Tax Funding Agreement Template for Indonesia

A Tax Funding Agreement provides the legal structure for corporate groups operating in Indonesia to manage tax obligations across multiple related entities. When your business operates through subsidiaries, joint ventures, or special purpose vehicles, you need clear documentation of how tax payments will be coordinated and funded within your group structure.

When do you need this document?

You require a Tax Funding Agreement when establishing new subsidiaries or group entities that will need tax funding support from parent companies or other group members. This document becomes essential during corporate restructuring where tax obligations need to be redistributed among entities, or when formalizing existing informal tax funding arrangements to meet Indonesian compliance standards. The agreement is particularly important for groups with Indonesian Tax Representative Offices, joint venture entities, or special purpose vehicles that require coordinated tax management. You also need this document when implementing transfer pricing policies that require documented inter-company funding arrangements for tax purposes.

Key legal considerations

Your Tax Funding Agreement must clearly define the calculation methods for tax funding amounts, including timing of payments and adjustment mechanisms for changes in tax liabilities. The document should specify which entities have funding obligations and which are entitled to receive funding, along with detailed procedures for requesting and approving tax funding transfers. You need to include provisions for dispute resolution, default scenarios, and termination procedures that protect all parties' interests. The agreement must address documentation requirements for inter-company transactions, ensuring proper record-keeping for Indonesian tax authorities. Consider including clauses for annual reviews and adjustments to reflect changes in group structure or tax regulations.

Legal requirements in Indonesia

Under Indonesian law, your Tax Funding Agreement must comply with the KUP Law (Law No. 6 of 1983) regarding tax administration and documentation requirements. The agreement must align with Income Tax Law No. 36 of 2008, particularly provisions related to inter-company financing and related party transactions. You must ensure compliance with Government Regulation No. 94 of 2010 regarding tax documentation standards and Ministry of Finance Regulation No. 169/PMK.010/2015 concerning thin capitalization rules. The document must include proper identification of all parties with their tax identification numbers and registration details as required by Indonesian tax authorities. Your agreement should establish clear audit trails and documentation procedures that meet Indonesian transfer pricing and related party transaction requirements, ensuring transparency for tax compliance purposes.