Philippines

This Agreement shall apply to taxes on income imposed on behalf of each Contracting State,
irrespective of the manner in which they are levied.

There shall be regarded as taxes on income all taxes imposed on total income or on elements of
income, including taxes on gains from the alienation of movable or immovable property, and taxes
on the total amounts of wages or salaries paid by enterprises.

The taxes which are the subject of this Agreement are:

in Indonesia :

the Income Tax (Pajak Pendapatan);

the Company Tax (Pajak Perseroan);

the Tax on Interest, Dividend and Royalty
(Pajak atas Bunga, Dividen dan Royalty),

in the Philippines :

the income taxes imposed by the Government of the Republic of the Philippines,

The Agreement shall apply also to any identical or substantially similar taxes on income which are
imposed after the date of signature of this Agreement in addition to, or in place of, the existing
taxes. The competent authorities of the Contracting States shall notify each other of substantial
changes which have been made in their respective taxation laws.

In this Agreement, unless the context otherwise requires :

the term “Indonesia” comprises the territory of the Republic of Indonesia as defined in its laws,
and parts of the continental shelf and adjacent seas, over which the Republic of Indonesia has
sovereignty, sovereign rights or other rights in accordance with international law;

the term “Philippines” means the Republic of the Philippines and when used in a geographical sense
means the national territory comprising the Republic of the Philippines;

the terms “a Contracting State” and “the other Contracting State” mean the Philippines or
Indonesia;

the term “person” includes an individual, an estate, a trust, a company, and any other body of
persons;

the term “company” means any body corporate or any entity which is treated as a body corporate for
tax purposes;

the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean
respectively an enterprise carried on by a resident of a Contracting State and an enterprise
carried on by a resident of the other Contracting State;

the term “international traffic” means any transport by a ship or aircraft operated by an
enterprise of a Contracting State, except when the ship or aircraft is operated solely between
places in the other Contracting State;

the term “national” means: 

any individual possessing the nationality of a Contracting State;

a juridical person created or organized under the laws of a Contracting State and all
organizations without juridical personality treated for the purposes of tax of that Contracting
State as juridical persons created or organized under the laws of that Contracting State;

the term “competent authority” means: 

in the case of Indonesia, the Minister of Finance or his duly authorized representative;

in the case of the Philippines, the Minister of Finance or his duly authorized representative.

As regards the application of this Agreement by a Contracting State, any term not defined therein
shall, unless the context otherwise requires, have the meaning which it has under the laws of that
State concerning the taxes to which this Agreement applies.

For the purposes of this Agreement, the term “resident of a Contracting State” means any person
who, under the laws of that Contracting State, is treated as a resident for tax purposes in the
Contracting State.

Where by reason of the provision of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows:

he shall be deemed to be a resident of the State in which he has a permanent home available to
him; if he has a permanent home available to him in both Contracting States, he shall be deemed to
be a resident of the State with which his personal and economic relations are closer (centre of
vital interests);

if the State in which he has his centre of vital interests cannot be determined, or if he has not
a permanent home available to him in either State, he shall be deemed to be a resident of the
State in which he has an habitual abode;

if he has an habitual abode in both Contracting States or in neither of them, the competent
authorities of the two Contracting States shall settle the question by mutual agreement.

Where by reason of the provision of paragraph 1, a person other than an individual is a resident
of both Contracting States, the competent authorities of the Contracting States shall settle the
question by mutual agreement. provisions of paragraph 1, a person other than an individual is a
resident of both Contracting State, the competent authorities of the Contracting State shall
settle the question by mutual agreement.

For the purposes of this Agreement, the term “permanent establishment” means a fixed place of
business through which the business of the enterprise is wholly or partly carried on.

a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

a building site or construction project or supervisory activities in connection therewith, where
such site, project or activity continues for a period of more than six months;

an assembly or installation project which exists for more than three months;

a warehouse, in relation to a person providing storage facilities for other;

the furnishing of services, including consultancy services, by an enterprise through an employee
or other personnel where activities of that nature continue (for the same or connected project)
for a period or periods aggregating more than 183 days within any twelve-month period.

Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall
be deemed not to include:

the use of facilities solely for the purpose of storage or display of goods or merchandise
belonging to the enterprise;

the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the
purpose of storage or display;

maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose
of processing by another enterprise;

the maintenance of a fixed place of business solely for the purpose of purchasing goods or
merchandise or of collecting information, for the enterprise;

the maintenance of a fixed place of business solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or auxiliary character;

the maintenance of a fixed place of business solely for any combination of activities mentioned in
sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business
resulting from this combination is of a preparatory or auxiliary character.

AA person acting in a Contracting State on behalf of an enterprise of the other Contracting State
(other than an agent of an independent status to whom paragraph 6 applies) shall be deemed to be a
permanent establishment in the first-mentioned State if: 

he has, and habitually exercises in that State, an authority to conclude contracts on behalf of
the enterprise, unless his activities are limited to the purchase of goods or merchandise for that
enterprise; or

he has no such authority, but habitually maintains in the first-mentioned State a stock of goods
or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise;
or

in so acting, he manufactures or processes in that State for the enterprise goods or merchandise
belonging to the enterprise.

An insurance enterprise of a Contracting State shall, except in regard to reinsurance, be deemed
to have a permanent establishment in the other State if it collects premiums in the territory of
that State or insures risks situated therein through an employee or through a representative who
is not an agent of an independent status within the meaning of paragraph 6.

An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely
because it carries on business in that State through a broker, general commission agent or any
other agent of an independent status, provided that such persons are acting in the ordinary course
of their business. However, when the activities of such an agent are devoted wholly or almost
wholly on behalf of the enterprise, he shall not be considered an agent of an independent status
within the meaning of this paragraph if it is shown that the transactions between the agent and
the enterprise were not made under arm’s length conditions. In such a case, the provisions of
paragraph 4 shall apply.

The fact that a company which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on business in that
other State (whether through a permanent establishment or otherwise), shall not of itself
constitute either company a permanent establishment of the other.

Income derived by a resident of a Contracting State from immovable property (including income from
agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

The term “immovable property” shall have the meaning which it has under the law of the Contracting
State in which the property in question is situated. The term shall in any case include property
accessory to immovable property, livestock and equipment used in agriculture and forestry, rights
to which the provisions of general law respecting landed property apply, usufruct of immovable
property and rights to variable or fixed payments as consideration for the working of, or the
right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft
shall not be regarded as immovable property.

The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use
in any other form of immovable property.

The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of independent personal
services.

The profits of an enterprise of a Contracting State shall be taxable only in that State unless the
enterprise carries on business in the other Contracting State through a permanent establishment
situated therein. If the enterprise carries on or has carried on business as aforesaid, the
profits of the enterprise may be taxed in the other State but only so much of them as is
attributable to:

that permanent establishment; or

sales within that other Contracting State of goods or merchandise of the same or similar kind as
those sold through that permanent establishment; or

other business activities carried on in that other State of the same or similar kind as those
effected through that permanent establishment.

Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on
business in the other Contracting State through a permanent establishment situated therein, there
shall in each Contracting State be attributed to that permanent establishment profits which it
might be expected to make if it were a distinct and separate enterprise engaged in the same or
similar activities under the same or similar conditions and dealing wholly independently with the
enterprise of which it is a permanent establishment.

In determining the profits of a permanent establishment, there shall be allowed as deduction
expenses which are incurred for the purposes of the permanent establishment, including executive
and general administrative expenses so incurred, whether in the State in which the permanent
establishment is situated or elsewhere.

Insofar as it has been customary in a Contracting State to determine the profits to be attributed
to a permanent establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from
determining the profits to be taxed by such an apportionment as may be customary; the method of
apportionment adopted shall, however, be such that the result shall be in accordance with the
principles contained in this Article.

Notwithstanding the provisions of paragraph 3, no deduction shall be allowed in respect of amounts
paid or charged (other than reimbursement of actual expenses) by the permanent establishment to
the head office of the enterprise or any of its other offices by way of:

royalties, fees or other similar payments in return for the use of patents or other rights; or

commission for specific services performed or for management; or

interest on money lent to the permanent establishment, except in the case of a banking
institution.

For the purposes of the preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there is good and
sufficient reason to the contrary.

Where profits include items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the provisions of this
Article.

