New Zealand - Indonesia Tax Treaty

Reprint

as at 5 March 1988

Double Taxation Relief (Indonesia)

Order 1988

(SR 1988/15)

Paul Reeves, Governor-General

Order in Council

At Wellington this 29th day of February 1988 Present:

His Excellency the Governor-General in Council

Pursuant to section 294 of the Income Tax Act 1976, His Excellency the Governor-General, acting by and with the advice and consent of the Executive Council, hereby makes the following order.

Contents

Page

1 Title
2

2 Giving effect to Agreement
2

Note

Changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in this reprint.

A general outline of these changes is set out in the notes at the end of this reprint, together with other explanatory material about this reprint.

This order is administered by the Inland Revenue Department.

cl 1

Order 1988

5 March 1988

Schedule 3

Agreement between the Government of New Zealand and the Government of the Republic of Indonesia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

1 Title

Order

This order may be cited as the Double Taxation Relief (Indone- sia) Order 1988.

2 Giving effect to Agreement

It is hereby declared that the arrangements specified in the Agreement set out in the Schedule, being arrangements that have been made with the Government of Indonesia with a view to affording relief from double taxation in relation to income tax and excess retention tax imposed under the Income Tax Act 1976 and the income tax imposed by the Government of Indonesia, shall, in relation to income tax and excess retention tax imposed under that Act, and notwithstanding anything in that Act or any other enactment, have effect from 1 April 1989.

Schedule

Agreement between the Government of New Zealand and the Government of the Republic of Indonesia for the avoidance of double taxation and the prevention

of fiscal evasion with respect to taxes on income

The Government of New Zealand and the Government of the Repub- lic of Indonesia

Desiring to conclude an Agreement for the avoidance of double tax- ation and the prevention of fiscal evasion with respect to taxes on income,

Have agreed as follows:

Article 1 Personal scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2 Taxes covered

  The existing taxes to which the Agreement shall apply are:

(a) in New Zealand:

(i) the income tax; and

(ii) the excess retention tax,

(hereinafter referred to as “New Zealand tax”);

(b) in Indonesia:

the income tax (pajak-penghasilan), (hereinafter referred to as “Indonesian tax”).

  The Agreement shall apply also to any identical or substan-

tially similar taxes which are imposed after the date of signa- ture of the Agreement in addition to, or in place of, the exist- ing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

Article 3 General definitions

  For the purposes of this Agreement, unless the context other-

wise requires:

(a) (i) the term “New Zealand” means the territory of New Zealand but does not include Tokelau or the Associated Self Governing States of the Cook Is- lands and Niue; it also includes any area beyond the territorial sea which by New Zealand legisla- tion and in accordance with international law has been, or may hereafter be, designated as an area in which the rights of New Zealand with respect to natural resources may be exercised;

(ii) the term “Indonesia” comprises the territory of the Republic of Indonesia as defined in its laws and the adjacent areas over which the Republic of In- donesia has sovereign rights or jurisdiction in ac- cordance with the provisions of the United Na- tions Convention on the Law of the Sea, 1982;

(b) the terms “a Contracting State” and “the other Contract- ing State” mean New Zealand or Indonesia as the context requires;

(d) the term “company” means any body corporate or any entity which is treated as a body corporate for tax pur- poses;

(e) the terms “enterprise of a Contracting State” and “enter- prise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

(f) the term “national” means:

(i) in respect of New Zealand, any individual pos- sessing citizenship of New Zealand and any legal person, partnership or association deriving its sta- tus as such from the law in force in New Zealand;

Article 3—continued

(ii) in respect of Indonesia, any individual possess- ing the nationality of Indonesia and any legal per- son, partnership or association deriving its status as such from the law in force in Indonesia;

(g) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

(h) the term “competent authority” means:

(i) in the case of New Zealand, the Commissioner of Inland Revenue or his authorised representative;

(ii) in the case of Indonesia, the Minister of Finance or his authorised representative.

  In the Agreement, the terms “New Zealand tax” and “Indone-

sian tax” do not include any charge imposed as a penalty or interest under the law of either Contracting State relating to the taxes to which the Agreement applies.

