60% of the company.
- Under Article 13(4), Indonesia may tax the gain because the value is derived from immovable property in Indonesia and the ownership threshold is met.
- Indonesia levies capital gains tax at domestic rates.
- Singapore also taxes worldwide capital gains if the gain is considered trading income (case-by-case).
- Singapore allows a foreign tax credit for Indonesian tax paid, subject to domestic rules.
If the shares had been listed on the Indonesia Stock Exchange, the tax would be governed by Indonesia’s Minister of Finance Decree No. 282/KMK.04/1997, as referenced in Article 13(5).
Example 2: Sale of Singapore shares by an Indonesian resident
An Indonesian company sells shares in a Singapore company and earns a capital gain of S$500,000. The Singapore company does not hold real estate in Indonesia, and the Indonesian company has no PE in Singapore.
- Under Article 13(6), only Indonesia may tax this gain, as it does not fall into any exception.
- Singapore does not impose tax on capital gains under domestic law.
- The Indonesian seller is taxed in Indonesia according to its own capital gains tax provisions.
Indonesia–Singapore DTAA: Tax on Interest Income
How interest income is taxed under the treaty
Treaty Provision
According to Article 11 of the Singapore–Indonesia DTAA, interest income may be taxed in both the source country and the country of residence of the recipient. However, if the recipient is the beneficial owner of the interest, the withholding tax in the source country is capped at 10% of the gross amount of interest.
There are also exemptions:
- Interest paid to the government or specified government-related entities of either country is exempt from tax in the other country.
- If the interest is connected to a permanent establishment or fixed base, it is taxed under Article 7 (Business Profits) or Article 14 (Independent Services), not Article 11.
Example 1: Interest paid by a Singapore company to an Indonesian resident
A Singapore company pays S$100,000 in interest to an Indonesian bank that qualifies as the beneficial owner.
- Under Article 11(2), Singapore may impose a withholding tax of up to 10%, which is S$10,000.
- Indonesia also taxes the interest as foreign income under its domestic rules.
- The Indonesian bank can claim a foreign tax credit for the S$10,000 withheld in Singapore.
Example 2: Interest paid by an Indonesian company to a Singapore resident
An Indonesian company pays S$100,000 in interest to a Singapore investment firm, which is the beneficial owner.
- Under the DTAA, Indonesia may apply a 10% withholding tax, amounting to S$10,000.
- Singapore taxes the interest income under its domestic law, but the Singapore firm is entitled to a foreign tax credit for the tax paid in Indonesia.
- If the interest were paid to a qualifying Singapore government-linked entity (such as the Monetary Authority of Singapore or GIC), it could be fully exempt from Indonesian tax under Article 11(3) and (4).
Indonesia–Singapore DTAA: Tax on Royalties
How royalty income is taxed under the treaty
Treaty Provision
Under Article 12 of the Singapore–Indonesia DTAA, royalties may be taxed in both the source country and the recipient's country of residence. However, if the recipient is the beneficial owner, the source country’s withholding tax is limited to:
- 10% of the gross amount for royalties related to copyrights, patents, trademarks, and technical know-how (Article 12(2)(a));
- 8% for royalties related to the use of industrial, commercial, or scientific equipment, or for technical information (Article 12(2)(b)).
If the royalty is effectively connected to a permanent establishment or fixed base, it is taxed under Article 7 (Business Profits) or Article 14 (Independent Services), rather than Article 12.
Example 1: Royalty paid by a Singapore company to an Indonesian resident
A Singapore manufacturing firm pays S$100,000 to an Indonesian company for the use of patented technology.
- The Indonesian company is the beneficial owner of the royalty income.
- Under Article 12(2)(a), Singapore may apply a 10% withholding tax, which amounts to S$10,000.
- Indonesia also taxes the income, but the company can claim a foreign tax credit for the S$10,000 paid in Singapore.
- If the royalty related to the use of equipment rather than patents, the rate would be 8% under Article 12(2)(b), reducing the withholding tax to S$8,000.
Example 2: Royalty paid by an Indonesian company to a Singapore resident
An Indonesian company pays S$100,000 to a Singapore firm for the right to use software developed in Singapore.
- The Singapore company is the beneficial owner of the royalties.
- Indonesia applies a 10% withholding tax under Article 12(2)(a), which equals S$10,000.
- Singapore taxes the royalty income under its domestic law, but allows a foreign tax credit for the Indonesian withholding tax paid.
- If the payment was for the use of equipment leased from Singapore, the rate would be 8% under Article 12(2)(b).
Indonesia–Singapore DTAA: Tax on Personal Services
How Independent Services are taxed under the treaty
Treaty Provision
According to Article 14 of the Singapore–Indonesia DTAA, income earned by an individual resident of one country from independent professional or technical services is taxable only in the country of residence, unless either of the following conditions is met:
- The individual has a fixed base regularly available in the other country. In that case, only income attributable to that fixed base may be taxed in the source country.
- The individual is present in the other country for 90 days or more within a 12-month period. If so, only the portion of income earned during that period may be taxed there.
The term “independent services” includes work by consultants, lawyers, engineers, accountants, and similar professions carried out on a self-employed basis.