Profits from sources within a Contracting State derived by an enterprise of the other Contracting
State from the operation of ships or aircraft in international traffic may be taxed in the
first-mentioned State but the tax so charged shall not exceed:

1.5 per cent of the gross revenues derived from sources in that State; or

the lowest rate of Philippine tax that may be imposed on profits of the same kind derived under
similar circumstances by a resident of a third State.

The provisions of paragraph 1 shall also apply to profits derived from the participation in a
pool, a joint business or an international operating agency.

Where :

an enterprise of a Contracting State participates directly or indirectly in the management,
control or capital of an enterprise of the other Contracting State; or

the same persons participate directly or indirectly in the management, control or capital of an
enterprise of a Contracting State and an enterprise of the other Contracting State,

A Contracting State shall not change the profits of an enterprise in the circumstances referred to
in paragraph 1 after the expiry of the time limits provided in its national laws.

Dividends paid by a company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State..

However, such dividends may also be taxed in the Contracting State of which the company paying the
dividends is a resident and according to the laws of that State, but if the recipient is the
beneficial owner of the dividends, the tax so charged shall not exceed:

15 per cent of the gross amount of the dividends if the beneficial owner is a company which holds
directly at least 25 per cent of the capital of the paying company;

20 per cent of the gross amount of the dividends in all other cases. 

This paragraph shall not affect the taxation of the company in respect of the profits out of which
the dividends are paid.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of
application of the limitations provided in the preceding paragraph.

The term “dividends” as used in this Article means the income from shares, mining shares,
founders’ shares or other rights, not being debt-claims, participating in profits, as well as
income from other corporate rights which is subjected to the same taxation treatment as income
from shares by the laws of the State of which the company making the distributions is a resident.

The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other Contracting State of
which the company paying the dividends is a resident, through a permanent establishment situated
therein, or performs in that other State independent personal services from a fixed base situated
therein, and the holding in respect of which the dividends are paid is effectively connected with
such permanent establishment or fixed base. In such a case, the provisions of Article 7 (Business
Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.

Where a company which is a resident of a Contracting State derives profits or income from the
other Contracting State, that other State may not impose any tax on the dividends paid by the
company, except insofar as such dividends are paid to a resident of that other State or insofar as
the holding in respect of which the dividends are paid is effectively connected with a permanent
establishment or a fixed base situated in that other State, nor subject the company’s
undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid
or the undistributed profits consist wholly or partly of profits or income arising in such other
State.

Nothing in this Article shall prevent either Contracting State from imposing, apart from the
corporate income tax, a tax on remittances of profits by a branch to its head office, provided
that the tax so imposed shall not exceed 20 per cent of the amount remitted.

Interest arising in a Contracting State and paid to a resident of the other Contracting State may
be taxed in that other State.

However, such interest may also be taxed in the Contracting State in which it arises, and
according to the laws of that State, but if the recipient is the beneficial owner of the interest
the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

Notwithstanding the provisions of paragraph 2 :

interest arising in a Contracting State and paid to a resident of the other Contracting State
shall be taxable only in that other State, if the interest is paid in respect of: 

a bond, debenture or other similar obligation of the government of that State or a political
subdivision or local authority thereof; or

a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Central
Bank of the Philippines, or the “Bank Indonesia” (the Central Bank of Indonesia), or any other
lending institution, as may be specified and agreed in letters exchanged between the competent
authorities of the Contracting States;

the tax on interest paid by a company which is a resident of a Contracting State in respect of
public issues of bonds, debentures or similar obligations shall not exceed 10 per cent of the
gross amount of the interest.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of
application of the limitations prescribed in the preceding paragraphs.

The term “interest” as used in this Article means income from debt-claims of every kind, whether
or not secured by a mortgage, and whether or not carrying a right to participate in the debtor’s
profits, and, in particular, income from government securities and income from bonds or
debentures, including premiums and prizes attaching to such securities, bonds or debentures, as
well as income assimilated to income from money lent by the taxation laws of the State in which
the income arises, including interest on deferred payment sales. Penalty charges for late payment
shall not be regarded as interest for the purpose of this Article.

