the territory of Brunei Darussalam as defined in its laws and the
adjacent areas over which Brunei Darussalam has sovereignty, sovereign rights or
jurisdiction in accordance with the provisions of the United Nations Convention on the Law
of the Sea, 1982;
(b) the term " Indonesia " means:
the territory of the Republic of Indonesia as defined in its laws and
the adjacent areas over which the Republic of Indonesia has sovereignty, sovereign rights
or jurisdiction in accordance with the provisions of the United Nations Convention on the
Law of the Sea, 1982;
(c) the term "Government" means:
(i) in the case of Brunei Darussalam:
(1) The Brunei Currency Board,
(2) The Brunei Investment Agency,
(3) Any local or statutory authority or body exempt from tax in Brunei
Darussalam,
(4) Any body corporate controlled or wholly owned by the Government of
Brunei Darussalam,
(5) Such institutions as may be agreed from time to time between the
two Contracting States;
(ii) in the case of Indonesia:
(1) Local authorities,
(2) A political subdivision,
(3) The Central Bank or any financial institution controlled by the
Government the capital of which is wholly owned by the Government;
(d) the terms "a Contracting State" and "the other
Contracting State" mean Brunei or Indonesia as the context requires;
(e) the term "tax" means Brunei tax or Indonesian tax as the
context requires;
(f) the term "person" includes an individual, a company, a
body of persons and any other entity which is treated as a taxable entity under the tax
laws of the respective Contracting States;
(g) the term "company" means any company, body corporate or
any other entity which is treated as a company under the tax laws of the respective
Contracting States;
(h) the terms "enterprise of a Contracting State" and
"enterprise 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;
(i) the term "national" means:
(a) in the case of Brunei Darussalam:
any natural person who is afforded the status of a national under the
applicable laws in Brunei and may also include any person in possession of a national
passport issued by the competent authorities;
b) in the case of Indonesia:
any natural person who is afforded the status of a national under the
applicable laws in Indonesia;
(ii) any legal person, partnership and association deriving its status
as such from the laws in force in a Contracting State;
- the term "international traffic" means carriage of passengers, mails,
livestock or goods by a ship or aircraft which is operated by an enterprise of one of the
Contracting States, except when the ship or aircraft is operated solely between places in
the other Contracting State or solely between such places and one or more structures used
for the exploration or exploitation of natural resources situated in waters adjacent to
the territorial waters of that other Contracting State;
(k) the term "competent authority" means:
(i) in Brunei: the Minister of Finance or his authorised
representative;
(ii) in Indonesia: the Minister of Finance or his authorised
representative.
2. As regards the application of this Agreement by a Contracting State,
any term not otherwise defined shall, unless the context otherwise requires, have the
meaning which it has under the laws of that Contracting State relating to the taxes which
are the subject of this Agreement.
Article 4
RESIDENT
1. For the purpose of this Agreement, the term "resident of a
Contracting State" means any person who, under the laws of that Contracting State, is
liable to tax therein by reason of his domicile, residence, place of management or any
other criterion of a similar nature.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then his status shall be determined in accordance
with the following rules:
(a) He shall be deemed to be a resident of the Contracting State in
which he has a permanent home available to him. If he has permanent home available to him
in both Contracting States he shall be deemed to be a resident of the Contracting State
with which his personal and economic relations are closest (centre of vital interests);
(b) If the Contracting 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 Contracting State, he shall be deemed to be a resident of the Contracting State in
which he has an habitual abode;
(c) If he has an habitual abode in both Contracting States or in
neither of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than
an individual is a resident of both Contracting States, then it shall be deemed to be a
resident of the State in which the control and management of its business is exercised. If
its place of control and management cannot be determined, the competent authorities of the
Contracting States shall settle the question by mutual agreement.
Article 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Agreement, the term "permanent
establishment" means a fixed place of business through which the business of the
enterprise is wholly or partly carried on.
2. The term "permanent establishment" shall include
especially:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a store, warehouse or premises used as a sales outlet;
(e) a factory;
(f) a workshop;
(g) a farm or plantation;
(h) a mine, an oil or gas well, a quarry or other place of extraction
or exploration of natural resources, drilling rig or working ship used for the exploration
or exploitation of natural resources including timber or other forest produce;
(i) a building site or construction or supervisory activities in
connection therewith, provided such site, project or activity continues for a period of
more than 183 days;
(j) assembly project or installation project which exists for more than
three months; and
(k) the furnishing of services, including consultancy services by an
enterprise through employees or other personnel 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 3 months within
any twelve month period.
