PT PMA Dividends for Foreign Shareholders: Key Checks

PT PMA dividends may be distributed to foreign shareholders where the distribution complies with company law. However, the decision to distribute profit must be separated from the recipient’s tax review. The company needs to establish whether the shareholder is an Indonesian resident or nonresident taxpayer before determining income tax treatment.

For a nonresident shareholder, dividends from Indonesia generally involve PPh Article 26 withholding. A double tax agreement rate may be considered if the residence jurisdiction and all application conditions qualify.

Can a PT PMA Distribute Dividends to Foreign Shareholders?

In principle, PT PMA status does not prohibit profit distributions to foreign shareholders. However, not every recorded profit can immediately be transferred to an investor as a dividend.

Provisions on using net profit, allocating reserves and deciding dividend distributions are contained in Law No. 40 of 2007 on Limited Liability Companies, as amended through Job Creation legislation.

Before declaring dividends, management needs to review financial statements, retained earnings, reserve obligations, the articles of association and shareholder resolutions.

Distinguish dividends from a director’s salary, repayment of shareholder loans, service payments and share transfers. Each has a different legal basis and tax treatment.

The ownership structure is the starting point for identifying profit distribution recipients. For corporate documentation and investor rights, read Jasa Legal ID’s guide to PT PMA share structures in Bali (Indonesian), then compare it with your company’s articles and shareholder register.

Company Law Conditions for Dividend Distributions

A dividend decision should be based on financial statements prepared and reviewed according to the company’s requirements. Shareholders need to understand the profit available, reserves to consider and earnings to retain for operations.

Review Retained Earnings and Reserves

Current year profit is not necessarily the amount available for distribution. Earlier accumulated losses, reserve allocations and decisions on the use of profit can affect the dividend amount.

Keep available cash separate from distributable profit. A high company bank balance does not by itself prove that the amount is profit available for distribution.

Prepare the Profit Distribution Decision

Document the dividend decision through the applicable corporate mechanism. Review general meeting of shareholders requirements, the articles of association and specific conditions where interim dividends are being considered.

The decision documents need to show the dividend amount, recipients, allocation basis and information needed to execute payment.

Tax on PT PMA Dividends for Foreign Shareholders

An investor’s nationality is insufficient to determine withholding. Start with the recipient’s tax status, whether the recipient is an individual or entity, and the tax residence jurisdiction.

A Nonresident Shareholder

DJP’s PPh Article 26 guidance describes a domestic rate of 20% of gross income for payments such as dividends to nonresident taxpayers where the conditions for treaty treatment are not met.

This domestic rate is a starting point for review, rather than necessarily the final rate. The recipient’s residence jurisdiction, treaty provisions and administrative compliance can affect the rate available.

Confirm whether the recipient is entitled to the benefit of the income and whether any conditions restrict treaty relief.

A Foreign Shareholder Who Is an Indonesian Resident Taxpayer

A foreign national’s tax status depends on the circumstances and applicable rules. Do not determine treatment solely from nationality or possession of a foreign passport.

Dividend exemption provisions for relevant resident taxpayer categories are contained in Government Regulation No. 55 of 2022, as amended. These exemptions must not be applied automatically to every foreign shareholder.

For an Indonesian resident individual, check the investment and administrative requirements for the exemption. For a resident entity, assess the treatment under the appropriate recipient category.

Using a Tax Treaty and the DGT Form

A double tax agreement is a tax treaty between Indonesia and a partner country or jurisdiction. It can provide treatment different from domestic rates, including for dividends, where the conditions are met.

For payments to nonresident shareholders, the administrative provisions to review include Minister of Finance Regulation No. 112 of 2025 on Procedures for Applying Double Tax Agreements.

DJP’s implementation announcement for Regulation No. 112 of 2025 explains that nonresident treaty application uses the DGT Form under that regulation.

Review the Dividend Recipient’s Documents

Before using a treaty rate, examine tax residence, recipient identity, individual or entity status, shareholding and the relevant treaty requirements.

Check the documents against the payment period. A treaty rate cannot be applied merely because an investor comes from an Indonesian treaty partner.

DJP also explains that DGT Forms under PER-25/PJ/2018 issued before Regulation No. 112 of 2025 remain usable for the periods stated in those documents.

Under DJP’s implementation instructions, DGT Form information and documents are submitted through the LA.03-03 Nonresident Taxpayer Certificate of Domicile service in Coretax DJP.

Ensure the documents have been processed according to the applicable requirements before determining dividend withholding.

Example of Calculating PT PMA Dividends

Suppose a PT PMA declares a gross dividend of IDR 500,000,000 for a shareholder confirmed to be a nonresident taxpayer. This illustration assumes there is no entitlement to a treaty rate, so the domestic PPh Article 26 rate of 20% applies.

Component	Amount
Gross dividend	IDR 500,000,000
Illustrative PPh Article 26 rate	20%
PPh Article 26 withheld	IDR 100,000,000
Net dividend after withholding	IDR 400,000,000

This example only shows how to distinguish gross dividends, withholding and net payment. The net dividend does not yet account for possible transfer charges or currency conversion.

If the shareholder qualifies for treaty treatment, the result may differ. Check the actual treaty rate against the recipient’s residence jurisdiction and the specific provisions of the applicable agreement.