  As regards the application of the Agreement by a Contracting

State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Agreement applies.

Article 4 Resident

  For the purposes of this Agreement, the term “resident of a

Contracting State” means any person who, under the law of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of management or any other criter- ion of a similar nature.

  Where by reason of the provisions of paragraph 1 an individual

is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall

Article 4—continued

be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

(b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

  Where,  by  reason  of  the  provisions  of  paragraph  1,  a  per-

son other than an individual is a resident of both Contract- ing States, the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement having regard to its day to day management, the place where it is incorporated or otherwise constituted and any other relevant factors.

Article 5 Permanent establishment

  For the purposes of this Agreement, the term “permanent es-

tablishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

  The term “permanent establishment” includes especially:

(a) a place of management;

(b) a branch;

(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.

  The term “permanent establishment” likewise encompasses:

(a) a building site, a construction, assembly or installation project or supervisory activities in connection there-

Article 5—continued

with, but only where such site, project or activities con- tinue for a period of more than six months;

(b) the furnishing of services, including consultancy ser- vices by an enterprise through employees or other per- sonnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than three months within any twelve month period.

  Notwithstanding the preceding provisions of this Article, the

term “permanent establishment” shall be deemed not to in- clude:

(a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise be- longing to the enterprise solely for the purpose of stor- age or display;

(c) the maintenance of a stock of goods or merchandise be- longing to the enterprise solely for the purpose of pro- cessing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of infor- mation, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise;

(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subpara- graphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combin- ation is of a preparatory or auxiliary character.

  Notwithstanding the provisions of paragraphs 1 and 2, where a

person—other than an agent of an independent status to whom paragraph 6 applies—is acting in a Contracting State on behalf

Article 5—continued

of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first- mentioned State in respect of any activities which that person undertakes for the enterprise, if such a person:

(a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, un- less the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provi- sions of that paragraph; or

(b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

  An enterprise of a Contracting State shall not be deemed to

have a permanent establishment in the other Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, where the activities of such an agent are devoted wholly or almost wholly on behalf of the enterprise, he shall be considered an agent of dependent status and that enterprise shall be deemed to have a permanent establishment in that State.

  The fact that a company which is a resident of a Contracting

State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6

Income from immovable property

  Income  derived  by  a  resident  of  a  Contracting  State  from

immovable property (including income from agriculture or

Article 6—continued

forestry) situated in the other Contracting State may be taxed in that other State.

  The term “immovable property” shall have the meaning which

it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

  The provisions of paragraph 1 shall apply to income derived

from the direct use, letting, or use in any other form of immov- able property.

  The provisions of paragraphs 1 and 3 shall also apply to the

income from immovable property of an enterprise and to in- come from immovable property used for the performance of independent personal services.

Article 7 Business profits

  The profits of an enterprise of a Contracting State shall be tax-

able only in that State unless the enterprise carries on business in the other Contracting State through a permanent establish- ment 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—

(a) that permanent establishment; or

(b) sales within that other Contracting State of goods or merchandise of the same or a similar kind as those being sold, or other business activities of the same or a similar kind as those being carried on through that permanent establishment if the sale or the business activities had been made or carried on in that way with a view to avoiding taxes in that other State.

Article 7—continued

  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 activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

  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 execu- tive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.

  Insofar as it has been customary in a Contracting State to deter-

mine the profits to be attributed to a permanent establishment on the basis of a certain percentage of the gross receipts of the enterprise or on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in para- graph 2 shall preclude that Contracting State from determin- ing the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, how- ever, be such that the result shall be in accordance with the principles contained in this Article.

  No income or profits shall be attributed to a permanent estab-

lishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

  For the purposes of the preceding paragraphs, the profits to be

attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

  Nothing in this Article shall affect any provisions of the law

of either Contracting State at any time in force regarding the taxation of any income or profits from the business of any form of insurance.

Article 7—continued

  Where income or profits include items of income or profits

which are dealt with separately in other Articles of this Agree- ment, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8 Shipping and air transport

  Profits of an enterprise of a Contracting State from the oper-

ation of ships or aircraft in international traffic shall be taxable only in that State.

