Sharing Dividends to Another Company, Should It Be Subject to PPh 23 Deduction?

A dividend paid by CV Sukses to a domestic corporate taxpayer is subject to Income Tax Article 23. This is regulated in Article 23 paragraph (1) letter a number 1 of the Income Tax Law. The applicable rate is 15% of the gross amount of the dividend distributed. CV Sukses, as the party paying the dividend, is required to make this withholding, deposit it into the state treasury, and provide proof of withholding to the corporate shareholder. However, there is an important exception: dividends received by a domestic corporate taxpayer are not subject to Income Tax Article 23 if the dividend or share of profit is received or earned by a domestic taxpayer limited liability company, cooperative, SOE/Regional-owned Enterprise, from capital participation in a business entity established and domiciled in Indonesia, provided that:

a. The dividend originates from retained earnings; b. For a limited liability company, SOE/Regional-owned Enterprise, the share ownership in the entity paying the dividend is at least 25% (twenty-five percent) of the paid-up capital; c. The share of profit received or earned by members of a limited partnership whose capital is not divided into shares, a partnership, an association, a firm, and a joint venture, including holders of collective investment contract participation units; d. A cooperative's surplus on its business results paid by the cooperative to its members; e. Income paid or owed to a business entity for financial services that function as a distributor of loans and/or financing.