ANALYSIS OF PERMANENT ESTABLISHMENT TAXATION

Download reimbursement of actual expenses) by the. Permanent Establishment to the head office of the enterprise or any of its other offices, by way ...
1 downloads 772 Views 287KB Size
Download PDF
Love PNG Images
ANALYSIS OF PERMANENT ESTABLISHMENT TAXATION POLICY AS AN ASPECT OF INTERNATIONAL TAX UNDER THE LAW OF INCOME TAX

Deddy Arief Setiawan

Abstract. This research which uses qualitative approach with dimensional of descriptive and case studies. Permanent Establishment is Foreign Tax Subject that fulfillment of taxes obligation as Foreign Tax Subject equivalent with Domestic Tax Subject. Foreign Tax Subject includes an individual who does not reside in Indonesia, the person who is present in Indonesia for not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months, and entities that are not established or domiciled in Indonesia. Permanent Establishment contains a place of business, is a fixed place and is used to run the business or activity. Taxable Income of Permanent Establishment is calculated by subtracting from income referred to in Article 5 paragraph (1) of Law Number 7 of 1983 on Income Tax, as last amended by Law Number 36 of 2008 with regard to the provisions of Article 4 paragraph (1) the reduction referred to in Article 5 paragraph (2) and paragraph (3), Article 6 paragraph (1), and paragraph (2), and Article 9, paragraph (1) letter c , d, e and letter g. While the fulfillment of Corporate Income Tax and Income Tax of Article 26 paragraph (4) or the Branch Profits Tax is calculated based on Article 6 paragraph (2), Article 16 paragraph (3), Article 17 paragraph (1) letter b and (2a), and Article 26 paragraph (4) of Law Number 7 of 1983 on Income Tax, as last amended by Law Number 36 of 2008. Keyword: Permanent Establishment, Corporate Income Tax and Income Tax of Article 26 paragraph (4). Abstract. Penelitian ini menggunakan pendekatan kualitatif dengan dimensi studi deskriptif dan kasus. Bentuk Usaha Tetap adalah Subyek Pajak Luar Negeri bahwa pemenuhan kewajiban pajak sebagai Pajak Luar Negeri setara dengan Subyek Pajak Dalam Negeri. Subjek Pajak Asing meliputi orang pribadi yang tidak bertempat tinggal di Indonesia , orang yang hadir di Indonesia tidak lebih dari 183 hari dalam jangka waktu 12 ( dua belas ) bulan , dan badan yang tidak didirikan atau berdomisili di Indonesia. Bentuk Usaha Tetap berisi tempat usaha, adalah tempat yang tetap dan digunakan untuk menjalankan usaha atau kegiatan . Penghasilan Kena Pajak Bentuk Usaha Tetap dihitung dengan mengurangkan dari penghasilan sebagaimana dimaksud dalam Pasal 5 ayat ( 1 ) Undang-Undang Nomor 7 Tahun 1983 tentang Pajak Penghasilan sebagaimana telah diubah terakhir dengan UndangUndang Nomor 36 Tahun 2008 berkaitan dengan ketentuan Pasal 4 ayat ( 1 ) pengurangan sebagaimana dimaksud dalam Pasal 5 ayat ( 2 ) dan ayat ( 3 ) , Pasal 6 ayat ( 1 ) , dan ayat ( 2 ) , dan Pasal 9 ayat ( 1 ) huruf c , d , e , dan huruf g . Sementara pemenuhan Pajak Penghasilan Badan dan Pajak Penghasilan Pasal 26 ayat ( 4 ) atau Branch Profit Tax dihitung berdasarkan Pasal 6 ayat ( 2 ) , Pasal 16 ayat ( 3 ) , Pasal 17 ayat ( 1 ) huruf b dan ( 2a ) , dan Pasal 26 ayat ( 4 ) Undang-Undang Nomor 7 Tahun 1983 tentang Pajak Penghasilan sebagaimana telah diubah terakhir dengan UndangUndang Nomor 36 Tahun 2008 . Keyword : Bentuk Usaha Tetap , Pajak Penghasilan Badan dan Pajak Penghasilan Pasal 26 ayat ( 4 ) . Definition of Permanent Establishment according to Model Tax Convention on Income and on Capital (2008: 24-25), (1) Article 5 paragraph 1, for the purposes of this Convention,

the term "Permanent Establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. (2) Article 5 paragraph 2, the term

