The Netherlands and Indonesia on July 30 signed a protocol to their 2002 tax treaty.
The agreement provides that taxation in the source country on dividends is reduced to 5 percent if paid to corporate shareholders that hold at least a 25 percent interest in the company paying the dividends, is 10 percent if the beneficial owner is a pension fund, and is 15 percent in other cases.
Taxation in the source country on interest is set at a 5 percent rate if the beneficial owner of the interest is a resident of the other state and if the interest is paid on a loan made for a period of more than 2 years or is paid in connection with the sale on credit of any industrial, commercial, or scientific equipment.
The agreement also adds a clause stating that the treaty will be interpreted by reference to the OECD Model Tax Convention or its Commentary, particularly with respect to the definition of ‘beneficial owner.’
It also updates provisions on exchange of information regarding tax matters between the tax authorities, as well as provisions on assistance in the collection of taxes.
The agreement will enter into force after the countries have notified each other that the necessary domestic procedures to bring the protocol in to force been completed.
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