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

TaxationOn the rental payments to the Indonesian SPCs• Article 4(2) Withholding Income TaxThe payment of rental on land and/or buildings leased by the Master Lessee to the Indonesian SPCs willbe subject to 10.0% final withholding income tax on the gross value of the land and/or buildings rental.• VATGiven the fact that the Master Lessee is a Taxable Entrepreneur, then the 10.0% VAT charged by theIndonesian SPCs on the rental payments should be treated as input tax for the Master Lessee (to beoffset against its output tax to arrive at the amount of VAT due to the state treasury).Tax implication for the Indonesian SPCsOn the transfer of title of land and/or buildings• Property Title Acquisition DutyAs stipulated by Law No. 20/2000, the Indonesian SPCs must pay the Property Title Acquisition Duty atthe rate of 5.0% from the amount of the actual selling price or from the sales value of tax object(predetermined value for tax calculation purposes), whichever is higher.• VATConsidering that the Indonesian SPCs are Taxable Entrepreneurs, then the 10.0% VAT charged by theMaster Lessee on the transfer should be treated as input tax for the Indonesian SPCs (to be off setagainst the output tax from the rental fee to arrive at the amount of VAT due to the state treasury).On the rental income received from the Master Lessee• Corporate Income TaxThe rental income received from the Master Lessee will be subject to final withholding income tax(Withholding article 4(2) Income Tax) at the rate of 10.0% because the rental income has alreadysubjected to the final income tax, then the said income should not be combined with other non-finalincome in calculating the corporate income tax due for the corresponding tax year.The rental income received from the Master Lessee will be treated as income for the Indonesian SPCsand the income tax of 10.0% withheld by the Master Lessee will be treated as payment for the corporateincome tax due for the respective Indonesian SPCs. The imposition of final income tax does not meanthat the income from the lease of land and/or buildings does not need to be reported in the AnnualCorporate Income Tax Return (SPT Tahunan PPh Badan) of the Indonesian SPCs. The rental incomemust be reported in the annual tax return, however, the income should not be combined with other nonfinalincome in calculating the income tax due for the corresponding tax year.• VATThe Indonesian SPCs must charge 10.0% VATon the rent of land and/or building (taxable service) to theMaster Lessee. This VATshould be treated as input tax for the Master Lessee and to be offset against itsoutput tax to arrive at the amount of VAT due to the state treasury.Payment of Shareholders’ Loans and related interest from Indonesian SPCs to Singapore SPCsTax implications for the Indonesian SPCs• The Repayment of Principal from Shareholders’ LoansThe repayment of principal from the shareholder’s loans will not be subject to any form of Indonesian taxas there are no thin capitalisation rules in Indonesia.• The Payment of Interest on Shareholders’ LoanThe Indonesian tax rules generally require a twenty percent (20%) tax to be withheld on the payment ofinterest from an Indonesian taxpayer to an offshore tax resident. Under the tax treaty betweenSingapore and Indonesia, the rate of withholding tax is reduced to ten percent (10%) on thepayment of interest to Singapore tax resident beneficial owner of the interest. The reduced rate is253