"Permanent Establishment" includes especially: a) a place of management; b) a branch; c) an office; d) a factory; e) a workshop, and f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. (3) Article 5 paragraph 3, a building site or construction or installation project constitutes a Permanent Establishment only if it lasts more than twelve months”. Model Tax Convention on Income and on Capital is commonly referred to as OECD Model Tax Treaty. Then continued with Definition of Permanent Establishment according to The United Nations Model Double Taxation (1999 revision: 10-11), (1) Article 5 paragraph 1, for the purposes of this Convention, the term “Permanent Establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on. (2) Article 5 paragraph 2, The term “Permanent Establishment” includes especially: a). a place of management; b). a branch; c). an office; d). A factory; e). a workshop; f). a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. (3) Article 5 paragraph 3, the term “Permanent Establishment” also encompasses: a) a building site, a construction, assembly or installation project or supervisory activity in connection therewith, but only if such site, project or activity last more than six months; b). the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activity of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than six months within any twelve-month period. The United Nations Model Double Taxation is commonly referred to UN Model Tax Treaty. Based on these two models , a Permanent Establishment is a fixed place of business to conduct the business of an enterprise carried either in part or whole. The conditions that must been met in order to form a Permanent Establishment according Darussalam et al. (2010: 90) are as follows: (1) The existence of a place of business; (2) The established place of business in a particular location; (3) Tax subject shall have

the right to utilize certain business premises; (4) The use of the premises must be permanent or exceeded within the specified time period; and (5) Activity undertaken through a place of business must be an understanding of the business activity as business activity set out in domestic law and double taxation treaties. If one of the above conditions are not met, then the Permanent Establishment will not be formed (Darussalam et al., 2010: 90). Determination of business profit from Permanent Establishment are described as follows: (1) Model Tax Convention on Income and on Capital (2008: 26-27); (1a) Article 7 paragraph 1, the profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a Permanent Establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that Permanent Establishment. (1b) Article 7 paragraph 2, subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a Permanent Establishment situated therein, there shall in each Contracting State be attributed to that Permanent Establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activity under the same or similar conditions and dealing wholly independently with the enterprise of which it is a Permanent Establishment. (1c) Article 7 paragraph 3, in determining the profits of a Permanent Establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the Permanent Establishment, including executive and general administrative expenses so incurred, whether in the State in which the Permanent Establishment is situated or elsewhere. (2) The United Nations Model Double Taxation (1999 revision: 14-15); (2a) Article 7 paragraph 1, The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a Permanent Establishment situated therein. If the

enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to (1) that Permanent Establishment; (2) sales in that other State of goods or merchandise of the same or similar kind as those sold through that Permanent Establishment; or (3) other business activity carried on in that other State of the same or similar kind as those effected through that Permanent Establishment. (2b) Article 7 paragraph 2, subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a Permanent Establishment situated therein, there shall in each Contracting State be attributed to that Permanent Establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activity under the same or similar conditions and dealing wholly independently with the enterprise of which it is a Permanent Establishment. (2c) Article 7 paragraph 3, in the determination of the profits of a Permanent Establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the Permanent Establishment including executive and general administrative expenses so incurred, whether in the State in which the Permanent Establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the Permanent Establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other ights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the Permanent Establishment. Likewise, no account shall be taken, in the determination of the profits of a Permanent Establishment, for amounts charged (otherwise than towards reimbursement of actual expenses), by the Permanent Establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other

rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. Determination of Business Profits from Permanent Establishment is described by two models according to international tax literature called "attribution principle" (Surahmat, 2007: 19). Based on the description of the understanding and business profit Permanent Establishment, the focus research of Permanent Establishment taxation policy is counting Corporate Income Tax and Income Tax of Article 26 paragraph (4) or Branch Profit Tax according to the Law Number 36 of 2008. Therefore, the scope of the study is the calculation of Corporate Income Tax and Income Tax of Article 26 paragraph (4) of a general nature. Special matters such as income Permanent Establishment that undertake the project which was funded by government grants and/ or loans abroad; and Permanent Establishment earns income that is taxed as Income Tax of Final. LITERATURE REVIEW Literature review of Permanent Establishment taxation policy is mainly from the taxation laws such as the Law Number 36 of Year 2008 (Fitriandi et al ., 2010), as well as Government Regulation Number 94 of Year 2010, the Minister of Finance Regulation Number 14/PMK.03/2011 and Decision Director General of Taxation Number KEP-62/PJ./1995 (www.pajak.go.id and www.ortax.org). Definition of Permanent Establishment Foreign Tax Subjects are include: (1) An individual who does not reside in Indonesia, the person who is present in Indonesia for not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months, and entities that are not established or domiciled in Indonesia, which runs business or conduct activity through a Permanent Establishment in Indonesia, and (2) An individual who does not reside in Indonesia, the person who is present in Indonesia for not more than 183 (one hundred

