Dissecting the OECD “Side-by-Side” Package and Its Implications for Taxpayers in Indonesia

The issuance of Minister of Finance Regulation Number 136 of 2024 (PMK 136/2024) marks Indonesia’s bold step in adopting the Global Minimum Tax (GMT) rules. This regulation mandates Multinational Enterprise Groups (MNE Groups) with a consolidated gross revenue exceeding EUR 750 million to ensure they pay a minimum tax of 15% in every jurisdiction where they operate.

However, amidst the complexities of calculating the Effective Tax Rate (ETR) and Top-up Tax, the OECD Inclusive Framework has recently released a strategic guidance document known as the "Side-by-Side Package" (2026). This package offers significant reforms to existing compliance mechanisms, promising material simplification and the protection of tax incentives.

This article explores how this new package interacts with Indonesian domestic law and shapes the future of corporate tax strategy.

Transformation of the Safe Harbour Regime: From Transitional to Permanent

In PMK 136/2024, Article 56 governs the Transitional CbCR Safe Harbour. This facility allows MNE Groups to use data from their Country-by-Country Report (CbCR) and Qualified Financial Statements to test whether they are exempt from Top-up Tax obligations during the transition period.

However, the OECD Side-by-Side Package introduces two fundamental changes that are highly beneficial to Taxpayers:

• Extension of the Transition Period: The document extends the validity of the Transitional CbCR Safe Harbour by one year, covering Fiscal Years starting on or before December 31, 2027. This provides additional breathing room for Taxpayers in Indonesia before shifting to full calculations, even though Article 56 paragraph (2) of PMK 136/2024 currently limits it to 2026. Given that the PMK was drafted based on global consensus, a revision of domestic rules to accommodate this extension is highly likely.
• Simplified ETR Safe Harbour (SESH): As a permanent replacement following the transition period, SESH introduces a simplified ETR calculation method. Unlike the full rules that require detailed entity-by-entity calculations, SESH allows the use of data from Consolidated Financial Statements with minimal adjustments to determine Simplified Income and Simplified Taxes.

Safeguarding Tax Incentives: SBTI Safe Harbour

A primary concern for investors in Indonesia is the fate of Tax Holiday and Tax Allowance facilities. Under the standard GloBE regime, these incentives reduce the ETR, which triggers a Top-up Tax, thereby neutralizing the benefits of the incentives.

The latest OECD package introduces a solution through the Substance-based Tax Incentive (SBTI) Safe Harbour. This mechanism allows Qualified Tax Incentives (QTIs) to be treated as if they were taxes paid (increasing Adjusted Covered Taxes) in the ETR calculation.

To qualify as a QTI, an incentive must be:

• Expenditure-based or production-based; and
• Linked to substantial activities within the jurisdiction (such as investment in physical assets or payroll costs).

Side-by-Side System: Harmonious Coexistence

The document also introduces the concept of the Side-by-Side (SbS) Safe Harbour. This concept is designed to prevent overlap between GloBE rules and the domestic tax systems of other countries deemed equivalent (e.g., the U.S. GILTI system, if certain conditions are met).

If the Ultimate Parent Entity (UPE) is located in a jurisdiction with a Qualified SbS Regime, the Top-up Tax (both IIR and UTPR) is deemed to be zero. The primary requirement is that the jurisdiction must have a minimum nominal rate of 20%, a domestic minimum tax of 15%, and a comprehensive global taxation system.

While Indonesia's Corporate Income Tax (CIT) rate of 22% meets the nominal rate threshold, Indonesia may not yet fully qualify as a Qualified SbS Regime due to our foreign taxation system, which provides exemptions for certain foreign dividends (Article 4 paragraph 3 letter f of the Income Tax Law). This contradicts the OECD's requirement for a comprehensive global system. Therefore, Indonesia remains on the path of full GloBE implementation through PMK 136/2024.

Compliance Strategy: What Should Taxpayers Do?

Based on PMK 136/2024 and the latest OECD developments, Taxpayers in Indonesia are advised to take the following tactical steps:

1. Validate CbCR Data: Ensure that the Country-by-Country Report is prepared based on Qualified Financial Statements (parent standard or audited local standards). The validity of this data is key to enjoying the extension of the Transitional Safe Harbour until 2027.
2. Prepare for SESH: Starting in 2025, simulate ETR calculations using the Simplified ETR method. Ensure that consolidated accounting systems can accurately segregate data by jurisdiction, as SESH does not permit imprecise allocations.
3. Incentive Audit: Map out the tax incentives currently utilized. If the company utilizes a Tax Holiday, prepare documentation proving the link between the incentive and real expenditure (assets and payroll) in anticipation of the SBTI Safe Harbour implementation.

Conclusion

PMK 136/2024 has laid a solid legal foundation for the Global Minimum Tax in Indonesia. However, the OECD Side-by-Side Package provides a more flexible and business-friendly roadmap for the future. By leveraging these updated Safe Harbour mechanisms—both SESH and SBTI—MNE Groups can navigate this new era of tax transparency with lower compliance risks and higher legal certainty.