Jakarta. Indonesia has signed the Multilateral Instrument Subject to Tax Rule (MLI STTR) alongside leaders from 42 other countries and jurisdictions. This agreement is part of a global initiative to reduce unhealthy tax competition.

The STTR permits countries to impose an additional tax of up to 9 percent on specific income—such as royalties, interest, and certain services—paid to partner countries with a Double Taxation Agreement (DTA) that charge less than 9 percent. The STTR applies only to intragroup payments exceeding €1 million in a tax year. For other types of income, the payment must exceed the cost plus an 8.5 percent margin.

“Mobilizing domestic resources is crucial for any country, and the STTR provides a way for nations to protect their tax bases,” said Finance Minister Sri Mulyani in an official statement on Friday.

Indonesia's participation in the MLI STTR highlights its commitment to fostering a fairer and more transparent business environment in global economic cooperation. The agreement levels the playing field for local companies against multinational firms, enhancing their competitiveness.

From a financial perspective, the MLI STTR strengthens anti-tax avoidance measures, helping Indonesia combat practices that lead to revenue losses. This is essential for ensuring that multinational corporations pay their fair share of taxes, thereby safeguarding the domestic tax base. Additionally, it creates more fiscal space for the government to address other macroeconomic challenges.

“This commitment reflects the government’s efforts to balance investment development with maintaining a healthy fiscal space to support sustainable development in Indonesia,” Sri Mulyani added.

Indonesia's involvement in this initiative aligns with its preparations for membership in the Organisation for Economic Co-operation and Development (OECD). The provisions of the MLI STTR will be systematically integrated into DTAs without the need for bilateral negotiations.

The implementation of this instrument is expected to affect 29 of Indonesia's DTAs with partner countries. Like other international agreements, the MLI STTR will be implemented following the necessary ratification processes.

Notable participants of the agreement include France, Germany, the United Kingdom, Canada, Australia, Japan, and India