and eighty three) days within a period of 12 (twelve) months, and entities that are not established or domiciled in Indonesia, which can receive or earn income from Indonesia not from conducting business or conduct activity through a Permanent Establishment in Indonesia. Furthermore Permanent Establishment is a form of business that is used by an individual who does not reside in Indonesia, the person who is present in Indonesia for not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months, and entities that are not established or domiciled in Indonesia to conduct business or conduct activity in Indonesia. A Permanent Establishment implies the existence of a place of business is a facility that can be land and buildings as well as machinery, equipment, warehouse and computer or electronic agent or automated equipment that is owned, leased, or used by providers of electronic transactions to run business activity through the Internet. Permanent place of business and is used to run the business or activity of an individual who does not reside or entities not established or domiciled in Indonesia. The definition of Permanent Establishment to embrace the individual or entity as an agent whose position is not free to act for and on behalf of the individual or entity who is not resident or domiciled in Indonesia. An individual who does not reside or entities not established or domiciled in Indonesia can not be deemed to have a Permanent Establishment in Indonesia if the individual or entity doing business or conducting activity in Indonesia using agents, brokers or intermediaries who have accrued, as long as the agent or intermediary in fact acted completely in order to run his own company. The insurance company incorporated and domiciled outside Indonesia deemed to have a Permanent Establishment in Indonesia if the insurance company receives payment of insurance premiums or insures risks in Indonesia through its employees, representatives or agents in Indonesia. Bear the risk in Indonesia does not mean that the events that lead to these risks occur in Indonesia. Noteworthy is that the insured person resides, is located, or domiciled in Indonesia.

For individuals who do not reside in Indonesia and are no more than 183 (one hundred and eighty three) days and entities not established or domiciled in Indonesia , which is engaged in business or activity in Indonesia through a Permanent Establishment, the tax liability begins at the time of the Permanent Establishment is located in Indonesia and terminate when the Permanent Establishment is no longer located in Indonesia. Classification of Permanent Establishment Classification of Permanent Establishment include: place of management; branch company; representative office; office buildings; factory; workshops; warehouse; room for promotion and sales, mining and quarrying of natural resources; mining area of oil and gas; fisheries, animal husbandry, agriculture, plantation, or forestry; construction, installation or assembly project; provision of services of any kind by employees or others, all made more than 60 (sixty) days within a period of 12 (twelve) months; person or entity acting as an agent whose position is not free; agent or employee of an insurance company that is not established or domiciled in Indonesia who receives insurance premiums or insures risks in Indonesia, and computers, electronic agent, or automated equipment owned, leased, or used by providers of electronic transactions to conduct business over the Internet. Figure 1. Income of Permanent Establishment Which is the income object of Permanent Establishment under Article 4 paragraph (1), and Article 5 paragraph (1) letter a, b and c of Law Number 7 of Year 1983 on Income Tax, as last amended by Law Number 36 of Year 2008, include: (1) Income from business or activity of the Permanent Establishment and from property owned or controlled by Permanent Establishment. Permanent Establishment is taxed on income derived from business or activity and of property owned or mastered. Thus all of the income taxed in Indonesia include any additional economic benefit received or obtained taxpayer, which can be used for consumption or to increase the wealth of the taxpayer concerned, with the name and in whatever form consists of: (1a) Reimbursement or compensation in respect of

employment or services received or acquired, including salaries, wages, allowances, honoraria, commissions, bonus, gratuity, pension, or other forms of remuneration; (1b) Gift from lottery or work or activity, and awards; (1c) The operating profit; (1d) Gains from the sale or transfer of property, including: (1d.1) Gain on the transfer of property to a corporation, partnership , and other entities in exchange for shares or equity participation; (1d.2) Gain on the transfer of property to shareholders, partners, or members of the acquired company, partnership, and other entities; (1d.3) enefit from a liquidation, merger, consolidation, expansion, solving, business takeover, or reorganization with the name and in whatever form; (1d.4) Gain on the transfer of property in the form of grants, aid, or except donations given to blood relatives in the direct lineage of the degree and religious bodies, educational bodies, including charities,

foundations, cooperatives, or individuals who run micro and small enterprises, the provisions set further to the Regulation of the Minister of Finance, along with no business relationship, employment, ownership, or control of the parties concerned, and (1d.5) Gains from the sale or transfer of some or all mining rights, marks participated in the financing, or capital in mining company; (1e) Refunds of tax payments that have been charged to expense and additional payments of tax refunds; (1f) Interest including premiums, discounts , and rewards for a guarantee loan; (1g) Royalties or fees for the use of the right; (1h) Rental and other income in connection with the use of property; (1i) Receipt or acquisition of periodic payments; (1j) Advantage for debt relief, except to a certain amount set by government regulation; (1k) Exchange gain on foreign exchange; (1l)Gains from revaluation of assets; (1m) Insurance premiums, and (1n) Reward