3. Notwithstanding the preceding provisions of this Article, the term
"permanent establishment" shall not be deemed to include:
(a) the use of facilities solely for the purposes of storage, or
display of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage or display;
(c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purposes of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose
of purchasing goods or merchandise, or for collecting information for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose
of advertising, for the supply of information, for scientific research or for similar
activities which have a preparatory or auxiliary character, for the enterprise.
4. Notwithstanding the provisions of paragraphs 1 and 2, where a person
- other than an agent of an independent status to whom paragraph 5 applies - is acting in
a Contracting State on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the first-mentioned
Contracting State in respect of any activities which that person undertakes for the
enterprise, if such a person:
- has and habitually exercises in that Contracting State an authority to conclude
contracts in the name of the enterprise, unless the activities of such person are limited
to those mentioned in paragraph 3 which, if exercised through a fixed place of business
would not make this fixed place of business a permanent establishment under the provisions
of that paragraph.
has no such authority, but habitually maintains in the
first-mentioned Contracting State a stock of goods or merchandise from which he regularly
delivers goods or merchandise on behalf of the enterprise; or
manufactures or processes in that Contracting State for the
enterprise goods or merchandise belonging to the enterprise.
5. An insurance enterprise of a Contracting State shall, except with
regard to reinsurance, be deemed to have a permanent establishment in the other
Contracting State if it collects premiums in that other State or insures risks situated
therein through an employee or through a representative who is not an agent of an
independent status within the meaning of paragraph 6.
6. 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 other Contracting 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, when the activities of such an agent are
devoted wholly or almost wholly on behalf of that enterprise or its associated
enterprises, he will not be considered an agent of an independent status within the
meaning of this paragraph.
7. 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 Contracting State (whether through a
permanent establishment or otherwise), shall not of itself make either company a permanent
establishment of the other.
Article 6
INCOME FROM IMMOVABLE PROPERTY
1. Income derived by a resident of a Contracting State from immovable
property (including income from agriculture or forestry) situated in the other Contracting
State may be taxed in that other Contracting State.
2. The term "immovable property" shall be defined in
accordance with 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, forestry and fishery, rights to which the
provisions of general law respecting landed property apply, usufruct of immovable property
and rights to variable or fixed payments in cash or kind 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.
3. The provisions of paragraph 1 shall apply to income derived from the
direct use, letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income
from immovable property of an enterprise and to income from immovable property used for
the performance of independent personal services.
Article 7
BUSINESS PROFITS
1. The profits of an enterprise of a Contracting State shall be taxable
only in that Contracting State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the enterprise
carries on business as aforesaid, the profits of the enterprise may be taxed in the other
Contracting State but only so much of them as is attributable to (a) that permanent
establishment; (b) sales in that other Contracting State of goods or merchandise of the
same or similar kind as those sold through that permanent establishment; or (c) other
business activities carried on in that other Contracting State of the same or similar kind
as those effected through that permanent establishment.
2. 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.
3. In the determination of the profits of a permanent establishment,
there shall be allowed as deductions expenses which are incurred for the purposes of the
permanent establishment, including executive and general administrative expenses so
incurred, whether in the Contracting State in which the permanent establishment is
situated or elsewhere, but this does not include any expenses which, under the law of that
Contracting State would not be allowed to be deducted by an enterprise of that Contracting
State.
4. In so far as it has been customary in a Contracting State to
determine the profits to be attributed to a permanent establishment on the basis of an
apportionment of the total profits of the enterprise to its various parts, nothing in
paragraph 2 shall preclude that Contracting State from determining the profits to be taxed
by such apportionment as may be customary; the method of apportionment adopted shall,
however, be such that the result shall be in accordance with the principles laid down in
this Article.
5. 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.
6. Where profits include items of income which are dealt with
separately in other Articles of this Agreement, then the provisions of those Articles
shall not be affected by the provisions of this Article.
7. No profits shall be attributed to a permanent establishment by
reason of the mere purchase by that permanent establishment of goods or merchandise for
the enterprise.
