136
Withholding tax
Withholding-tax related to debt securities in Indonesia
Type of debt Type of investor or
institution
Tax rate
Government
securities
Domestic banks
Approved pension funds
Domestic mutual funds
Other domestic investors
Foreign investors
0%
5%
15%
20%
FCY government
securities
Any investor Exempt
BI certificates Any investor 20%
Corporate bonds Domestic banks
Approved pension funds
Domestic mutual funds
Other domestic investors
0%
5%
20%
Source: ASEAN+3 Bond Market Guide 2017
Different tax rate imposed on different
groups of investors. To create a level
playing field for all NBFIs is to consider
full exemption/or reductions across
the board. The sacrifice in foregoing tax
revenue from withholding taxes will
have a ripple effect on the fund flows
into Indonesia’s capital markets.
Sources: RAM, ISRA
Table 4.17: Recommendations to Improve Supply (Sell Side) – Medium-Term Solutions
Issues and challenges Supply (sell side) opportunities
Create a sustainable supply of
corporate sukuk
Encourage SOEs and corporates to issue retail sukuk linked to
infrastructure projects.
Explore new sukuk programmes directed specifically at religious funds
(hajj fund, zakat, waqf) that are linked to directly finance the
government’s infrastructure projects.
Lack of understanding among
corporates on ICM access (i.e.
unfamiliarity with Islamic
structures and principles)
There are ongoing efforts by the regulators to raise market awareness
of ICM products. However, the level of awareness remains low.
The government and the regulators can dedicate sections on their
websites to share comprehensive information on sukuk and its
processes, to increase knowledge and build market awareness.
Improve sukuk’s cost
competitiveness to encourage
corporates to issue sukuk
The OJK has initiated a reduction in registration fees for sukuk. Other
applicable fees should be reviewed for waivers or exemptions.
However, the tax authorities should also collaborate with the OJK to
propose viable stimuli to encourage corporate issuance.
Promote activity in the Islamic
money market
Following the release of the Islamic Repo guidelines in 2015, there has
been market activity although this has yet to reach the regulators’
targeted volumes.
Greater understanding of Islamic banks’ issues and challenges can
facilitate better volumes of Islamic repo and look at alternative forms
of liquidity-management tools offered in other countries, which can be
adopted in Indonesia.
Expansion of ICM products Promote product innovation with social welfare benefits (i.e awqaf-
linked sukuk).
Sources: RAM, ISRA