interest referred to in the Law governing the general provisions and procedures of taxation. (2) Income of headquarters office from businesses or activity, the sale of goods or provision of services in Indonesia, similar to that carried out by the Permanent Establishment in Indonesia. Income derived from the headquarters office or business activity, sales of goods and rendering of services, similar to that carried out by the Permanent Establishment is considered as the income of the Permanent Establishment, since in essence the business or activity included in the scope of the business or activity and can be done by Permanent Establishment. Businesses or activity similar to the business or activity of the Permanent Establishment, such as occurs when a bank outside of Indonesia who have a Permanent Establishment in Indonesia, providing loans directly without going through the company's Permanent Establishment in Indonesia. Sales of goods similar to those sold by the Permanent Establishment, such as headquarters office abroad which have a Permanent Establishment in Indonesia selling the same products as the products sold by that Permanent Establishment directly without going through a Permanent Establishment to buyers in Indonesia. The provision of services by the headquarter office similar to the services provided by the Permanent Establishment, such as the company's headquarters outside consultants advising the Indonesian equal to the type of services performed by such Permanent Establishment directly without going through a Permanent Establishment to clients in Indonesia . (3) Income as stated in Article 26 of the Income Tax Law received or obtained headquarters, along there is an effective relationship between the Permanent Establishment to the property or activity that provide income in question. Income referred to in Article 26 of the Income Tax Law received or earned income headquarters regarded as a Permanent Establishment in Indonesia, where there is an effective relationship between the properties or activity that provide income to the Permanent Establishment. For example, X Inc. close agreement with PT license to use the trademark Y X Inc. For the use of the X Inc. rights. receive compensation in the form of

royalties from PT Y. In connection with the agreement X Inc. also provides management services to PT Y through a Permanent Establishment in Indonesia, in the course of marketing the products of PT Y that uses the trademark. In such case, the use of the trademark by PT Y effectively connected with a Permanent Establishment in Indonesia , and therefore income X Inc. in the form of royalties is treated as the income of the Permanent Establishment. Income Deduction of Permanent Establishment Which becomes income deduction of Permanent Establishment under Article 5 paragraph (2) and (3), Article 6 paragraph (1) and (2), and Article 9, paragraph (1) letter c , d, e and g Law Number 7 of Year 1983 on Income Tax, as last amended by Law Number 36 of Year 2008, include: (1) The cost to acquire, collect, and maintain income of Permanent Establishment, include: (1a) Costs that are directly or indirectly related to the business activity, among others: (1a.1) Purchase costs of materials;(1a.2) Costs in respect of employment or services, including wages, salaries, honoraria, bonuses, gratuities, and benefits provided in the form of money; (1a.3) Interest, rents, and royalties; 1a.4) Travel expenses; (1a.5) Waste treatment costs; (1a.6) Insurance premiums; (1a.7) Sales promotion costs are regulated by or under the Regulation of the Minister of Finance ; (1a.8) Administrative costs, and (1a.9) Taxes except income tax; (1b) Depreciation of expenditures to acquire tangible assets and amortization of expenses to obtain the right and at the expense of others that have a useful life of more than 1 (one) year . To calculate depreciation, useful lives and depreciation rates of intangible assets is determined as follows: (2) In the same section over the useful life of the property set (the straight-line method), includes : (2a) Tangible Assets Group of Not Building (2a.1) Group 1 with a useful life of 4 years by 25 % (2a.2) Group 2 with a useful life of 8 years was 12.5 % (2a.3) Group 3 with a useful life of 16 years at 6.25 % (2a.4) Group 4 with a useful life of 20 years at 5 % (2b) Tangible Assets Group of Building (2b.1) Permanent with a useful life of 20 years at

5 % (2b.2) Not Permanent with a useful life of 10 years at 10 % (3) In parts decreased by applying the depreciation rate of the book value (declining balance method), includes : (3a) Tangible Assets Group of Not Building (3a.1) Group 1 with a useful life of 4 years by 50 % (3a.2) Group 2 with a useful life of 8 years by 25 % (3a.3) Group 3 with a useful life of 16 years was 12.5 % (3a.4) Group 4 with a useful life of 20 years at 10 % (3b) Tangible Assets Group of Building There is no. To calculate the amortization, useful lives and intangible asset amortization rates are set as follows: (1) In the same section over the useful life of the property set (the straight - line method), includes : (1a) Group 1 with a useful life of 4 years by 25 % (1b) Group 2 with a useful life of 8 years was 12.5 % (1c) Group 3 with a useful life of 16 years at 6.25 % (1d) Group 4 with a useful life of 20 years at 5 % (2) In parts decreased by applying the depreciation rate of the book value (declining balance method), includes : (2a) Group 1 with a useful life of 4 years by 50 % (2b) Group 2 with a useful life of 8 years by 25 % (2c) Group 3 with a useful life of 16 years was 12.5 % (2d) Group 4 with a useful life of 20 years at 10 % (2e) Contributions to the pension fund whose establishment has been approved by the Ministry of Finance; (2f) Losses from the sale or transfer of property owned and used in business or held for earning, collecting and securing income; (2g) Losses on foreign exchange; (2h) The cost of research and development carried out in Indonesia; (2i) The cost of scholarships, internships, and training; (2j) Receivables, which obviously can not be charged with the following requirements; (2j.1) Has been charged as an expense in the income statement of commercial; (2j.2) Taxpayers must submit a list of debts that can not be billed to the Directorate General of Taxation, and (2j.3) Has submitted the case to the District Court or the collection agencies that handle state claims, or the existence of a written agreement on the elimination of receivables/ debt relief between the creditor and the debtor in question, or has been published in a general or special, or the recognition of the debtor that the debt has been written off for a certain amount of debt; (2j.4)