Article 8
SHIPPING AND AIR TRANSPORT
1. Notwithstanding the provision of Article 7, profits from the
operation of aircraft in international traffic carried on by an enterprise of a
Contracting State shall be taxable only in that Contracting State.
2. Profits from sources within a Contracting State derived by an
enterprise of the other Contracting State from the operation of ships in international
traffic may be taxed in the first mentioned State, but the tax imposed shall be reduced by
an amount equal to 50 per cent thereof.
3. The provisions of paragraphs 1 and 2 of this Article shall likewise
apply to profits derived from the participation in pools, in a joint business or in an
international operating agency of any kind by enterprises engaged in the operation of
ships or aircraft in international traffic.
4. For the purposes of this Article, profits derived from the other
Contracting State mean profits from the carriage of passengers, mail, livestock or goods
shipped, or loaded into a ship or an aircraft in that Contracting State (excluding the
profits accruing from passengers, mail, livestock or goods which are brought to that other
Contracting State solely for transshipment, or for transfer from one aircraft to another
or from one aircraft to a ship or from a ship to an aircraft).
Article 9
ASSOCIATED ENTERPRISES
(a) an enterprise of a Contracting State participates directly or
indirectly 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
management, 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, any profits which would, but for those
conditions, 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.
2. Where a Contracting State includes in the profits of an enterprise
of that Contracting State - and taxes accordingly - profits on which an enterprise of the
other Contracting State has been charged to tax in that other Contracting State and the
profits so included are profits which would have accrued to the enterprises of the
first-mentioned Contracting State if the conditions made between the two enterprises had
been those which would have been made between independent enterprise, then that other
Contracting State shall make an appropriate adjustment to the amount of the tax charged
therein on those profits. In determining such adjustment, due regard shall be had to
the other provisions of this Agreement and the competent authorities of the Contracting
States shall, if necessary consult each other.
3. A Contracting State shall not change the profits of an enterprise in
the circumstances referred to in paragraph 2 after the expire of the time limits provided
in its tax laws.
Article 10
DIVIDENDS
1. Dividends paid by a company which is a resident of a Contracting
State to a resident of the other Contracting State may be taxed in that other Contracting
State.
2. 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
Contracting State, but if the recipient is the beneficial owner of the dividends
the tax so charged shall not exceed 15 per cent 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 limitation.
This paragraph shall not affect the taxation of the company in respect
of the profits out of which the dividends are paid.
3. Notwithstanding the provisions of paragraph 2, dividends arising in
a Contracting State and paid to the Government of the other Contracting State shall
be exempt from tax in the first-mentioned Contracting State.
4. The term "dividends" as used in this article means income
from shares, "jouissance" shares or "jouissance" rights, mining
shares, founders' shares or other rights, not being debt-claims, participating in profits,
as well as income from the other corporate rights which is subjected to the same taxation
treatment as income from shares by the laws of the Contracting State of which the company
making the distribution is a resident.
5. The provisions of paragraph 1 and 2 shall not apply if the
beneficial owner of the dividends, being a resident of a Contracting 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 performs in that other
Contracting 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
permanent establishment or fixed base. In such case the provisions of Article 7 or Article
14, as the case may be, shall apply.
6. Where a company which is a resident of a Contracting State derives
profits or income from the other Contracting State, that other Contracting State
may not impose any tax on the dividends paid by the company except in so far as such
dividends are paid to a resident of that other Contracting State or in so far as the
holding in respect of which the dividends are paid is effectively connected with a
permanent establishment or a fixed base situated in that other Contracting State, nor
subject the company's undistributed profits to a tax on the company's undistributed
profits, even if the dividends paid or the undistributed profits consist wholly or partly
or profits or income arising in such other Contracting State.
7. Notwithstanding any other provision of this Agreement where a
company which is a resident of a Contracting State has a permanent establishment in the
other Contracting State, the profits of the permanent establishment may be subjected to an
additional tax in that other Contracting State in accordance with its law, but the
additional tax so charged shall not exceed 10 per cent of the amount of such
profits after deducting therefrom income tax and other taxes on income imposed thereon in
that other Contracting State.
8. The rate of tax in paragraph 2 and in paragraph 7 of this Article
shall not affect the rate of the tax applied in any production sharing contracts or any
other similar contracts relating to oil and gas sector or other mining sector concluded by
the Government of a Contracting State, its instrumentality, its relevant state oil and gas
company or any other entity thereof with a person who is a resident of the other
Contracting State.
