Merger Between Companies

Two companies that want to merge or combine business, should use book value calculation of assets and pass the test required for business purposes from Director General of Taxes (DGT). This policy applies to all business sectors that are based in Indonesia as of March 13, 2008.

The goal that taxpayers could be evaluated on the aims and objectives for the merger, thus preventing the possibility for tax evasion. According to DGT, with the objective test of corporate strategy, the mode of tax evasion as a merger of two companies of different types of business can be prevented.

This provision is based on the Minister of Finance Regulation No. 48/2008 on the Use of Book Value of Transfer of Wealth in the Framework of Merger, Consolidation, or expansion. The merger approval process at least one month, provided that all requirements complete. The Directorate General of Taxes in this merger gives only facility with three conditions, if not full mergers should use the market value (revalued). Two other requirements are accompanied by explanations apply to the Directorate General of merger objectives Taxes, and paid all tax liabilities before the merger. Mergers based on the book value losses to divert company to company expressly prohibited. Mergers in loss conditions should be done first from revaluation of assets, the revaluation of the difference in value (capital gains) subject to final income tax rate 10%.

Responding to that provision, DGT too much suspicion when assessing a merger is considered as a mode of tax evasion. Although such a mode, the majority of mergers are used instead to improve the performance of the company.

If you are intending to do a merger in Indonesia, should have read the tax regulation before doing so. Regulation can you see on PER-28/PJ./2008 REQUIREMENTS AND PROCEDURES FOR GRANTING PERMITS FOR THE USE OF BOOK VALUE TRANSFER OF PROPERTY IN THE FRAMEWORK MERGER, CONSOLIDATION, OR EXPANSION OF BUSINESS.

Good Luck.