The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other Contracting State in
which the interest arises, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein, and the debt-claim
in respect of which the interest is paid is effectively connected with such permanent
establishment or fixed base. In such a case, the provisions of Article 7 (Business Profits) or
Article 14 (Independent Personal Services), as the case may be, shall apply.

Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a
political subdivision, a local authority or a resident of that State. Where, however, the person
paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base in connection with which the indebtedness on which
the interest is paid was incurred, and such interest is borne by such permanent establishment or
fixed base, then such interest shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.

Where, by reason of a special relationship between the payer and the beneficial owner or between
both of them and some other person, the amount of the interest, having regard to the debt-claim
for which it is paid, exceeds the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In such a case, the excess part of the payments shall remain
taxable according to the laws of each Contracting State, due regard being had to the other
provisions of this Agreement.

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may
be taxed in that other State, if such resident is the beneficial owner of the royalties.

Such royalties may also be taxed in the Contracting State in which they arise, and according to
the laws of that State. However, the tax so charged shall not exceed:

in the case of Indonesia :
15 percent of the gross amount of the royalties;

in the case of the Philippines :

15 per cent of the gross amount of the royalties where the royalties are paid by an enterprise
registered with the Philippine Board of Investments, and engaged in preferred areas of activities
as determined by the said Board; and

in all other cases, 25 percent of the gross amount of the royalties.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of
application of the limitations provided in the preceding paragraph.

The term “royalties” as used in this Article means payments of any kind received as a
consideration for the use of, or the right to use, any copyright of literary, artistic or
scientific work, any patent, trademark, design or model, plan, secret formula or process, or for
the use of, or the right to use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific experience, and includes payments of
any kind in respect of motion picture films and works on films or videotapes for use in connection
with television or tapes for the use of radio broadcasting.

The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties,
being a resident of a Contracting State, carries on business in the other Contracting State in
which the royalties arise, through a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base situated therein, and the right or
property in respect of which the royalties are paid is effectively connected with such permanent
establishment or fixed base. In such a case, the provisions of Article 7 (Business Profits) or
Article 14 (Independent Personal Services), as the case may be, shall apply.

Gains derived by a resident of a Contracting State from the alienation of immovable property
referred to in Article 6 (Income from Immovable Property) and situated in the other Contracting
State may be taxed in that other State.

Gains from the alienation of movable property forming part of the business property of a permanent
establishment which an enterprise of a Contracting State has in the other Contracting State or of
movable property pertaining to a fixed base available to a resident of a Contracting State in the
other Contracting State for the purpose of performing independent personal services, including
such gains from the alienation of such permanent establishment (alone or with the whole
enterprise) or of such fixed base, may be taxed in that State.

Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft
operated in international traffic or movable property pertaining to the operation of such ships or
aircraft, shall be taxable only in that State.

Gains from the alienation of shares of a company, the property of which consists principally of
immovable property situated in a Contracting State, may be taxed in that State. Gains from the
alienation of interest in a partnership or a trust, the property of which consists principally of
immovable property situated in a Contracting State, may be taxed in that State.

Gains from the alienation of any property, other than those mentioned in paragraphs 1, 2, 3 and 4
shall be taxable only in the Contracting State of which the alienator is a resident.

Income derived by a resident of a Contracting State in respect of professional services or other
activities of an independent character shall be taxable in that State. However, such income may be
taxed in the other Contracting State if:

he has a fixed base regularly available to him in that other State for the purpose of performing
his activities but only so much of the income as is attributable to that fixed base; or

his stay in that other State is for a period or periods aggregating 90 days or more in the
calendar year.

The term “professional services” includes especially independent scientific, literary, artistic,
educational or teaching activities as well as the independent activities of physicians, lawyers,
engineers, architects, dentists and accountants.

Subject to the provisions of Articles 16 (Directors’ Fees), 18 (Pensions and Annuities), 19
(Government Service), 20 (Professors and Teachers), and 21 (Students and Trainees), salaries,
wages and other similar remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable only in that State unless the employment is exercised in that other
Contracting State. If the employment is so exercised, such remuneration as is derived therefrom
may be taxed in that other State.

Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State shall be taxable only
in the first-mentioned State if:

the recipient is present in the other State for a period or periods not exceeding in the aggregate
183 days in the calendar year concerned, and

the remuneration is paid by, or on behalf of an employer who is not a resident of the other State,
and

the remuneration is not borne by a permanent establishment or a fixed base which the employer has
in the other State.

Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an
employment as a member of a regular crew or complement of a ship or aircraft operated in
international traffic by an enterprise of a Contracting State shall be taxable only in that State.

Directors’ fees and other similar payments derived by a resident of a Contracting State in his
capacity as a member of the board of directors of a company which is a resident of the other
Contracting State may be taxed in that other State.

The remuneration which a person to whom paragraph 1 applies derives from the company in respect of
the discharge of day-to-day functions of a managerial or technical nature may be taxed in
accordance with the provisions of Article 15 (Dependent Personal Services).

Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15 (Dependent
Personal Services), income derived by a resident of a Contracting State as an entertainer, such as
a theater, motion picture, radio or television artiste, or a musician, or as an athlete, from his
personal activities as such exercised in the other Contracting State may be taxed in that other
State.

Where income in respect of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to that entertainer or athlete himself but to another person, that
income may, notwithstanding the provisions of Articles 7 (Business Profits), 14 (Independent
Personal Services), and 15 (Dependent Personal Services), be taxed in the Contracting State in
which the activities of the entertainer or athlete are exercised.

The provisions of paragraphs 1 and 2 of this Article shall not apply to income derived from
activities performed in a Contracting State by an entertainer or an athlete if the visit to that
Contracting State is pursuant to a special programme for cultural exchange agreed upon between the
two Contracting States or is substantially supported by public funds of the other Contracting
State, including those of any political subdivision, local authority or statutory body thereof,
nor to income derived by a non-profit making organization in respect of such activities, provided
no part of its income is payable to, or is otherwise available for the personal benefit of its
proprietors, members or shareholders and the organization is certified as qualifying under this
provision by the competent authority of the other State.

Notwithstanding the provisions of Article 7 (Business Profits), where the activities mentioned in
paragraph 1 of this Article are provided in a Contracting State by an enterprise of the other
Contracting State, the profits derived from providing these activities by such an enterprise may
be taxed in the first-mentioned Contracting State unless the visit to that Contracting State is
pursuant to a special programme for cultural exchange agreed upon between the two Contracting
States or the enterprise is substantially supported by public funds of the other Contracting
State, including any political subdivision, local authority or statutory body thereof, or unless
the enterprise is a non-profit organization referred to in paragraph 3.

Subject to the provisions of paragraph 2 of Article 19 (Government Service), pensions and other
similar remuneration paid to a resident of a Contracting State in consideration of past employment
shall be taxable only in that State.

Notwithstanding the provisions of paragraph 1, social security pensions paid by a social security
instrumentality of a Contracting State shall be taxable only in that State.

Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a
local authority thereof to an individual in respect of services rendered to that State or
subdivision or authority thereof in the discharge of functions of a governmental nature shall be
taxable only in that Contracting State.

However, such remuneration shall be taxable only in the other Contracting State if the services
are rendered in that State and the individual is a resident of that State who: 

is a national of that State; or

did not become a resident of that State solely for the purpose of rendering the services.

Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or
a local authority thereof to an individual in respect of services rendered to that State or
subdivision or authority shall be taxable only in that State.

However, such pension shall be taxable only in the other Contracting State if the individual is a
resident of, and a national of, that State.

The provisions of Articles 15 (Dependent Personal Services), 16 (Directors’ Fees) and 18 (Pensions
and Annuities) shall apply to remuneration and pensions in respect of services rendered in
connection with a business carried on by a Contracting State or a political subdivision or a local
authority thereof.

Remuneration which a professor or a teacher, who is a resident of one of the Contracting States
and who visits the other Contracting State for a period not exceeding two years for the purpose of
teaching or carrying out advanced study or research at a university, college, school or other
educational institution, receives for those activities shall be taxable only in the
first-mentioned State.

For the purposes of paragraph 1 of this Article, the term “remuneration” shall include remittances
from sources outside the other State sent to enable the professor or teacher to carry out the
purposes referred to in paragraph 1.

This Article shall not apply to remuneration which a professor or a teacher receives for
conducting research if the research is undertaken primarily for the private benefit of a specific
person or persons.