Article 11
INTEREST
1. Interest arising in a Contracting State and paid to a resident of
the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State in
which it arises and according to the laws of that Contracting State, but if the recipient
is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of
the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, interest arising in a
Contracting State and paid to the Government of the other Contracting State shall be
exempt from tax in the first-mentioned Contracting State.
4. 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, as well as income assimilated to income
from money lent by the taxation laws of the Contracting State in which the income arises
including interest on deferred payment sales. Penalty charges for late payment shall not
be regarded as interest for the purpose of this Article.
5. The provisions of paragraphs 1 and 2 shall not apply if the
beneficial owner of the interest, being a resident of a Contracting 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 Contracting State
independent personal services from a fixed base situated therein, and the debt-claim in
respect of which the interest is paid is effectively connected with such permanent
establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as
the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the
payer is that Contracting State itself, a political sub-division, a local authority or a
resident of that Contracting 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 establishment 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
Contracting State in which the permanent establishment or fixed base is situated.
7. 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 a 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.
Article 12
ROYALTIES
1. Royalties arising in a Contracting State and paid to a resident of
the other Contracting State may be taxed in that other Contracting State.
2. However, such royalties may also be taxed in the Contracting State
in which they arise, and according to the laws of that Contracting State, but, if the
recipient is the beneficial owner of the royalties, the tax so charged shall not exceed 15
per cent of the gross amount of the royalties.
3. Notwithstanding the provisions of paragraph 2, royalties arising in
a Contracting State and paid to the Government of the other Contracting State shall be
exempt from tax in the first-mentioned Contracting State.
4. 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, including cinematographic films or
tapes for television or 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 information concerning industrial or scientific
experience.
5. Royalties shall be deemed to arise in a Contracting State when the
payer is that Contracting State itself, a local authority or a resident of that
Contracting State. Where, however, the person paying the royalties, whether he is a
resident of a Contracting State or not, has in that Contracting State a permanent
establishment in connection with which the liability to pay the royalties was incurred,
and such royalties are borne by such permanent establishment, then such royalties shall be
deemed to arise in that Contracting State in which the permanent establishment is
situated.
6. The provisions of paragraphs 1, 2 and 5 of this Article shall
likewise apply to proceeds arising from the alienation of any copyright of scientific
work, any patent, trade mark, design or model, plan or secret formula or process.
7. The provisions of paragraphs 1, 2 and 5 of this Article shall not
apply if the recipient of the royalties or the proceeds, being a resident of a Contracting
State, has in the other Contracting State in which the royalties or the proceeds arise a
permanent establishment with which the right or property giving rise to the royalties or
the property the alienation of which gives rise to the proceeds is effectively connected.
In such a case, the provisions of Article 7 shall apply.
8. Where, owing to a special relationship between the payer and the
recipient or between both of them and some other person, the amount of the royalties paid,
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 recipient in the absence of such
relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In that 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.
Article 13
CAPITAL GAINS
1. Gains derived by a resident of a Contracting State from the
alienation of immovable property referred to in Article 6 and situated in the other
Contracting State may be taxed in that other Contracting State.
2. Gains from the alienation of movable property forming 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 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 Contracting State.
3. Gains derived by an enterprise of a Contracting State from the
alienation of ships or aircraft operated in international traffic or movable property
pertaining to the operation of such ships or aircraft, shall be taxable only in the
Contracting State.
4. 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.
5. Notwithstanding the provisions of paragraphs 1 and 2 of this Article
and paragraph 2 of the Protocol, capital gains arising in a Contracting State to the
Government of the other Contracting State shall be exempt from tax in the first-mentioned
Contracting State.
Article 14
INDEPENDENT PERSONAL SERVICES
1. Income derived by a resident of a Contracting State in respect of
professional services or other activities of an independent character shall be taxable
only in that Contracting State unless he has a fixed base regularly available to him in
the other Contracting State for the purpose of performing his activities or he is present
in that other Contracting State for a period or periods exceeding in the aggregate 183
days within any twelve month period. If he has such a fixed base or remains in that other
Contracting State for the aforesaid period or periods, the income may be taxed in that
other Contracting State but only so much of it as is attributable to that fixed base or is
derived in that other Contracting State during the aforesaid period or periods.