  The  provisions  of  paragraph  1  shall  also  apply  to  profits

derived from the participation in a pool, a joint business or an international operating agency but only to so much of the profits so derived as is attributable to the participant in proportion to its share in that joint operation.

Where

Article 9 Associated enterprises

(a) an enterprise of a Contracting State participates directly or in- directly in the management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the man- agement, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those condi- tions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10 Dividends

  Dividends paid by a company which is a resident of a Con-

tracting State to a resident of the other Contracting State may be taxed in that other State.

  However, such dividends may also be taxed in the Contracting

State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 15 percent of the gross amount of the dividends. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limi- tation. This paragraph shall not affect the taxation of the com- pany in respect of the profits out of which the dividends are paid.

  The term “dividends” as used in this Article means income

from shares and other income assimilated to income from shares by the taxation law of the Contracting State of which the company making the distribution is a resident.

  The provisions of paragraphs 1 and 2 shall not apply if the

beneficial owner of the dividends, being a resident of a Con- tracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or per- forms in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such per- manent establishment or fixed base. In such case the provi- sions of Article 7 or Article 14, as the case may be, shall apply.

  Where a company which is a resident of a Contracting State

derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in re- spect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the

Article 10—continued

undistributed profits consist wholly or partly of profits or in- come arising in such other State.

Article 11 Interest

  Interest arising in a Contracting State and paid to a resident of

the other Contracting State may be taxed in that other State.

  However, such interest may also be taxed in the Contracting

State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 percent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

  Notwithstanding the provisions of paragraph 2, interest aris-

ing in a Contracting State and received by the Government of the other Contracting State including a political subdivision or a local authority thereof or the central bank of that other Con- tracting State shall be taxable only in that other Contracting State.

  The term “interest” as used in this Article means income from

debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. However, this term does not include income dealt with in Art- icle 10. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

  The provisions of paragraphs 1 and 2 shall not apply if the

beneficial owner of the interest, being a resident of a Contract- ing State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effect- ively connected with such permanent establishment or fixed

Article 11—continued

base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

  Interest shall be deemed to arise in a Contracting State when

the payer is that State itself, a political subdivision, a local au- thority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establish- ment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

  Where, by reason of a special relationship between the payer

and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard be- ing had to the other provisions of this Agreement.

Article 12 Royalties

  Royalties arising in a Contracting State and paid to a resident

of the other Contracting State may be taxed in that other State.

  However,  such royalties may also be taxed in the Contract-

ing State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royal- ties the tax so charged shall not exceed 15 percent of the gross amount of the royalties. The competent authorities of the Con- tracting States shall by mutual agreement settle the mode of application of this limitation.

  The term “royalties” as used in this Article means payments

of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work

Article 12—continued

including cinematograph films, films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for in- formation concerning industrial, commercial or scientific ex- perience.

  The provisions of paragraphs 1 and 2 shall not apply if the

beneficial owner of the royalties, being a resident of a Con- tracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent estab- lishment situated therein, or performs in that other State inde- pendent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establish- ment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

  Royalties shall be deemed to arise in a Contracting State when

the payer is that State itself, a political subdivision, a local au- thority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establish- ment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royal- ties shall be deemed to arise in the State in which the perman- ent establishment or fixed base is situated.

  Where, by reason of a special relationship between the payer

and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Alienation of property

  Income or gains derived by a resident of a Contracting State

from the alienation of immovable property referred to in Art- icle 6 and situated in the other Contracting State may be taxed in that other State.

  Income or gains from the alienation of movable property form-

ing part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such income or gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

  Income or gains of an enterprise of a Contracting State from

the alienation of ships or aircraft operated in international traf- fic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.

  Income or gains from the alienation of any property other than

that referred to in paragraphs 1, 2 and 3, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14 Independent personal services

  Income derived by an individual who is a resident of a Con-

tracting State in respect of professional services or other activ- ities of an independent character shall be taxable only in that State unless such services are performed in the other Contract- ing State and—

(a) the individual is present in the other State for a period or periods exceeding in the aggregate 90 days in any consecutive twelve month period, or

(b) the individual has a fixed base regularly available to him in the other State for the purpose of performing his activities.

