How to Avoid Dispute Royalty to Affliated Party Considered as Disguised Dividend: Case Study of Indonesia’s Decision of Tax Court

DOI

10.2991/978-2-38476-132-6_76How to use a DOI?

Keywords

royalty; dividend. know-how

Abstract

The royalty payment is an important aspect of corporate taxation. The business must be able to prove the basis of the payment of royalties during the tax audit, therefor the company is not considered doing tax evasion by tax authorities. This study analyzes the result of tax dispute cases in the Indonesian Tax Court regarding royalty payments to foreign shareholders for service and information on know-how technology. This study aims to explain the variables that determine the tax treatment of royalties to affiliated parties which are considered disguised dividends by tax authorities and hence become the subject of disputes. By doing so, taxpayer can mitigate the risk of being challenged by the tax authorities and facing adverse tax consequences. The research method uses qualitative methods with case studies on the dispute case in the Indonesian Tax Court. The findings demonstrated that companies must ensure that royalty payments are supported by proper documentation, demonstrate economic substance, and adhere to arm's length principles. The results of this study are expected to provide a better understanding of the tax treatment of royalties on know-how and the result can be useful for business industries which are mostly cross-border transactions.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Titin Fachriah Nur
AU  - Hanna Bella
PY  - 2023
DA  - 2023/10/31
TI  - How to Avoid Dispute Royalty to Affliated Party Considered as Disguised Dividend: Case Study of Indonesia’s Decision of Tax Court
BT  - Proceedings of the 6th International Conference on Vocational Education Applied Science and Technology (ICVEAST 2023)
PB  - Atlantis Press
SP  - 898
EP  - 908
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-132-6_76
DO  - 10.2991/978-2-38476-132-6_76
ID  - Nur2023
ER  -