2. The term "professional services" includes independent
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
1. Subject to the provisions of Articles 16, 18, 19 and 20,
salaries, wages and other similar remuneration or income for personal services derived by
a resident of a Contracting State, shall be taxable only in that Contracting State,
unless the services are performed in the other Contracting State. If the services are so
performed, such remuneration or income as is derived therefrom may be taxed in that other
Contracting State.
2. Notwithstanding the provisions of paragraph 1, remuneration or
income derived by a resident of a Contracting State for personal services performed in the
other Contracting State shall be exempt from tax of that other Contracting State if -
(a) the recipient is present in the other Contracting State for
a period or periods not exceeding in the aggregate 183 days within any twelve-month
period; and
(b) the remuneration or income is paid by or on behalf of, a person who
is a resident of the first-mentioned State; and
(c) the remuneration or income is not borne by a permanent
establishment which that person has in the other Contracting State.
3. Notwithstanding the preceding provisions of this Article,
remuneration derived in respect of an employment exercised aboard a ship or aircraft
operated in international traffic by an enterprise of a Contracting State shall be taxable
only in that Contracting State.
Article 16
DIRECTORS' FEES
1. Directors' fees and similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors or any other
similar organ of a company which is a resident of the other Contracting State may be taxed
in that other Contracting State.
2. The remuneration which a person to whom paragraph 1 applies derives
from the company in respect of the discharge of day-to-day functions of a managerial or
technical nature may be taxed in accordance with the provisions of Article 15.
Article 17
ARTISTES AND ATHLETES
1. 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 Contracting
State.
2. Where income in respect of personal activities exercised in a
Contracting State 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 and 15, be taxed in that Contracting State.
3. Notwithstanding the provisions of paragraphs 1 and 2, income derived
from activities referred to in paragraph 1 shall be exempt from tax in the Contracting
State in which the activities are exercised if the visits to that Contracting State are
wholly or substantially supported by funds of one or both of the Contracting States, a
local authority or public institution thereof.
Article 18
PENSIONS
1. Subject to the provisions of paragraph 2 of Article 19, any
pension or other similar remuneration paid to a resident of one of the Contracting States
from a source in the other Contracting State in consideration of past employment or
services in that other Contracting State and any annuity paid to such a resident from such
a source may be taxed in that other Contracting State.
2. The term "annuity" 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
1. (a) Remuneration, including benefits other than a pension, paid
by a Contracting State or a local authority thereof to an individual in respect of
services rendered to that Contracting State or authority shall be taxable only in that
Contracting State.
(b) However, such remuneration shall be taxable only in the other
Contracting State if the services are rendered in that other Contracting 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.
2. (a) Any pension paid by, or out of funds created by, a Contracting
State or a local authority thereof to an individual in respect of services rendered to
that Contracting State or authority shall be taxable only in that Contracting 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 other
Contracting State.
3. The provisions of Articles 15, 16, 17 and 18 shall apply to
remuneration and pensions in respect of services rendered in connection with a business
carried on by a Contracting State or a local authority thereof.
Article 20
INCOME OF GOVERNMENT
The Government of a Contracting State shall be exempt from tax in
respect of any income derived from sources within the other Contracting State.
Article 21
STUDENTS AND TRAINEES
1. An individual who is a resident of a Contracting State immediately
before making a visit to the other Contracting State and is temporarily present in that
other Contracting State solely
(a) as a student at a recognised university, college or school in that
other Contracting State;
(b) as a recipient of grant, allowance or award for the primary purpose
of study or research from a Governmental, religious, charitable, scientific, literary or
educational organisation; or
(c) as a business or technical apprentice,
shall be exempt from tax of that other Contracting State in respect of
–
(i) all remittances from abroad for the purposes of his maintenance,
education, study research or training;
(ii) the grant, allowance or award; and
(iii) any remuneration for personal services rendered in that other
Contracting State insofar the amount does not exceed non taxable income under the law of
that State.
