This decree will hereon consider collective investment contract on asset-backed securities (CIC) as an entity subject to tax

The Finance Ministry through its Directorate General for Tax has issued a decree (Kep-147/PJ/2003) which governs income tax related to collective investment contract for asset-backed securities (CIC). Effective since June 1^st, 2003, the decree contains tax treatments for such assets.

The decree deems that a CIC is considered to be an entity that is subject to tax. The CIC is however treated as an association of capital that is not distributed into shares; whereas the investors of the fixed cash flow of CIC are members of the association of capital; and the investors of the CIC’s floating cash-flow are bondholders.

The custodian bank will administer the income tax payment on behalf of the taxpayer. In calculating the taxable amount, the acquired gross income may be deducted by the costs of the issuance, maintenance and the collection of securities, including coupon payments.

If you need clarification or legal advice on this issue, please contact Lubis Ganie Surowidjojo at lgs@lgslaw.co.id