The France-Indonesia tax treaty: a review of the main articles

The France-Indonesia convention was signed in Jakarta on September 14, 1979. It covers income tax and wealth tax, but not inheritance or gift tax. It caps dividends at 10 % for a company that directly holds at least 25 % of the capital for 365 days, and at 15 % in other cases. For employees, the 183 days are calculated over any twelve-month period.

This page reads the consolidated text published by the French tax authorities, which incorporates the Multilateral Tax Convention (MLI) and the BOFiP (French Official Tax Bulletin) guidelines. It does not detail Indonesian tax law.

A text from 1979, the MLI since 2021

The convention. Signed in Jakarta on September 14, 1979 with a protocol, it entered into force on March 13, 1981. The administration's commentary does not mention any amendment.

The MLI. It entered into force on January 1, 2019 for France and on August 1, 2020 for Indonesia. It applies to withholding taxes from January 1, 2021. For other taxes, it applies to periods beginning on June 26, 2021 for France and on January 1, 2022 for Indonesia.

The taxes in question (Article 2). Income and wealth taxes, including taxes on capital gains. In France, income tax and corporate tax. In Indonesia, income tax, corporate tax, wealth tax, and taxes on dividends, interest, and royalties.

Maximum deductions and key rules

Who is a resident? A tie-breaker without nationality

Article 4 determines whether a person is liable for tax based on their domicile, residence, place of management, or a similar criterion. For an individual resident in both States, the following criteria are applied in order: permanent home; if they have one in each State, the closest personal and economic ties (center of vital interests); and if there is no determinable center or home, habitual residence. If the individual habitually resides in both States or in neither, the competent authorities shall decide by mutual agreement.

Nationality is not among these criteria. A legal entity is subject to the jurisdiction of the State where its effective management is located.

Dividends: 25 % of the capital for 365 days

Article 10, paragraph 2, caps the withholding tax at 10 % of the gross amount when the beneficiary is a company that directly owns at least 25 % of the capital of the company paying the dividends, throughout a 365-day period including the payment date. In other cases, the cap is 15 %. Therefore, an individual is subject to the 15 % cap.

According to Article 10 § 5, an Indonesian resident who receives dividends from a French resident company can obtain a refund of the withholding tax relating to those dividends, less the tax collected in accordance with domestic legislation and the provisions of paragraph 2. This page has not verified whether this withholding tax mechanism is still applied.

According to Article 10 § 6, the profits of a permanent establishment, after corporation tax, may be subject to an additional tax whose rate may not exceed 10 %.

Interest and royalties

Interest is taxable in the recipient's country of residence. The source country may also tax it, up to a limit of 15 %. This limit is reduced to 10 % if two conditions are met: the interest is paid by a bank, financial institution, or company whose principal activity falls within sectors listed in the legislation, and it is paid to a bank or other company. Certain payments to the other country or its public legal entities, or payments related to public financing, are exempt from withholding tax.

Royalties are capped at 10 % of the gross. The definition covers copyrights, patents, trademarks, processes, and industrial experience.

Capital Gains and Real Estate

Article 13, paragraph 1, makes taxable in the State where the capital gains are situated: gains on immovable property and on shares of companies whose assets consist mainly of immovable property at any time during the 365 days preceding the transfer. Gains on movable property of a permanent establishment or fixed base are taxable in the other State. Other gains are taxable in the State of residence of the transferor.

Employees: 183 days over any twelve-month period

The accounting window requires attention. Article 15 § 2 exempts the State of employment under three cumulative conditions: the beneficiary stays in the other State for a period or periods not exceeding in total 183 days "during any period of twelve months"; the employer is not a resident of the other State; the expense is not borne by a permanent establishment or fixed base of the employer.

The window is fluid: it is neither the calendar year nor the fiscal year. Two assignments separated by a change of year are combined if they take place within the same twelve months. Self-employment, as defined in Article 14, operates under a different logic: taxation in the other state is limited to income attributable to a regular fixed base.

Pensions

Pensions and similar remuneration paid to a resident in respect of previous employment are taxable only in his State of residence (Article 18 § 1), subject to Article 19. Social security pensions fall under the jurisdiction of the State of the body which pays them (§ 2).

Wealth tax: a separate article

This convention also deals with wealth. Article 23 classifies immovable property in the State where it is situated, movable property of a permanent establishment or fixed base in the State where it is located, ships and aircraft in international traffic in the State of the enterprise, and all other elements of a resident's wealth in his State of residence only.

This page does not examine the application of these rules to the French real estate wealth tax.

Eliminating double taxation: Article 24

France exempts income taxable in Indonesia under the convention, except for income covered by Articles 10, 11, 12, 14, 16, and 17. For this income, Indonesian tax entitles the taxpayer to a tax credit, up to the amount of French tax owed. The French tax rate can be calculated on worldwide income, and specific rules govern Indonesian tax incentives. Indonesia, in turn, grants a credit against French tax, up to the corresponding portion of its own tax liability.

Inheritance and gifts: the convention does not address these.

The administrative register provides information on income tax and wealth tax for Indonesia. Inheritance and gift tax are not included.

Other articles and what this page does not cover

The amicable procedure is outlined in Article 26: the case must be submitted within three years of the initial notification of the measure. Article 27 governs the exchange of confidential information; the text does not include a clause on banking secrecy.

This page does not detail the sectors listed in Article 11, the protocol, or the articles on corporate profits.

Dividends and mission to Indonesia: a numerical example (fictitious profile)

Situation. A French company (fictitious profile) has directly held 30 % shares in an Indonesian company for over 365 days. It receives €400,000 in gross dividends (assumptions). A French resident executive, employed by a French company, undertakes two assignments in Indonesia: from October 1 to December 20, 2026, and then from February 1 to May 31, 2027.

Issue. The company wants to know the maximum withholding tax in Indonesia. The executive wants to know if his assignments remain below the 183-day threshold.

Strategy. The company applies Article 10 § 2 a). The manager calculates his days over the busiest twelve-month period, and not calendar year by calendar year.

Result. The withholding tax cannot exceed €40,000 for 10 % employees, compared to €60,000 for 15 % employees, a difference of €20,000. The manager accrues 81 days in 2026 and 120 days in 2027, totaling fewer than 183 days in each calendar year. Over the twelve months from October 1, 2026, to September 30, 2027, the total is 201 days: the threshold is exceeded by 18 days. The conditions relating to the employer and the permanent establishment remain to be examined.

This profile is fictitious. The calculations do not take into account either Indonesian or French taxation. No result is guaranteed, and Indonesian law should be verified with local advice.