An individual who was a resident of a Contracting State immediately before visiting the other
Contracting State and is temporarily present in that State solely as a student at a university,
college or other similar educational institution shall, for a period not exceeding in the
aggregate five years from the date of his first arrival, be exempt from tax in that other State
on:

all remittances from abroad for purposes of his maintenance or education, and

any remuneration not exceeding an amount, in local currency of the respective Contracting States,
as is equivalent to US$ 1,800 in any calendar year, for personal services rendered in that State
with a view of supplementing the resources available to him for such purposes.

An individual who was a resident of a Contracting State immediately before visiting the other
Contracting State and is temporarily present in that State solely as a trainee for the purpose of
acquiring technical, professional or business experience shall, for a period not exceeding two
years from the date of his first arrival, be exempt from tax in that other State on:

all remittances from abroad for purposes of his maintenance or training, and

any remuneration not exceeding an amount, in local currency of the respective Contracting States,
as is equivalent to US$ 3,600 in any calendar year, for personal services rendered in that other
State, provided such services are in connection with his training or incidental thereto.

An individual who was a resident of a Contracting State immediately before visiting the other
Contracting State and is temporarily present in that State solely for the purpose of study,
research or training as a recipient of a grant, allowance or award from a scientific, educational,
religious or charitable organization or under a technical assistance programme entered into by the
government of the Contracting States shall, for a period not exceeding two years from the date of
his first arrival, be exempt from tax in that other State on:

the amount of such grant, allowance or award;

all remittances from abroad for the purposes of his maintenance education or training; and

any remuneration for personal services in that other State, provided that such services are in
connection with his study, research, training or incidental thereto.

The amounts referred to in paragraph 1 and 2 of this Article may be reviewed and agreed upon by
the competent authorities of both Contracting State from time to time.

The laws of each of the Contracting States shall continue to govern the taxation of income whether
derived from the Contracting State or elsewhere except where express provisions to the contrary
are made in this Agreement. Where income derived from a Contracting State is subject to tax in
both Contracting States, relief from double taxation on such income shall be given in accordance
with the following provisions of this Article.

In the case of Indonesia, double taxation shall be avoided as follows :

Indonesia, when imposing tax on residents of Indonesia, may include in the basis upon which such
tax is imposed, the items of income which may be taxed in the Philippines in accordance with the
provisions of this Agreement.

Where a resident of Indonesia derives income from the Philippines and that income may be taxed in
the Philippines in accordance with the provisions of this Agreement, the amount of Philippine tax
payable in respect of that income shall be allowed as a credit against the Indonesian tax imposed
on that resident. The amount of credit, however, shall not exceed that part of the Indonesian tax
which is appropriate to that income.

In the case of the Philippines, double taxation shall be avoided as follows :
Subject to the provisions of the laws of the Philippines relating to the allowance as credit
against Philippine tax of tax payable in any country other than the Philippines, Indonesian taxes
paid or accrued under the laws of Indonesia and in accordance with this Agreement, whether
directly or by deduction, in respect of income from sources within Indonesia shall be allowed as a
credit against Philippine tax payable in respect of that income. 

Taxes which have been exempted or reduced in one of the Contracting States by virtue of this
Agreement or the special incentive laws of that Contracting State designed to promote economic
development, effective on the date of signature of this Agreement, or which may be introduced in
future taxation laws in modification of, or in addition to, the existing laws, shall be considered
as though such taxes had been paid and shall be allowed tax credit in the other Contracting State
in an amount equal to the tax which would have been appropriate to the income concerned if no such
exemption had been given or no such reduction had been allowed.

Nationals of a Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith, which is other or more burdensome than the
taxation and connected requirements to which nationals of that other Contracting State in the same
circumstances are or may be subjected.

The taxation on a permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State than the taxation
levied on enterprises of that other State carrying on the same activities. This provision shall
not be construed as obliging a Contracting State to grant to residents of the other Contracting
State any personal allowances, reliefs and reductions for taxation purposes on account of civil
status or family responsibilities which it grants to its own residents.

Except where the provisions of paragraph 1 of Article 9 (Associated Enterprises), paragraph 6 of
Article 11 (Interest), or paragraph 4 of Article 12 (Royalties) apply, interest, royalties and
other disbursements paid by an enterprise of a Contracting State to a resident of the other
Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be
deductible under the same conditions as if they had been paid to a resident of the first-mentioned
State.

Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled,
directly or indirectly, by one or more residents of the other Contracting State, shall not be
subjected in the first-mentioned State to any taxation or any requirements connected therewith
which is other or more burdensome than the taxation and connected requirements to which other
similar enterprises of the first-mentioned State are or may be subjected.

Nothing contained in this Article shall be construed as to prevent either Contracting State from
limiting to its nationals the enjoyment of tax incentives and any tax of a preferential nature
designed in pursuance of its programme of economic development.

In this Article, the term “taxation” means taxes which are the subject of this Agreement.

The competent authorities of the Contracting States may consult with each other on the mode of
application of this Article.

Where a person considers that the actions of one or both of the Contracting States result or will
result for him in taxation not in accordance with the provisions of this Agreement, he may,
irrespective of the remedies provided by the domestic laws of those States, present his case to
the competent authority of the Contracting State of which he is a resident. The case must be
presented within two years from the first notification of the action which gives rise to taxation
not in accordance with the provisions of this Agreement.

The competent authority shall endeavour, if the objection appears to it to be justified and if it
is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement
with the competent authority of the other Contracting State, with a view to the avoidance of
taxation which is not in accordance with this Agreement.

A Contracting State shall not, after the expiration of the period prescribed by its domestic law,
but in no case after five years from the end of the taxable period in which the income concerned
has accrued, increase the tax base of a resident of either of the Contracting States by including
therein items of income which have also been charged to tax in the other Contracting State.

The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement
any difficulties or doubts arising as to the interpretation or application of the Agreement. They
may also consult together for the elimination of double taxation in cases not provided for in this
Agreement.

The competent authorities of the Contracting States shall exchange such information as is
necessary for carrying out the provisions of this Agreement and of the domestic laws of the
Contracting States concerning taxes covered by this Agreement insofar as the taxation thereunder
is in accordance with this Agreement. The exchange of information is not restricted by Article 1.
Any information so exchanged shall be treated as secret and shall not be disclosed to any persons
or authorities other than those concerned with the assessment, including judicial determination,
or collection of the taxes which are the subject of this Agreement.

In no case shall the provisions of paragraph 1 be construed as to impose on one of the Contracting
States the obligation:

to carry out administrative measures at variance with the laws or the administrative practice of
that or of the other Contracting State;

to supply particulars which are not obtainable under the laws or in the normal course of the
administration of that State or of the other Contracting State;

to supply information which would disclose any trade, business, industrial, commercial or
professional secret or trade process, or information, the disclosure of which would be contrary to
public policy.

The provisions of this Agreement shall not be construed as to restrict in any manner any
exclusion, exemption, deduction, credit or other allowance now or hereafter accorded:

by the laws of one of the Contracting States in the determination of the tax imposed by that
Contracting State; or

by any other special arrangement on taxation in connection with the economic or technical
cooperation between the two Contracting States.

Nothing in this Agreement shall be construed as preventing the Philippines from taxing its
citizens who may be residing in Indonesia, in accordance with its domestic legislation. However,
no credit shall be given for taxes paid pursuant thereto.

This Agreement shall be ratified and the instruments of ratification shall be exchanged at Jakarta
as soon as possible.

This Agreement shall enter into force after the expiration of 30 days from the date of the
exchange of the instruments of ratification and its provisions shall have effect in both
Contracting States:

in respect of taxes withheld at the source, on amounts paid to non-residents on or after the first
day of January of the calendar year following that in which the exchange of the instruments of
ratification takes place; and

in respect to other taxes, for taxation years beginning on or after the first day of January of
the calendar year next following that in which the exchange of the instruments of ratification
takes place.

in respect of taxes withheld at the source, on amounts paid to non-residents on or after the first
day of January in the calendar year next following that in which the notice is given; and

in respect of other taxes, for taxation years beginning on or after the first day of January in
the calendar year next following that in which the notice is given.

For the Government of the
Republic of Indonesia

For the Government of the
Republic of the Philippines

For the Government of the
Republic of Indonesia

For the Government of the
Republic of the Philippines