Article 14—continued

In such cases, the income may be taxed in that other State but only so much of it as is attributable to activities connected with that fixed base or performed during such period or periods.

  The  term  “professional  services”  includes,  especially,  inde-

pendent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15 Dependent personal services

  Subject to the provisions of Articles 16,  18,  19,  20 and 21,

salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

  Notwithstanding the provisions of paragraph 1, remuneration

derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any consecutive twelve month period, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establish- ment or a fixed base which the employer has in the other State.

  Notwithstanding the preceding provisions of this Article, re-

muneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that Con- tracting State.

Article 16 Directors’ fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of direct- ors of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17 Artistes and athletes

  Notwithstanding the provisions of Articles 14 and 15, income

derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

  Where income in respect of personal activities exercised by

an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

  Notwithstanding the provisions of paragraphs 1 and 2, income

derived from activities referred to in paragraph 1 performed under a cultural agreement or arrangement between the Con- tracting States shall be exempt from tax in the Contracting State in which the activities are exercised if the visit to that State is wholly or substantially supported by funds of the Gov- ernment of the other Contracting State, a local authority or public institution thereof.

Article 18 Pensions and annuities

  Subject to the provisions of paragraph 2 of Article 19, pen-

sions, annuities and other similar remuneration paid to a resi- dent of a Contracting State in consideration of past employ- ment shall be taxable only in that State.

Article 18—continued

  Notwithstanding the provisions of paragraph 1, pensions and

other payments made under the social security legislation of a Contracting State may be taxed in that State.

  (a)     The term “pensions” as used in this Article means peri-

odic payments made in consideration for past services rendered.

(b) The term “annuities” as used in this Article means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Article 19 Government service

  (a)     Remuneration, other than a pension, paid by a Contract-

ing State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident of that State solely for the purpose of rendering the services.

  (a)     Any pension paid by, or out of funds created by, a Con-

tracting State or a political subdivision or a local author- ity thereof to an individual in respect of services ren- dered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

Article 19—continued

  The provisions of Articles 15, 16, and 18 shall apply to remu-

neration and pensions in respect of services rendered in con- nection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20 Professors and teachers

  A  professor  or  teacher  who  is  or  was  a  resident  of  a  Con-

tracting State immediately before making a visit to the other Contracting State, and who, at the invitation of any university, college, school or other similar educational institution, which is recognised by the competent authority in that other Con- tracting State, visits that other Contracting State for a period not exceeding two years solely for the purpose of teaching or research or both at such educational institution shall be ex- empt from tax in that other Contracting State on any remuner- ation for such teaching or research. However, to the extent the above-mentioned remuneration is not taxed in the State where the recipient is a resident, the remuneration may be taxed in the other State.

  This Article shall not apply to remuneration which a professor

or teacher receives for conducting research if such research is undertaken primarily for the private benefit of a specific person or persons.

Article 21 Students

Payments which a student or business apprentice who is or was im- mediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Article 22 Other income

Items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State except that, if such income is derived from sources within the other Contracting State, it may also be taxed in that other State.

Article 23

Methods of elimination of double taxation

  In the case of Indonesia, double taxation shall be avoided as

follows:

(a) Indonesia, when imposing tax on residents of Indone- sia, may include in the basis upon which such tax is imposed the items of income which may be taxed in New Zealand in accordance with the provisions of this Agreement;

(b) Where a resident of Indonesia derives income from New Zealand and that income may be taxed in New Zealand in accordance with the provisions of this Agreement, the amount of New Zealand tax payable in respect of that income shall be allowed as a credit against the Indone- sian tax imposed on that resident. The amount of credit, however, shall not exceed that part of the Indonesian tax which is appropriate to that income.

  In the case of New Zealand, double taxation shall be avoided

as follows:

Subject to any provisions of the law of New Zealand which may from time to time be in force and which relate to the al- lowance of a credit against New Zealand tax of tax paid in a country outside New Zealand (which shall not affect the gen- eral principle hereof), Indonesian tax paid under the law of Indonesia and consistently with this Agreement, whether di- rectly or by deduction, in respect of income derived by a New Zealand resident from sources in Indonesia (excluding, in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against New Zealand tax payable in respect of that income.

