Dispute over Indonesia's aircraft leasing tax
Indonesia’s transport and finance ministries are at odds over a new tax on aircraft leasing that could push up freight costs to destinations in Indonesia.
The finance ministry Directorate General of Taxation is attempting to implement a regulation that would require Indonesian airlines to pay 20% tax on the amount they pay to lease planes from foreign airlines.
The transportation ministry insists the tax, announced in November and due to be enforced from 1 January, would be detrimental to international and domestic services and amount to double-taxation because airlines already pay withholding tax.
“The airlines already have an obligation to pay withholding tax and now they have to pay rental taxes. That’s double taxation,” Harry Bhakti, the Transportation Ministry’s director general for aviation, was quoted in a local paper.
The transportation ministry would, instead, like to see foreign companies taxed on the amount earned from leasing aircraft.
Some 80% of the 500 airplanes operated by Indonesian-registered airlines are thought to be leased.
Negotiations between the ministries on the implementation of the new regulation were continuing this week.
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