2. An individual who was a resident of a Contracting State immediately
before visiting the other Contracting State and is temporarily present in that other
Contracting State solely as a trainee for the purpose of acquiring technical, professional
or business experience, shall for a period not exceeding four years from the date of his
first arrival in that other Contracting State in connection with that visit be exempt from
tax in that other Contracting State in respect of -
(a) all remittances from abroad for the purposes of his maintenance or
training, and
(b) any remuneration for personal services rendered in that other
Contracting State insofar the amount does not exceed non taxable income under the law of
that State.
3. The benefits of paragraphs 1 and 2 of this Article shall not be
concurrently cumulative.
Article 22
TEACHERS
An individual who is a resident of a Contracting 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 Contracting 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 exempt from tax
in that other Contracting State on his remuneration for such teaching or research.
Article 23
OTHER INCOME
Items of income of a resident of a Contracting State not dealt with
in the foregoing Articles of this Agreement and arising in the other Contracting State may
be taxed in that other Contracting State.
Article 24
ELIMINATION OF DOUBLE TAXATION
Double taxation shall be avoided as follows:
- In the case of Brunei:
Subject to the provisions of the laws of Brunei regarding allowance as
a credit against Brunei tax of tax payable in a territory outside Brunei (which shall not
affect the general principle hereof), tax payable under the laws of Brunei and in
accordance with this Agreement, whether directly or by deduction, on profits or income
from sources within Indonesia shall be allowed as a credit against any Brunei tax computed
by reference to the same profits or income on which the Indonesian tax is computed.
In the case of Indonesia:
Where a resident of Indonesia derives income from Brunei, the amount of
tax on that income payable in Brunei in accordance with the provisions of this Agreement,
may be credited against the tax levied in Indonesia imposed on that resident. The amount
of credit, however, shall not exceed the amount of tax of Indonesia on that income
computed in accordance with Indonesia taxation laws and regulations.
For the purposes of this Article, the term "tax payable"
shall be deemed to include the amount of tax which would have been paid if the tax had not
been exempted or reduced in accordance with the special incentive laws designed to promote
economic development in either Contracting State, effective on the date of signature of
this Agreement, or which may be introduced hereafter in modification of, or in addition
to, the existing laws.
Article 25
NON-DISCRIMINATION
1. Nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which nationals of that
other Contracting State in the same circumstances are or may be subjected.
2. The taxation on a permanent establishment which an enterprise of a
Contracting State has in the other Contracting State shall not be less favorably levied in
that other Contracting State than the taxation levied on enterprises of that other
Contracting State carrying on the same activities. This provision shall not be construed
as obliging a Contracting State to grant to residents of the other Contracting State any
personal allowances, reliefs and reductions for taxation purposes on account of civil
status or family responsibilities which it grants to its own residents.
3. Enterprises of a Contracting State, the capital of which is wholly
or partly owned or controlled, directly or indirectly, by one or more residents of the
other Contracting State, shall not be subjected in the first-mentioned Contracting State
to any taxation or any requirement connected therewith which is other or more burdensome
than the taxation and connected requirements to which other similar enterprises of that
first-mentioned State are or may be subjected.
4. Interest, royalty and other disbursements paid by an enterprise of a
Contracting State to a resident of the other Contracting State shall, for the purpose of
determining the taxable profits of such enterprise, be deductible under the same
conditions as if they had been paid to a resident of the first-mentioned Contracting
State.
5. In this Article the term "taxation" means taxes which are
the subject of this Agreement.
Article 26
MUTUAL AGREEMENT PROCEDURE
1. Where a resident of a Contracting State considers that the actions
of one or both of the Contracting States result or will result for him in taxation not in
accordance with this Agreement, he may notwithstanding the remedies provided by the
national laws of those States, present the case to the competent authority of the
Contracting State of which he is a resident. The case must be presented within three years
from the first notification of the action resulting in taxation not in accordance with the
provisions of the Agreement.
2. The competent authority shall endeavour, if the objection appears to
it to be justified and if it is not itself able to arrive at an appropriate 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 not in accordance with this Agreement.
3. The competent authorities of the Contracting States shall endeavour
to resolve by mutual agreement any difficulty or doubt arising as to the interpretation or
application of this Agreement. They may also consult together for the elimination of
double taxation in cases not provided for in this Agreement.
4. The competent authorities of the Contracting States may communicate
with each other directly for the purpose of applying the provisions of this Agreement.