Example 1: Services by a Singapore resident to an Indonesian company
A Singapore-based legal consultant provides advisory services to an Indonesian company and earns S$100,000. The consultant does not have a fixed base in Indonesia and is physically present for only 45 days.
- Under Article 14, the income is taxable only in Singapore.
- Indonesia has no taxing rights since neither the fixed base test nor the 90-day presence test is met.
- The consultant reports the income in Singapore and pays personal income tax at applicable resident rates.
Now suppose the consultant spends 120 days in Indonesia in a 12-month period delivering services.
- In that case, Indonesia may tax the portion of income earned during the time spent in-country.
- If the entire S$100,000 was earned during those 120 days, Indonesia may apply withholding tax or impose income tax on the full amount under its domestic rules.
- Singapore allows a foreign tax credit for any Indonesian tax paid.
Example 2: Services by an Indonesian resident to a Singapore company
An Indonesian engineer earns S$100,000 by providing independent technical services to a Singapore firm. The engineer does not have a fixed base in Singapore and spends only 30 days in Singapore during the contract.
- Under the DTAA, Singapore may not tax this income, as neither test is met.
- The income is taxable only in Indonesia.
- If, instead, the engineer had a fixed base in Singapore, or was present for more than 90 days, Singapore could tax the portion attributable to the fixed base or time spent.
How Dependent Services are taxed under the treaty
Treaty Provision
Under Article 15 of the Singapore–Indonesia DTAA, employment income (salaries, wages, and other similar remuneration) is taxable only in the country of residence, unless the work is physically performed in the other country.
If the employment is exercised in the other country, then that country has taxing rights, unless all three of the following conditions are met:
- The employee is present in the other country for no more than 183 days in any 12-month period.
- The employer is not a resident of the other country.
- The remuneration is not borne by a permanent establishment or fixed base of the employer in that other country.
If any one of the three conditions is not met, the other country may tax the employment income earned during the time spent there.
Example 1: Singapore resident employed in Indonesia
A Singaporean employee works for a Singapore-based company but is assigned to Indonesia for a short-term project, spending 150 days in Indonesia and earning S$100,000 during this time.
- Since the employee spends more than 183 days, Indonesia may tax the income earned for work performed there.
- The employee continues to be taxed in Singapore as a resident.
- Singapore allows a foreign tax credit for Indonesian tax paid on that income, subject to domestic limitations.
Now suppose the employee had spent only 120 days in Indonesia, the employer had no PE there, and the salary was paid entirely by the Singapore company.
- In this case, all three conditions are met, so only Singapore taxes the income, and Indonesia has no taxing rights.
Example 2: Indonesian resident employed in Singapore
An Indonesian software developer is employed by an Indonesian company and sent to work in Singapore for 200 days, earning S$100,000 during the assignment.
- Since the presence in Singapore exceeds 183 days, Singapore may tax the income earned during the stay.
- If the salary is also paid or borne by a PE in Singapore, this further confirms Singapore's taxing rights.
- The developer continues to be taxed in Indonesia as a tax resident.
- Indonesia provides a tax credit for Singapore tax paid on this income.
If the developer had stayed in Singapore for 90 days, and salary was paid fully by the Indonesian employer with no Singapore PE, then only Indonesia would tax the income.
Indonesia–Singapore DTAA: Tax on Director Fee
How director fee is taxed under the treaty
Treaty Provision
According to Article 14 of the Singapore–Indonesia DTAA, income earned by an individual resident of one country from independent professional or technical services is taxable only in the country of residence, unless either of the following conditions is met:
- The individual has a fixed base regularly available in the other country. In that case, only income attributable to that fixed base may be taxed in the source country.
- The individual is present in the other country for 90 days or more within a 12-month period. If so, only the portion of income earned during that period may be taxed there.
The term “independent services” includes work by consultants, lawyers, engineers, accountants, and similar professions carried out on a self-employed basis.
Example 1: Services by a Singapore resident to an Indonesian company
A Singapore-based legal consultant provides advisory services to an Indonesian company and earns S$100,000. The consultant does not have a fixed base in Indonesia and is physically present for only 45 days.
- Under Article 14, the income is taxable only in Singapore.
- Indonesia has no taxing rights since neither the fixed base test nor the 90-day presence test is met.
- The consultant reports the income in Singapore and pays personal income tax at applicable resident rates.
Now suppose the consultant spends 120 days in Indonesia in a 12-month period delivering services.
- In that case, Indonesia may tax the portion of income earned during the time spent in-country.
- If the entire S$100,000 was earned during those 120 days, Indonesia may apply withholding tax or impose income tax on the full amount under its domestic rules.
- Singapore allows a foreign tax credit for any Indonesian tax paid.
Example 2: Services by an Indonesian resident to a Singapore company
An Indonesian engineer earns S$100,000 by providing independent technical services to a Singapore firm. The engineer does not have a fixed base in Singapore and spends only 30 days in Singapore during the contract.
- Under the DTAA, Singapore may not tax this income, as neither test is met.
- The income is taxable only in Indonesia.
- If, instead, the engineer had a fixed base in Singapore, or was present for more than 90 days, Singapore could tax the portion attributable to the fixed base or time spent.
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