Requirements referred to in point 3) does not apply to the elimination of small debtors for doubtful accounts as referred to in Article 4 paragraph (1) letterk; the implementation is further regulated by or under the Regulation of the Minister of Finance; (2k) Contribution in the context of the provisions of national disaster management is regulated by the Government; (2l) Donations in order to research and development is carried out in Indonesia, which is regulated by the provisions of the Government; (2m) Social infrastructure development costs provisions are regulated by the Government; (2n) Contribution provisions educational facilities regulated by the Government, and (2o) Donations in order to develop the sport provisions regulated by the Government. (3) Costs related to: (3a) Income of headquarters office from businesses or activity, the sale of goods or provision of services in Indonesia, similar to that carried out or carried out by the Permanent Establishment in Indonesia. (3b) Income as stated in Article 26 of the Income Tax Law received or obtained headquarters office, along there is an effective relationship between the Permanent Establishment to the property or activity that provide income in question. (4) Headquarters office administrative costs are allowed to be charged is the cost associated with the business or activity of the Permanent Establishment, as determined by the Director General of Taxation ie , the Director General of Taxation Number KEP-62/PJ./1995 on type and amount of Headquarters Office Administrative Costs Permitted for Cost Charged As A Permanent Establishment. The central office administrative costs related to and in order to support the business or activity of the Permanent Establishment concerned to obtain, collect, and maintain the highest income is proportional to the magnitude of the circulation of the business or activity of a Permanent Establishment in Indonesia to the entire circulation of business or activity companies around the world. The mechanism is : (4a) Shall submit a consolidated or combined financial statements of the head office covering the whole of the business and/ or activity of companies around the world for the tax year in question as an attachment to the Tax

Return Annually of Income Tax. (4b) Consolidated or combined financial statements should be audited by a public accountant and reveal details of the circulation of the business or activity of the company and the type and amount of administrative expenses charged to each of the Permanent Establishment in the country where the company in question do business or activity. Payment to the headquarter office is not allowed to be deducted as expenses are: (a) Royalties or other remuneration in connection with the use of property, patents, or other rights; (b) Reward in connection with management services and other services; (c) Interest , unless interest with respect to the business of banking; Payment to the central office is not allowed to be deducted as expenses received or obtained from the central office is not considered as taxable income, except for interest relating to banking business. (5) If the expenses are allowed under the provisions of tax laws after the deductible from the gross income derived losses, these losses are compensated by net income or taxable income for 5 (five) consecutive years starting from the year next following the year he got the loss . (6) Deductible costs with specific requirements are as follows: (6a) The formation or accumulation of reserve funds, unless; (6a.1) Reserve for doubtful accounts for banking business and other business entities that extend credit, lease with option rights, consumer finance companies and factoring companies; (6a.2) Reserve for insurance business including social assistance reserve established by the Social Security Agency; (6a.3) Underwriting reserve for Deposit Insurance Corporation; (6a.4) Reserve for mining reclamation costs; (6a.5) Reserve a replanting costs for forestry businesses, and (6a.6) Reserve a closing costs and maintenance of industrial waste disposal site for industrial waste processing business,the terms and the terms set by or under the Regulation of the Minister of Finance; (6b) Health insurance premiums, accident insurance, life insurance, endowment insurance, and insurance scholarship, which is paid by an individual taxpayer, unless it is paid by the employer and the premium is calculated as income of the taxpayer concerned; (6c) Reimbursement or compensation in

