Indonesia said foreigners selling shares in Indonesian companies must pay income taxes of 5% of the gross sales proceeds.
Indonesia subjects persons selling shares in Indonesian companies to a 20% withholding tax on the profit — in theory. However, in practice, the tax applies to a “deemed” profit regardless of actual profit. The finance minister announced that 25% of gross proceeds from the sale of shares will be considered profit. A tax of 20% times 25% is equivalent to a tax of 5% of gross sales proceeds. Indonesian companies cannot register a change in shareholders without proof that the tax has been paid.
The tax can be avoided by owning shares through an offshore company and selling shares in the offshore company.