Why Can a Treaty Rate Not Be Assumed?

Each agreement may have its own dividend provisions. Some differentiate treatment according to recipient type, shareholding level or other conditions.

Applying one rate to every foreign investor is therefore not an adequate basis for the company. Review the documents before calculating the transfer amount.

Documents Before Transferring Dividends Abroad

Before paying a foreign shareholder, the finance team should assemble a review file covering corporate, tax and payment transaction documents.

Relevant documents may include:

1. Financial statements and retained earnings details.
2. The articles of association and share ownership data.
3. A general meeting resolution or other applicable basis for the dividend decision.
4. The recipient list and gross dividend amounts.
5. Documents determining the recipient’s tax status.
6. The DGT Form and treaty documents where relevant.
7. A withholding calculation worksheet.
8. Payment documents, withholding evidence and bank reconciliation.

This list is an internal control recommendation. Specific official requirements must follow the tax provisions and administrative needs applicable to the transaction.

Reconcile the Accounting Entries

After the dividend is declared, distinguish the gross dividend, tax withheld and net payment to the shareholder in the accounting records.

All three amounts should be explainable through corporate decisions, withholding evidence and bank movements.

For a foreign currency payment, trace the exchange rates relevant to the accounts and tax obligations. Reconcile the foreign currency transfer with its rupiah amount.

Use PT PMA tax document controls to archive decisions and tax records consistently. If the transaction transfers ownership, review PT PMA share sale tax, because a share sale has a different transaction basis from a profit distribution.

Once the profit distribution decision and recipient’s tax position have been reviewed, use the PT PMA overseas dividend transfer reconciliation guide (Indonesian) to match the net amount, conversion rate, bank charges and investor receipts.

Errors to Avoid

Dividend administration errors often arise when the company pays immediately without separating the profit distribution decision from the tax assessment.

Review situations such as declaring dividends without supporting financial statements, using company cash as the measure of distributable profit and choosing a tax rate solely from the investor’s nationality.

Other risks include using a treaty rate without reviewing documents and recipient status, recording the net payment as the gross dividend, and lacking appropriate withholding evidence.

Also keep dividends separate from management fees, shareholder loans and share sale proceeds. Differences in transaction substance can produce different tax consequences.

Conclusion

PT PMA dividends for foreign shareholders require two sets of checks: whether profit can be distributed under company law and how the recipient’s tax status affects treatment.

For nonresident taxpayers, PPh Article 26 and potential treaty application are central issues. Review DGT Forms under the current rules, calculate withholding correctly and reconcile the payment with the accounts.

Before transferring funds, ensure the profit distribution decision, recipient documents, tax rate, withholding evidence and payment amount have a reviewable basis. This helps PT PMA management make dividend payment decisions with more complete information.

Need Tax Advice on Dividends for Foreign Shareholders?

PT PMA distributions to overseas investors can involve tax status checks, PPh Article 26, treaty documents and financial statement reconciliation. Usman Tax provides accounting and tax reporting services that can be a starting point for discussing company administration needs.

Discuss the dividend payment structure and available documents to identify the tax review and accounting work needed before paying shareholders.

Use Usman Tax accounting services to discuss financial statement readiness, retained earnings and dividend entries according to the company’s needs.

Read Also: Business Tax Administration in Bali: Accounting, Reporting and Document Controls

FAQ PT PMA Dividends

Can a PT PMA Distribute Dividends to Foreign Shareholders?

In principle, yes, provided the company complies with the applicable profit distribution provisions, articles of association and corporate decisions. The recipient’s tax obligations still require a separate review.

What Tax Rate Applies to PT PMA Dividends for Nonresident Shareholders?

The domestic PPh Article 26 rate is generally 20% of the gross amount. A treaty rate may apply where the recipient’s residence jurisdiction and all treaty requirements qualify.

Is Every Foreign National Shareholder Subject to PPh Article 26?

Not automatically. Determine tax status first. Foreign nationality does not itself establish that an individual is a nonresident taxpayer.

Is the DGT Form Still Required in 2026?

The DGT Form remains part of treaty administration. The current provisions refer to Minister of Finance Regulation No. 112 of 2025 and DJP implementation instructions. Earlier documents may qualify for transitional treatment for their stated periods.

Can PT PMA Dividends Be Paid Without a General Meeting of Shareholders?

Review the profit distribution mechanism under the Company Law, articles of association and interim dividend provisions where relevant. Payment without an appropriate corporate decision can create legal, accounting and tax issues.

Is a Dividend Distribution the Same as a PT PMA Share Sale?

No. Dividends distribute profit to shareholders, while a share sale transfers ownership. Their transaction bases and tax provisions require separate examination.

Sources and References

1. Law No. 40 of 2007 on Limited Liability Companies — peraturan.bpk.go.id
2. PPh Article 26 Withholding Guidance — pajak.go.id
3. Minister of Finance Regulation No. 112 of 2025 on Treaty Application — jdih.kemenkeu.go.id
4. Implementation Announcement for Regulation No. 112 of 2025 — pajak.go.id
5. Government Regulation No. 55 of 2022 on Income Tax Adjustments, as amended — pajak.go.id
6. Law No. 7 of 2021 on Harmonisation of Tax Regulations — pajak.go.id