connection with the work or services provided in kind and enjoyment, except for the provision of food and beverages for all employees as well as reimbursement or compensation in kind and enjoyment in certain areas and are related to the execution of the work provided for by or under the Regulation of the Minister of Finance, and (6d) Donated property , assistance or donations, and inheritance as referred to in Article 4 paragraph (3) letters a and b, except donations referred to in Article 6 paragraph (1) letter i to letter m and zakat received by the amil zakat agency (BAZ) or amil zakat institution (LAZ) established or approved by the government or religious donations that are mandatory for recognized religious adherents in Indonesia, which is received by a religious institution established or approved by the government, which is governed by its provisions or by government regulation. RESEARCH METHODOLOGY The research approach used was qualitative research. The pattern of qualitative research using empirical-rational approach and inductive reasoning (Santoso, 2005: 10). Qualitative research emphasizes the implementation of observation that changes from time to time. Pattern of thinking is inductive inferences to the specific case of the general symptoms (Kuncoro, 2003: 4). Qualitative research can be expressed as the planned activity include interpretive practice that allows world of respondents and informers can be seen by Agusta (Denzin and Lincoln, 2000). The dimensions of qualitative research include descriptive research, as well as case studies and field research. Descriptive research according Kuncoro (Boyd et al., 1989: 129 ) is an attempt to obtain a complete and accurate description of the situation. Case studies and field research to learn intensively about the background of the current situation and environment interaction as a social unit of individuals , groups and communities (Suryana, 2010). The study is in-depth on a particular social unit that result is a complete picture and organized (Suryana, 2010). Location of the research conducted in the Tax Office of Permanent Establishment and Foreign

Two period July 2010 to April 2012 and the Tax Office and of Permanent Establishment and Foreign from May 2012 until June 2013. Taxpayers Permanent Establishment administered at the Tax Office of Permanent Establishment and Foreign Two and the Tax Office of Permanent Establishment and Foreign. When the month of April 2012 the Tax Office of Permanent Establishment and Foreign Two turned into a Tax Office of Oil and Gas and the Tax Office of Permanent Establishment and Foreign One turned into the Tax Office of Permanent Establishment and Foreign. Taxpayers entire Permanent Establishment transferred to the Tax Office of Permanent Establishment and Foreign. Research data collection is done through observation and documented in the form of notes. Observations were carried out in accordance with the location of the author's work as an Account Representative in the Tax Office of Permanent Establishment and Foreign Two and Large Tax Office Three. The Tax Office of Permanent Establishment and Foreign and Large Tax Office Three are being one location in the address at

Taman Makam Pahlawan Kalibata, South Jakarta. In addition, data collection is done through library research such as tax laws, books, journals, seminars, and websites. RESULTS DISCUSSION Corporate Income Tax and Income Tax of Article 26 Paragraph (4) Taxation aspects of Permanent Establishment is Corporate Income Tax and Income Tax of Article 26 paragraph (4) or the Branch Profit Tax. Calculations are based on income and expenses Permanent Establishment described below : (a) Taxable income of Permanent Establishment under Article 16 paragraph (3) of Law Number 7 of 1983 concerning Income Tax as amended by Law Number 36 of 2008 ie, taxable income for taxpayers who carry out foreign business or conduct activity through a Permanent Establishment in Indonesia in a tax year is calculated by subtracting from income referred to in Article 5 paragraph (1) with regard to the provisions of Article 4 paragraph (1) the reduction referred to in Article 5 paragraph (2) and paragraph (3), Article 6 paragraph (1), and

Example calculation 2 Tax Year 2009 Taxable Income: Rp. 1.250.000.000,00 Income tax payable: 28 % x Rp. 1.250.000.000,00= Rp. 350.000.000,00 Example calculation 3 Tax Year 2010 Taxable Income: Rp1.000.000.000,00 Income tax payable: 25 % x Rp1.000.000.000,00 = Rp250.000.000,00 paragraph (2), and Article 9, paragraph ( 1 ) letter c, d, e and g. Exibith 1. (b) Fiscal loss compensation provided for in Article 6 paragraph (2), namely, if the gross income obtained after reduction of losses, the loss is compensated by the income tax starting in the next row up to 5 (five) years. Example calculation 1. The balance of Fiscal loss in Year of 2009 amounted Rp. 100.000.000,00 remaining at the end of 2014 should not be offset against fiscal profit again by 2015, while the fiscal loss in Year of 2011 of Rp. 300.000.000,00 only be offset against taxable income in 2015 and 2016, for a five year period that began in 2012 ended in late 2016.

