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a. Shipping revenue from domestic 105,000,000$
b. Shipping revenue from expansion/international 10,000,000$
c. Other revenue (Object of regular rate) 5,000,000$
d. Total Revenue (a+b+c) 120,000,000$
e. Direct Cost 97,200,000$
f. Gross Profit (d-e) 22,800,000$
g. Operating & Other Expenses 4,032,000$
h. Commercial Nett Profit Before Taxes (f-g) 18,768,000$
i. Positive fiscal adjustment (95.83% of e+g) 97,014,000$
j. Negative fiscal adjustment 115,000,000$
k. Fiscal Net Profit (h+i-j) 782,000$
l. Indonesian Income Tax (Regular rate 25%) 195,500$
m. Indonesian Shipping Income Tax ( Effective rate 1.2%) 1,380,000$
n. Total Tax expenses (l+m) 1,575,500$
o. Profit after taxes (h - n) 17,192,500$
For the year ended December 31, 20xx
a. Shipping revenue from Singapore 10,000,000$
b. Direct Cost 8,100,000$
c. Extra Operating & Other Expenses incurred in Branch (5%) 500,000$
d. Nett Profit Before Taxes from Expansion (a-b-c) 1,400,000$
e. Singapore Corporate Income Taxes -$
f. Nett Profit after Taxes from Expansion (d-e) 1,400,000$
g. Branch Profit 1,400,000$
h. Witholding tax of Branch Profit Tax -$
i. Transferred to X company 1,400,000$
a. Shipping revenue from domestic 105,000,000$
b. Shipping revenue from Branch 10,000,000$
c. Other revenue (Object of regular rate) 5,000,000$
d. Total Revenue (a+b+c) 120,000,000$
e. Direct Cost (Indonesia & Singapore) 97,200,000$
f. Gross Profit (d-e) 22,800,000$
g. Operating & Other Expenses 4,032,000$
h. Operating & Other Expenses incurred in Branch (5%) 500,000$
i. Commercial Nett Profit Before Taxes (f-g-h) 18,268,000$
j. Positive fiscal adjustment (95.83% of e+g+h) 97,493,167$
k. Negative fiscal adjustment 115,000,000$
l. Fiscal Net Profit (i+j-k) 761,167$
m. Indonesian Income Tax (Regular rate 25%) 190,292$
n. Indonesian Shipping Income Tax ( Effective rate 1.2%) 1,380,000$
o. Total Tax expenses (m+n) 1,570,292$
p. Profit after taxes (i - n) 16,697,708$
For the year ended December 31, 20xx
For the year ended December 31, 20xx
incurred in the destination country reported all in
central company financial statement. Any taxes that
incurred regarding revenue are deducted over the
commercial nett profit that earned in destination
country, and the rest is called as Branch Profits.
Branch Profit frequently transferred to central
company after deducted witholding tax (if any).
Since shipping income are exempted from
income tax under Section 13A and/or 13F of
Singapore Income Tax Act, then in this form of
business unit there is no taxes to be charged in
Singapore too. So that, the total Branch Profit to be
transfered to the central company is equal to
US$1,400,000.
Figure 3: Income statement simulation over expansion
through branch (Processed by the author).
All revenues, direct costs and operating & other
expenses recorded in central company income
statement. So that commercial nett profit before
taxes is US$ 18,286,000, spesific calculation in
Figure 3.
After fiscal adjustment of US$ 17,506,833, the
Indonesian Taxable Income which is the object of
regular rate is US $ 761,167 and the corporate
income tax payable is equal to US$ 190,292. There
is no overseas tax credited over, since no tax witheld
in Singapore. Shipping revenue from domestic and
international transactions are object of effective rate
1.2% under Indonesian Minister of Finance Decision
Letter Number KMK-416/KMK.04/1996, that is
US$1,380,000.
According to calculations above, total tax
expenses over total projected revenues are US$
1,570,292 and total profit after taxes is US$
16,697,708.
4.3 Expansion through Direct Business
Expanding business through direct business
means conducting business in the destination
country without forming new entity nor register a
permanent establishment. In this form, revenues,
direct costs and operating expenses incurred in the
destination country reported all in central company
financial statement. Any taxes that incurred
regarding revenue are become overseas tax credit in
Indonesia.
Actually this form similar to conduct business
expansion through Branches, however there is one
difference that is the absence of extra operating and
other expenses. Since Singapore tax income on a
quasi-territorial basis, as long as X company afford
to run this business remotely/virtually, International
transaction is better be runned from Indonesia.
Simulation of X company Income Statement
described in Figure 4. Commercial nett profit before
taxes is become US$ 18,786,000. After fiscal
adjustment of US$ 17,986,000, the Indonesian
Taxable Income which is the object of regular rate is
US $ 782,000 and the Corporate Income Tax
payable is equal to US$ 195,000. According to
calculations above, total tax expenses over total
projected revenues are US$ 1,575,500 and total
profit after taxes is US$ 17,192,500.
Figure 4: Income statement simulation over expansion
through Direct Business (Processed by the author).
Tax Planning for Shipping Company Business Expansion
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