The Tax Landscape of Split Contracts in Engineering, Procurement, and Construction (EPC) Investments: An In-Depth Study
Main Article Content
The study examines tax complexities in Engineering, Procurement, and Construction (EPC) contracts, focusing on Indonesia's regulations. It stresses the importance of segregating contracts to simplify taxation, with Final Income Tax applying mainly to construction services. Challenges arise from offshore and onshore components, like equipment supplies and services, leading to disputes over Permanent Establishment (PE) presence and income attribution. Case studies from Indonesia and India demonstrate different tax interpretations. Indonesia typically taxes EPC contracts as unified, while India focuses on profit attribution within its jurisdiction. The paper highlights the role of Tax Treaties, like the Indonesia-Germany protocol, in determining tax treatment based on activities within each country. It underscores the need for consistent tax treatment through contract segregation, considering jurisdictional activities and relevant Tax Treaties.
Keywords:
EPC Taxation, Contract Segregation, Jurisdictional Activities
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Liu, Lili, De Angelis, Michael, & Torbert, Sally. (2017). Municipal Pooled Financing of Infrastructure in the United States. World Bank Policy Research Working Paper, (8212). https://doi.org/10.1596/1813-9450-8212
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Marcelo, Darwin, House, Schuyler, & Raina, Aditi. (2018). Prioritizing Infrastructure Investments: A Comparative Review of Applications in Chile. World Bank Policy Research Working Paper, (8602).
Nugroho, Bustani, & Handayani, Putri. (2020). Analysis of Implementation Contractor Safety Management System (CSMS) at the Implementation Stage in PT. Multikarya Asia Pasifik Raya on the Project PT. Pertamina EP Asset 3 Field Jatibarang in 2019. (Icoh 2019), 370–379. https://doi.org/10.5220/0009778603700379
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Rusba, Komeyni, Noeryanto, Zulfikar, Iwan, Liku, James Evert Adolf, Purwanti, Sri, & Pongky, Patunru. (2022). Contractor Safety Management System (CSMS). EUNOIA Jurnal Pengabdian Masyarakat, 1(2), 69–73.
Saputra, Akbar, & Fathoni, Muchamad Irham. (2023). Principal Purpose Test (PPT) As An Instrument To Detect Tax Treaty Abuse. Asian Journal of Social and Humanities, 1(07), 378–388.
Silaen, Primawaty, Sandhyavitri, Ari, & Ikhsan, Muhammad. (2020). Critical success mitigation of contractor’s performance on longsegment poliSilaen, P., Sandhyavitri, A., & Ikhsan, M. (2020). Critical success mitigation of contractor’s performance on longsegment policy of national roads preservation. AIP Conference Proc. AIP Conference Proceedings, 2227(1), 30003. AIP Publishing LLC.
Yu, Hong. (2017). Motivation behind China’s ‘One Belt, One Road’initiatives and establishment of the Asian infrastructure investment bank. Journal of Contemporary China, 26(105), 353–368.
