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Indonesia Iran Tax Treaty: Lowest Dividend Tax Rate in the World


Following the exchange of notes of ratification between Indonesia and the Islamic Republic of Iran the Government announced that the tax treaty between the two countries will enter into effect on or after 1 January 2011. Taxand Indonesia looks at the agreement and its provisions which are retroactive.

The treaty sets out the right to tax by the source country which is limited to designated
tax rates, which are as follows:

Dividend 7 % Gross income
Interest 10 % Gross income
Royalty 12 % Gross income
Branch Profit Tax 7 % After-tax profit

However, if a taxpayer in Iran as the receiver of income in the form of dividends, interest or royalties
is not the beneficial owner who is a resident in Iran (as evidenced by a Certificate of Domicile), then
such income may be taxed at a rate of 20%.

Taxand's Take

Interestingly, the rate of tax on dividends envisaged by this tax treaty is the lowest in the world, thus
making Iran an attractive investment destination for Indonesian businesses compared with other
tax-treaty partners.

Read the full article from Taxand Indonesia, along with commentary on the tax treatment of donations, tax audit targets and an update of audit 'rules of the game'.

Your Taxand contact for further queries is:
Prijohandojo Kristanto
T. +62 21 835 6379

Taxand's Take Author