Tax change forces Indonesian bonds to innovate

Author: | Published: 17 Nov 2009

Changes to regulations governing withholding tax in Indonesia could limit the appeal of issuing bonds as a financing tool. Borrowers may turn to banks for financing unless new structures are created.

The new regulations (61/PJ/2009 and 62/PJ/2009 from the Directorate General of Taxation) limit the impact of existing tax treaties to issuers that fit particular criteria and impose a 20% withholding tax on all other transactions.

Joel Hogarth, a partner in O’Melveny & Myers’s Singapore office, believes issuers would need to factor this into the...