LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

TaxationTax implication for the Indonesian SPCsOn the rental payments received from the Tenants• Corporate Income TaxThe rental income received from the Tenants will be subject to final income tax (Withholding article 4(2)Income Tax) at the rate of 10.0%. Because the rental income has already been subjected to the finalincome tax, the said income should not be combined with other non-final income in calculating thecorporate income tax due for the corresponding tax year.The imposition of final income tax to the rental income treated as income for the Indonesian SPCs andthe income tax of 10.0% withheld by the Tenants will be treated as payment for the corporate income taxdue for the respective Indonesian SPCs. The imposition of final income tax does not mean that theincome from the lease of land and/or buildings does not need to be reported in the Annual CorporateIncome Tax Return (SPT Tahunan PPh Badan) of the Indonesian SPCs. The rental income must bereported in the Indonesian SPC’s returns, however it should not be combined with other non-finalincome in calculating the income tax due for the corresponding tax year.• VAT on the Rental of Land and/or BuildingThe Indonesian SPCs must charge 10.0% VATon the rental of land and/or building (taxable service) tothe Tenants.On the payment of Management Fee to the Property Manager• Article 23 withholding income taxThe Indonesian SPCs must withhold article 23 income tax at the rate of 4.5% from the payment ofmanagement fees to the Property Manager. This 4.5% withholding tax will be treated as prepaid tax forthe Property Manager.Please be advised that according to Article 13 of Law No. 16/2000 regarding General Tax Provisions andProcedures, the Directorate General of Taxation shall have the authority to conduct audit or verificationwithin a 10 years period after the end of fiscal year or fiscal period.Tax implications on the Retail Spaces portion of the LMIR Trust StructureTax implication for the Master LesseeOn the transfer of title of land and/or buildings• Capital Gains TaxAny capital gain received by the Master Lessee from the transfer of title of land and/or buildings (i.e.,Retail Spaces) to the Indonesian SPCs is subject to tax pursuant to Article 17 of Income Tax Law No. 17/2000 with a maximum rate of 30.0% and the liability for such capital gains tax is the sole obligation of theMaster Lessee.• Income Tax on the Transfer of Title of Land and/or BuildingsThe transfer of title of Land and/or Buildings by the Master Lessee will be subject to 5.0% income tax asstipulated by Government Regulation No. 79/1999, which can be treated as tax credit in calculating theamount of tax due for corporate income tax for the Master Lessee.• VATConsidering that the Master Lessee is a Taxable Entrepreneur, the Master Lessee needs to charge10.0% VAT on the transfer. This VAT will be treated as input tax for the Indonesian SPCs and will beoffset against Indonesian SPCs’ output tax (i.e. VAT charged by the Indonesian SPCs to the MasterLessee on the rental fee) to arrive at the amount of VAT due to the state treasury.252