Article 27
EXCHANGE OF INFORMATION
1. The competent authorities of the Contracting States shall exchange
such information as is necessary for carrying out the provisions of this Agreement or of
the domestic laws of the Contracting State concerning taxes covered by the Agreement, in
so far as the taxation thereunder is not contrary to the Agreement, in particular for the
prevention of fraud or evasion of such taxes. Any information received by a Contracting
State shall be treated as a secret in the same manner as information obtained under the
domestic laws of the State and shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or collection of,
the enforcement or prosecution in respect of, or the determination of appeals in relation
to, the taxes which are the subject of the Agreement. Such persons or authorities shall
use the information only for such purposes including the disclosure of such information in
public court proceedings or in judicial decisions.
2. 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 or
the 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 (order public).
Article 28
DIPLOMATIC AND CONSULAR OFFICIALS
Nothing in this Agreement shall affect the fiscal privileges of
diplomatic or consular officials under the general rules of international law or under the
provisions of special agreements.
Article 29
ENTRY INTO FORCE
1. This Agreement shall enter into force on the later of the dates on
which the respective Governments may notify each other in writing that the formalities
constitutionally required in their respective Contracting States have been complied with.
2. This Agreement shall have effect:
- in the case of Brunei:
in respect of Brunei tax for the year of assessment beginning on or
after 1 January in the calendar year immediately following the year in which the Agreement
enters into force and subsequent years of Assessment.
- in the case of Indonesia:
(i) in respect of tax withheld at source to income derived on or after
1 January in the year next following that in which the agreement enters into force; and
(ii) in respect of other taxes on income, for taxable years beginning
on or after 1 January in the year next following that in which the agreement enters into
force.
Article 30
TERMINATION
This Agreement shall remain in force until terminated by a Contracting
State. Either Contracting State may terminate the Agreement, through diplomatic channels,
by giving written notice of termination on or before the thirtieth of June of any calendar
year following after the period of five years from the year in which the Agreement enters
into force. In such event, the Agreement shall cease to have effect:
(a) in the case of Brunei:
in respect of Brunei tax for the year of assessment beginning on or
after 1 January in the second calendar year following the year in which the notice is
given and subsequent years of assessment.
(b) in the case of Indonesia:
(i) in respect of tax withheld at source to income derived on or after
1 January in the year next following that in which the notice of termination is given; and
(ii) in respect of other taxes on income, for taxable years beginning
on or after 1 January in the year next following that in which the notice of termination
is given.
IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have
signed this Agreement.
Done in duplicate at Bandar Seri Begawan, Brunei Darussalam this 27th
day of February 2000 in the English Language.
HRH Prince Mohamed Bolkiah
Minister of Foreign Affairs
For the Government of His
Majesty The Sultan Dan Yang
Dipertuan of Brunei Darussalam |
HE Alwi Shihab
Minister of Foreign Affairs
For the Government of
The Republic of Indonesia |
Protocol
On signing the Agreement between the the Government of Brunei
Darussalam and the Government of the Republic of Indonesia concerning the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on income, the
undersigned have agreed upon the following provision which is an integral part of the
Agreement:
1. With reference to Article 13
In respect of paragraph 4 of Article 13 the alienation of shares
traded in Stock Exchange are subject to withholding tax in accordance with prevailing law
and regulation.
- With reference to Article 19
In respect of paragraphs 1 and 2 of Article 19 all references to
"Contracting State" shall be deemed to include reference to a Government of a
Contracting State as defined in paragraph 1(c) of Article 3 of the Agreement.
Paragraph 3 of Article 19 shall not apply to renumeration and pensions
of nationals of the Government of a Contracting State in respect of services rendered in
connection with a business carried on by that Government of a Contracting State as defined
in paragraph 1 (c) of Article 3 of the Agreement.
3. With reference to Article 24
In respect of paragraph 3 of Article 24, the tax exemption, in the
case of Indonesia means tax which is borne by the Government in accordance with tax
incentive granted in qualified industries.
IN WITNESS WHEREOF the undersigned have signed the present Protocol
which shall have the same force and validity as if it were inserted word by word in the
Agreement.
HRH Prince Mohamed Bolkiah
Minister of Foreign Affairs
For the Government of His
Majesty The Sultan Dan Yang
Dipertuan of Brunei Darussalam |
HE Alwi Shihab
Minister of Foreign Affairs
For the Government of
The Republic of Indonesia |