The rate of tax imposed on the taxable income is set to Permanent Establishment : Article 17 paragraph (1) letter b of Law No. 7 of 1983 on Income Tax as amended by Law Number 36 of 2008, namely, domestic corporate taxpayer and Permanent Establishment is at 28% (twenty eight percent). Example calculation 2. Article 17 paragraph (2a) of Law Number 7 of 1983 concerning Income Tax as amended by Law Number 36 of 2008, namely, the rate referred to in paragraph (1) letter b shall be 25 % (twenty five percent) which came into effect since the 2010 tax year. Example calculation 3. Article 26 paragraph (4) of Law Number 7 of 1983 concerning Income Tax as amended by

Law Number 36 of 2008, stipulates that taxable income after deducting taxes from a Permanent Establishment in Indonesia taxed at 20 % (twenty percent), unless the income is reinvested in Indonesia, the provisions of which shall be further regulated by or under the Regulation of the Minister of Finance. Example calculation: To give a clear picture on calculation of the Corporate Income Tax and Income Tax of Article 26 Paragraph (4), the following is presented: Figure 2. Calculation of Corporate Income Tax and Income Tax of Article 26 paragraph (4) is reaffirmed in Article 22 of Government Regulation Number 94 Year 2010 concerning the calculation of taxable income and income tax payment in the Current Year, namely that in calculating the income tax referred to in Article 26 paragraph (4) Income tax Law, the Permanent Establishment owed income tax on any taxable year, the tax losses can not be compensated again with taxable income after deducting income tax. Example calculation: In 2009 Commercial net income Permanent Establishment in Indonesia amounted Rp16.000.000.000,00 and positive fiscal adjustment amounting Rp1.500.000.000,00. The balance of fiscal loss of the previous year can be carried forward in the year 2009 amounted

(1) Taxable Income Permanent Establishment in Indonesia in 2009 was Rp17.500.000.000,00 (2) Income Tax: 28 % x Rp17.500.000.000,00 = Rp4.900.000.000,00 (3) Taxable income after tax: Rp17.500.000.000,00 – Rp4.900.000.000,00 = Rp12.600.000.000,00 (4) Income Tax of Article 26 Paragraph (5) payable: 20 % x Rp12.600.000.000,00 = Rp2.520.000.000,00 Rp7.500.000.000,00. Calcula-tion of Income Tax Article 17 and Article 26 paragraph (4) as follows: Table 1. In calculating Income Tax Article 26 paragraph (4), compensation for fiscal loss of Rp. 7.500.000.000,00 it should not be deducted from taxable income after deducting taxes (or Rp7.200.000.000,00). Case Study of Corporate Income Tax and Income Tax of Article 26 Paragraph (4) Table 2. CONCLUSION Identification of Permanent Establishment is the existence of a place of business (place of business) is a facility that can be land and buildings as well as machinery, equipment, warehouse and computer or electronic agent or automated equipment (automated equipment ) that is owned, leased, or used by providers of electronic transactions to carry out business activity through the Internet. Permanent place of business and is used to run the business or activity of an individual who does not reside or

entities not established or domiciled in Indonesia. Such identification can be shaped or Permanent Establishment of Physical Assets, Permanent Establishment of Project, Permanent Establishment of Services, Permanent Establishment of Agent, Permanent Establishment of Insurance, Permanent Establishment of e-commerce. Taxable income of Permanent Establishment is calculated based on income from the business or activity of the Permanent Establishment and on property owned or controlled; income headquarters of the business or activity, the sale of goods or provision of services in Indonesia similar to those executed or performed by Permanent Establishment in Indonesia; income as stated in Article 26 of the Income Tax Law received or obtained headquarter office, along there is an effective relationship between the Permanent Establishment to the property or activity that provide income in question; costs to acquire, collect, and maintain income Permanent Establishment; headquarter office administrative costs are allowed to be charged is the cost associated with the business or activity of the Permanent Establishment, as determined by the Director General of Taxes; fiscal loss compensation, and costs deductible with certain requirements. Fulfillment of Corporate Income Tax and Income Tax of Article 26 paragraph (4) or the Branch Profits Tax is calculated based on Article 6 paragraph (2), Article 16 paragraph (3), Article 17 paragraph (1) letter b and (2a), and Article 26 paragraph (4) of Law Number 7 of 1983 on Income Tax, as last amended by Law Number 36 of 2008. Calculation of Corporate Income Tax and Income Tax of Article 26 paragraph (4) is reaffirmed in Article 22 of Government Regulation Number 94 Year 2010 concerning the calculation of taxable income and income tax payment in the Current Year. FUTURE RESEARCH In this discussion , the author has not explained the Income Tax Article 26 paragraph (4) above income Permanent Establishment that undertake the project which was funded by government grants and/ or loans abroad in relation to Government Regulation Number 42 of

