RI, HONG KONG SIGN DOUBLE-TAXATION AVOIDANCE ACCORD

Jakarta, March 23 (ANTARA) - Indonesia and Hong Kong signed an agreement on avoidance of double taxation (P3B) here on Tuesday to provide fiscal certainty and stability.

The agreement was signed by Indonesia's Finance Minister Sri Mulyani and the finance secretary of China's Hong Kong Special Administrative Region, John Tsang, at the finance ministry.

"The P3B will give certainty and stability in tax treatment on flows of human resources, capital or technology between Indonesia and Hong Kong," Minister Sri Mulyani said.

She said it was hoped economic relations between the two sides would rise with constraints being eradicated and reduced.

"The agreement is also a significant step forward to achieve international standard global cooperation on tax information exchange," she said.

The P3B agreement will also strengthen the integrity of the Indonesian tax system due to the facilitation for information exchange on tax payers including banking information by the two sides' tax authorities and continued international efforts to increase transparent financial system and prevent tax avoidance abroad.

John Tsang meanwhile said that the agreement would boost transparency process between the two countries and business certainty.

The tax director of the directorate general of taxation, Syarifuddin Alsyah said with the agreement tax on dividends would be reduced to 10 percent from initially 20 percent and in case of direct investment a five percent dividend cost would be imposed on minimally 25 percent of shares in each of the country.

"There is also an incentive for foreign direct investment and branch profit if they have branch offices in the countries concerned or if we have a branch in Hong Kong we will get a five percent tax," he said.

He said under the agreement tax on interest is set at 10 percent from normally 20 percent and five percent on royalty if residents get royalties in other countries.