Article 23—continued

  For the purposes of this Article,  profits,  income or gains of

a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Agreement shall be deemed to arise from sources in that other State.

Article 24

Mutual agreement procedure

  Where a resident of a Contracting State considers that the ac-

tions of one or both of the Contracting States result or will re- sult for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies pro- vided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident. This case must be presented within two years from the first notification of the action giving rise to taxation not in accordance with the provisions of the Agreement.

  The competent authority shall endeavour, if the objection ap-

pears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in ac- cordance with the Agreement.

  The competent authorities of the Contracting States shall en-

deavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimin- ation of double taxation in cases not provided for in the Agree- ment.

  The competent authorities of the Contracting States may com-

municate with each other directly for the purpose of giving effect to the provisions of the Agreement.

Article 25 Exchange of information

  The competent authorities of the Contracting States shall ex-

change such information as is necessary for carrying out the

Article 25—continued

provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agree- ment insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collec- tion of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the in- formation only for such purposes. They may disclose the in- formation in public court proceedings or in judicial decisions.

  In no case shall the provisions of paragraph 1 be construed so

as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

Article 26 Diplomatic and consular officers

Nothing in this Agreement shall affect the fiscal privileges of diplo- matic or consular officers under the general rules of international law or under the provisions of special international agreements.

Article 27 Entry into force

  This Agreement shall be ratified and the instruments of ratifi-

cation shall be exchanged at Wellington as soon as possible.

  This Agreement shall enter into force after the expiration of

thirty days from the date of the exchange of instruments of ratification and shall have effect:

(a) in Indonesia:

in respect of income derived during any taxable year beginning on or after the first day of January in the cal- endar year next following that in which this Agreement enters into force;

(b) in New Zealand:

in respect of income derived during any income year be- ginning on or after 1 April in the calendar year next fol- lowing that in which this Agreement enters into force.

Article 28 Termination

This Agreement shall continue in effect indefinitely but either Con- tracting State may, on or before June 30 in any calendar year after the fourth year following the exchange of the instruments of ratification, give notice of termination to the other Contracting State and in such event the Agreement shall cease to have effect:

(a) in Indonesia:

in respect of income derived during any taxable year beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given;

(b) in New Zealand:

in respect of income derived during any income year begin- ning on or after 1 April in the calendar year next following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed the present Agreement.

DONE in duplicate at Wellington this 25th day of March 1987 in the English language.

Article 28—continued

Michael Moore Drs. Rachmat Saleh

For the Government of New Zealand

For the Government of the Re- public of Indonesia

Protocol

NEW ZEALAND and THE REPUBLIC OF INDONESIA have

agreed at the signing of the Agreement between the two States for the Avoidance of Double Taxation and the Prevention of Fiscal Eva- sion with respect to taxes on income upon the following provisions which shall form an integral part of the said Agreement.

With reference to Article 5,

(a) notwithstanding the provisions of paragraph 3 an enterprise shall be deemed to have a permanent establishment in a Con- tracting State and to carry on business through that permanent establishment if it carries on activities in that State in connec- tion with the exploration or exploitation of natural resources situated in that State;

(b) the provisions of paragraph (a) of this Protocol shall not apply if such activities are carried on for a period not exceeding three months in the aggregate in any consecutive twelve month period. However for the purposes of this paragraph activities carried on in that State by an enterprise associated with another enterprise shall be regarded as carried on by the enterprise with which it is associated if those activities are connected with ac- tivities carried on in that State by the last-mentioned enter- prise. An enterprise shall be deemed to be associated with another enterprise if one is controlled directly or indirectly by the other, or if both are controlled directly or indirectly by a third person or persons.

IN WITNESS WHEREOF the undersigned have signed this Protocol which shall have the same force and validity as if it were inserted word by word in the Agreement.

DONE in duplicate at Wellington this 25th day of March 1987 in the English language.

Explanatory note

Order 1988

5 March 1988

Michael Moore Drs. Rachmat Saleh

For the Government of New Zealand

For the Government of the Re- public of Indonesia

Marie Shroff, Clerk of the Executive Council.

Explanatory note This note is not part of the order, but is intended to indicate its general effect.

