Indonesia to keep tax on Google, Microsoft despite US exemption

Indonesia will continue to tax multinational companies such as Google and Microsoft operating in the country, despite the US securing an exemption from the OECD/G20 global minimum tax framework.

The Indonesian finance ministry said its implementation of the global minimum tax, via QDMTT, remains unchanged under local regulations.

Indonesia’s tax authority said it will use the qualified domestic minimum top-up tax (QDMTT) mechanism to ensure multinational firms pay at least a 15% effective tax rate on profits generated locally.

The US recently reached a “side-by-side agreement” with over 145 countries to exclude US-headquartered multinationals from the OECD/G20 minimum tax rules known as the income inclusion rule (IIR) and undertaxed payment rule (UTPR).

Indonesia cannot apply IIR and UTPR to US firms, but can still impose QDMTT on profits made within its borders.

Officials said they will continue monitoring international developments to ensure consistent application of the tax rules and safeguard Indonesia’s taxing rights.

🔗 Source: Bisnis.com

🧠 Food for thought

Implications, context, and why it matters.

Indonesia’s QDMTT protects tax revenue where US deal leaves gaps

With the US exempt from the income inclusion rule (IIR) and undertaxed payment rule (UTPR), any sub-15% effective tax rate in Google’s Indonesia unit would not be taxed abroad, so Indonesia can collect the shortfall through the qualified domestic minimum top-up tax (QDMTT) 1.
Tax holidays and Special Economic Zone (SEZ) perks that pull rates under 15% trigger a domestic top-up for in-scope multinational enterprises (MNEs), so officials are reworking incentives to stay appealing under global minimum tax rules because a full holiday would shift the 15% payment to home countries 2 3. Profit shifting cost Indonesia more than $2.9 billion in 2019, with 2024 losses equal to 3.7% of GDP 4.

Tax advisors can help MNEs restructure as Indonesia’s incentives lose appeal

MNEs using holidays or SEZ relief face effective tax rate tests that can trigger QDMTT top-ups, so they should revisit structures and financing 2.
Strong data governance with clean accounting is needed for Global Anti-Base Erosion (GloBE) income and covered tax math, or errors can bring sanctions 1. Create a Global Minimum Tax (GMT) task force. Review structure and prove economic substance in Indonesia, then keep in touch with the tax authority 5.
Advisors can manage compliance, guide restructurings, and prepare the GloBE Information Return (a standardized filing under the global minimum tax) for Indonesia’s GMT regime starting in the 2025 tax year 1.