1995 as amended several times reviewed by Government Regulation Number 25 of 2001 . In addition , the author also does not explain the calculation of Income Tax of Article 26 paragraph (4) above income object imposed Income Tax of final under Article 4 of Government Regulation Number 40 Year 2009 regarding Amendment to Government Regulation Number 51 of 2008 and Article 7, paragraph (1) and (2) Regulation of the Minister of Finance Number 153/PMK.03/2009 number of changes to the Regulation of the Minister of Finance Number 187/PMK.03/2008. The above discussion can be continued in the study so that the calculation of income tax berkutnya Article 26 paragraph (4) can be comprehensive. REFERENCES Books Boyd, et al. 1989. Marketing Reseach: Text and Cases. Boston: Irwin. Darussalam, John Hutagaol, Danny Septriadi. 2010. Konsep dan Aplikasi Perpajakan Internasional. Jakarta: Danny Darussalam Tax Center (PT Dimensi Internasional Tax). Gunadi. 2007. Pajak Internasional. Jakarta: Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia. Hutagaol, John, Darussalam, Danny Septriadi. 2006. Kapita Selekta Perpajakan. Jakarta: Penerbit Salemba Empat. Hutagaol, John. 2007. Perpajakan: Isu-isu Kontemporer. Yogyakarta: Penerbit Graha Ilmu. Kurniawan, Anang Mury. 2011. Pajak Internasional Beserta Contoh Aplikasinya. Bogor: Penerbit Ghalia Indonesia. Kuncoro, Mudrajad. 2003. Metode Riset untuk Bisnis dan Ekonomi. Jakarta: Penerbit Erlangga. Prastowo, Yustinus, Agus Priyatna, Yosep E. Nugraha. 2011. Buku Pintar Menghitung Pajak: Profesi, Badan Usaha, dan Persitiwa Khusus. Jakarta: Penerbit Raih Asa Sukses. Santoso, Gempur. 2005. Metodologi Penelitian, Kuantitatif dan Kualitatif. Surabaya: Prestasi Pustaka Publisher.

Suandy, Erly. 2003. Perencanaan Pajak. Jakarta: Penerbit Salemba Empat. Suryana. 2010. Metodologi Penelitian,”Model Praktis Penelitian Kuantitatif dan Kualitatif” (Buku Ajar Perkuliahan). Jakarta: Uiversitas Pendidikan Indonesia. Surahmat, Rachmanto. 2011. Persetujuan Penghindaran Pajak Berganda (P3B): Suatu Kajian terhadap Kebijakan Indonesia. Jakarta: Penerbit Salemba Empat. Surahmat, Rachmanto. 2003. Persetujuan Penghindaran Pajak Berganda: Suatu Pengantar. Jakarta: Penerbit PT Gramedia Pustaka Utama. Zakaria, Jaja. 2005. Perlakuan Perpajakan terhadap Bentuk Usaha Tetap (BUT). Jakarta: PT RajaGrafindo Persada. Zain, Mohammad. 2007. Manajemen Perpajakan. Jakarta: Penerbit Salemba Empat. Domestic Tax Regulation Undang-Undang Nomor 6 Tahun 1983 tentang Ketentuan Umum dan Tata Cara Perpajakan sebagaimana telah beberapa kali diubah terakhir dengan Undang-Undang Nomor 16 Tahun 2009. Undang-Undang Nomor 7 Tahun 1983 tentang Pajak Penghasilan sebagaimana telah beberapa kali diubah terakhir dengan UndangUndang Nomor 36 Tahun 2008. Peraturan Pemerintah Nomor 94 Tahun 2010 tentang Penghitungan Penghasilan Kena Pajak dan Pelunasan Pajak Penghasilan dalam Tahun Berjalan. Peraturan Menteri Keuangan Nomor 14/PMK.03/2011 tentang Perlakuan

Perpajakan atas Penghasilan Kena Pajak sesudah Dikurangi Pajak dari Suatu Bentuk Usaha Tetap. Keputusan Direktur Jenderal Pajak Nomor KEP62/PJ./1995 tentang Jenis dan Besarnya Biaya Administrasi Kantor Pusat yang Diperbolehkan untuk Dibebankan sebagai Biaya suatu Bentuk Usaha Tetap. International Tax Regulation Model Tax Convention on Income and on Capital. (2008). The United Nations Model Double Taxation. (1999 revision). Tax Treaty of Indonesia. Journals A. Skaar, Arvid. 2005. Commentary on Article 5 of the OECD Model Treaty: The Concept of Permanent Establishment. IBFD. Khan, Ahmad. 2000. Cross Border Transaction and Tax Treaties Theory and Practices. Pretosin Info Tech Pte. Ltd Singapore. Papers Agusta, Ivanovich. 2005. Makalah disampaikan dalam lokarya Metode Kualitatif. Jakarta: Fakultas Ekonomi Universitas Negeri Jakarta. Rusman, Roosmalawati. 2013. Metodologi Penelitian Kualitatif. Jakarta: Sekolah Tinggi Ilmu Administrasi Mandala Indonesia. Website www.pajak.go.id www.ortax.org