This order gives effect to an Agreement to avoid double taxation and fiscal evasion entered into between New Zealand and Indonesia on 25 March 1987. The arrangements contained in the Agreement will have effect from 1 April 1989.

Issued under the authority of the Acts and Regulations Publication Act 1989. Date of notification in Gazette: 4 March 1988.

Contents

1 General

2 Status of reprints

3 How reprints are prepared

4 Changes made under section 17C of the Acts and Regulations Publication Act 1989

5 List of amendments incorporated in this reprint (most recent

first)

Notes

1 General

This is a reprint of the Double Taxation Relief (Indonesia) Order 1988. The reprint incorporates all the amendments to the order as at 5 March 1988, as specified in the list of amend- ments at the end of these notes.

Relevant provisions of any amending enactments that contain transitional, savings, or application provisions that cannot be compiled in the reprint are also included, after the principal enactment, in chronological order. For more information, see http://www.pco.parliament.govt.nz/reprints/.

2 Status of reprints

Under section 16D of the Acts and Regulations Publication Act 1989, reprints are presumed to correctly state, as at the date of the reprint, the law enacted by the principal enactment and by the amendments to that enactment. This presumption applies even though editorial changes authorised by section 17C of the Acts and Regulations Publication Act 1989 have been made in the reprint.

This presumption may be rebutted by producing the official volumes of statutes or statutory regulations in which the prin- cipal enactment and its amendments are contained.

3 How reprints are prepared

A number of editorial conventions are followed in the prep- aration of reprints. For example, the enacting words are not included in Acts, and provisions that are repealed or revoked

Notes

Order 1988

5 March 1988

are omitted. For a detailed list of the editorial conventions, see http://www.pco.parliament.govt.nz/editorial-conventions/ or Part 8 of the Tables of New Zealand Acts and Ordinances and Statutory Regulations and Deemed Regulations in Force.

4 Changes made under section 17C of the Acts and Regulations Publication Act 1989

Section 17C of the Acts and Regulations Publication Act 1989 authorises the making of editorial changes in a reprint as set out in sections 17D and 17E of that Act so that, to the extent permitted, the format and style of the reprinted enactment is consistent with current legislative drafting practice. Changes that would alter the effect of the legislation are not permitted.

A new format of legislation was introduced on 1 January 2000. Changes to legislative drafting style have also been made since 1997, and are ongoing. To the extent permitted by section 17C of the Acts and Regulations Publication Act 1989, all legisla- tion reprinted after 1 January 2000 is in the new format for legislation and reflects current drafting practice at the time of the reprint.

In outline, the editorial changes made in reprints under the au- thority of section 17C of the Acts and Regulations Publication Act 1989 are set out below, and they have been applied, where relevant, in the preparation of this reprint:

• omission of unnecessary referential words (such as “of this section” and “of this Act”)

• typeface and type size (Times Roman, generally in 11.5 point)

• layout of provisions, including:

• indentation

• position of section headings (eg, the number and heading now appear above the section)

• format of definitions (eg, the defined term now appears in bold type, without quotation marks)

• format of dates (eg, a date formerly expressed as “the 1st day of January 1999” is now expressed as “1 January 1999”)

• position of the date of assent (it now appears on the front page of each Act)

• punctuation (eg, colons are not used after definitions)

• Parts numbered with roman numerals are replaced with arabic numerals, and all cross-references are changed accordingly

• case and appearance of letters and words, including:

• format of headings (eg, headings where each word formerly appeared with an initial cap- ital letter followed by small capital letters are amended so that the heading appears in bold, with only the first word (and any proper nouns) appearing with an initial capital letter)

• small capital letters in section and subsection ref- erences are now capital letters

• schedules are renumbered (eg, Schedule 1 replaces First Schedule), and all cross-references are changed accord- ingly

• running heads (the information that appears at the top of each page)

• format of two-column schedules of consequential amendments, and schedules of repeals (eg, they are rearranged into alphabetical order, rather than chrono- logical).

5 List of amendments incorporated in this reprint (most recent first)

Wellington, New Zealand:

Published under the authority of the New Zealand Government—2011

New Zealand - Indonesia Tax Treaty

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