When the Omnibus Law was enacted, tax rate on interests received by foreign investors from bonds was reduced to 10%. Local investors now enjoy this same reduced tax rate under Government Regulation No. 91 of 2021.
The reduced tax rate applies on any income received or gained by local investors in the form of interest, ujrah or fee, profit sharing, margin, and any other similar income from bonds issued by government or private institutions. The regulation introduces three possible income tax bases to calculate the 10% tax rate and allows an investor to set-off discount or loss on the securities against the interest income.
Lastly, the regulation widens the parties that can withhold tax to include pension funds or mutual funds acting as brokers and/or buyers, and custodians or sub-registries that records the transfer of ownership.
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