A Tax Allocation Agreement is essential for corporate groups operating in Indonesia where multiple entities share tax obligations or benefits. This document becomes necessary when companies within a group need to formalize their arrangements for sharing tax liabilities, credits, or benefits in compliance with Indonesian tax regulations. It is particularly relevant for consolidated groups, holding company structures, or joint ventures where tax implications need to be properly allocated among participating entities. The agreement ensures transparency in tax allocation methods, establishes clear payment procedures, and defines compliance responsibilities while adhering to Indonesian tax laws, including Law No. 36 of 2008 on Income Tax and Law No. 28 of 2007 on General Tax Provisions. It also addresses requirements for maintaining proper documentation for tax authorities and managing potential tax audits.
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1. Parties: Identification of the participating entities, including their legal status and registration details under Indonesian law
2. Background: Context of the agreement, relationship between the parties, and purpose of the tax allocation arrangement
3. Definitions: Definitions of key terms including 'Group Tax Liability', 'Individual Tax Liability', 'Tax Benefit', and other relevant terms
4. Scope of Agreement: Details of what taxes are covered and the period of application
5. Tax Allocation Methodology: Agreed method for calculating and allocating tax liabilities between parties
6. Payment and Settlement: Procedures and timing for settling tax allocations between parties
7. Record Keeping and Information Sharing: Requirements for maintaining tax records and sharing relevant information
8. Compliance Obligations: Responsibilities of each party regarding tax compliance and reporting
9. Term and Termination: Duration of the agreement and circumstances for termination
10. Dispute Resolution: Procedures for resolving disagreements about tax allocations
11. Governing Law: Specification of Indonesian law as governing law and relevant jurisdictional matters
12. General Provisions: Standard contractual provisions including notices, amendments, and severability
1. Regional Tax Considerations: Include when parties operate in different Indonesian regions with varying local tax requirements
2. International Tax Provisions: Include when any party has international operations or foreign ownership
3. Group Restructuring Provisions: Include when there's likelihood of corporate restructuring or changes in group composition
4. Tax Audit Procedures: Include when specific procedures for handling tax audits need to be agreed upon
5. Tax Benefits Allocation: Include when there are specific tax benefits or incentives to be shared among parties
6. Transfer Pricing Provisions: Include when transactions between parties require specific transfer pricing considerations
1. Schedule 1 - Calculation Methodology: Detailed formulas and examples of tax allocation calculations
2. Schedule 2 - Payment Procedures: Specific procedures, timelines, and banking details for settlements
3. Schedule 3 - Reporting Templates: Standard forms and templates for tax allocation reporting
4. Schedule 4 - Group Structure: Current corporate structure showing relationships between parties
5. Appendix A - Relevant Tax Regulations: List of applicable Indonesian tax regulations and guidelines
6. Appendix B - Compliance Calendar: Timeline of key tax compliance and payment dates
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