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

Taxationavailable to a Singapore company only if the company submits an original copy of its certificate ofdomicile to the Indonesian payor prior to the payment of the interest.On 7 July 2005, the Directorate General of Taxation in Indonesia issued a circular letter indicating thatthe benefits of Indonesia’s tax treaties would not be available to a recipient of Indonesian-sourcedincome who was not the beneficial owner of such income. The circular letter further elaborated that a“special purpose vehicle” which is a “conduit company”, “paper box company”, “pass-through company”or any similar form of entity would not qualify as the beneficial owner of payments received by it. Itremains uncertain as to how the Indonesian tax authorities will decide whether or not the SingaporeSPCs are the beneficial owners of interest received from the Indonesian SPCs.In the event that the Singapore SPCs were viewed by the Indonesian tax authorities as conduitcompanies or pass-through companies, and therefore not the beneficial owners of interest receivedfrom the Indonesian SPCs, the Unitholders of LMIR Trust should in that case be viewed as the beneficialowners of the interest. In that case it should still be possible to take the position that the reduced rate ofwithholding tax is applicable, to the extent that the Unitholders are tax resident in Singapore or any otherjurisdiction with the same tax rate under their respective tax treaty.Payment of dividends from Indonesian SPCs to Singapore SPCsTax implications for the Indonesian SPCs• VAT on the Payment of DividendsThere will be no VAT on the payment of dividends.• Article 26 Withholding Income Tax on the Payment of DividendsThe Indonesian tax rules generally require a 20.0% tax to be withheld on the payment of a dividend froman Indonesian taxpayer to an offshore tax resident. Under the tax treaty between Singapore andIndonesia, the rate of withholding tax is reduced to 10.0% on the payment of a dividend to Singapore taxresident beneficial owner of the dividend. The reduced rate is available to a Singapore company only ifthe company submits an original copy of its certificate of domicile to the Indonesian payor prior to thepayment of the dividend.As stated above, the Directorate General of Taxation in Indonesia issued a circular letter indicating thatthe benefits of Indonesia’s tax treaties would not be available to a recipient of Indonesian-sourcedincome who was not the beneficial owner of such income. The circular letter further elaborated that a“special purpose vehicle” which is a “conduit company”, “paper box company”, “pass-through company”or any similar form of entity would not qualify as the beneficial owner of payments received by it. Itremains uncertain as to how the Indonesian tax authorities will decide whether or not the SingaporeSPCs are the beneficial owners of dividends received from the Indonesian SPCs.In the event that the Singapore SPCs were viewed by the Indonesian tax authorities as conduitcompanies or pass-through companies, and therefore not the beneficial owners of dividends receivedfrom the Indonesian SPCs, the Unitholders of LMIR Trust should in that case be viewed as the beneficialowners of the dividends. In that case it should still be possible to take the position that the reduced rateof withholding tax is applicable, to the extent that the Unitholders are tax resident in Singapore or anyother jurisdiction with the same tax rate under their respective tax treaty.254