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4. PFIC Considerations
If we were to be classified as a PFIC in any taxable year, a US Holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of US federal income tax that a US Holder could derive from investing in a
non-US company that does not distribute all of its earnings on a current basis. In such event, a US Holder may be subject to tax at ordinary income tax rates on i any gain recognized on the sale of ADSs or common stock and ii any “excess
distribution” paid on ADSs or common stock generally, a distribution in excess of 125 of the average annual distributions paid by us in the three preceding taxable years. In addition, a US Holder will be subject to an interest charge on such gain or
excess distribution. Finally, the 15 maximum rate on Company dividends would not apply if we become classified as a PFIC. Each US Holder is urged to consult its tax advisor regarding the potential tax consequences to such holder if we are or
become classified as a PFIC, as well as certain elections that may be available to mitigate such consequences.
5. Backup Withholding Tax and Information Reporting Requirements
US backup withholding tax and information reporting requirements generally apply to certain payments to certain non corporate holders of stock. Information reporting generally will apply to payments of dividends on and to proceeds from the
sale or redemption of, ordinary shares made within the US or by a US pay or US middleman to a holder of ordinary shares other than an “exempt recipient,” including a corporation, a payee that is not a US person that provides an appropriate
certification and certain other persons. A payor will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ADSs or common stock within the US or by a US payor or US
middleman to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. The
backup withholding tax rate is 25 up to2014. The backup withholding tax is not an additional tax and may be credited against a US holder’s regular US federal income tax liability or, if in excess of such liability, refunded by the Internal
Revenue Service “IRS” if a timely refund claim is filed with the IRS. Copies of any information returns or tax returns for claims for refund filed by non-US Holders with the IRS may be made available by the IRS, under the provisions of a specific
treaty or other agreement providing for information exchange, to the taxing authorities of the country in which a non-US Holder resides.
IMPACT OF THE REGULATION CHANGES TOWARDS THE COMPANY
The framework for the telecommunications industry is comprised of specific laws, government regulations, ministerial regulations and ministerial decrees enacted and issued from time to time. The current telecommunications policy was first formulated and articulated
in the Government’s “Blueprint of the Indonesian Government’s Policy on Telecommunications”, contained in MoC Decree No.KM.721999 dated September 17, 1999.
1. Telecommunications Law
The telecommunications sector is primarily governed by Law No.36 of 1999 “Telecommunications Law”, which became effective on September 8, 2000. The Telecommunications Law sets guidelines for industry reforms, including industry
liberalization, facilitation of new entrants and enhanced transparency and competition. The Telecommunications Law eliminated the concept of “organizing entities” thereby ending our and Indosat’s responsibility for
coordinating domestic and international telecommunications services, respectively. To enhance competition, the Telecommunications Law prohibits monopolistic practices and unfair competition among telecommunications operators.
The Telecommunications Law was implemented through several Government Regulations, Ministerial Regulations and Ministerial Decrees. The most important of such regulations include:
- Government Regulation No.522000 regarding Telecommunications Services. - MoCI Regulation No.1PERM.KOMINFO012010 dated January 25, 2010 regarding Operation of Telecommunications
Networks. - MoC Decree No.KM.212001 regarding the Provision of Telecommunications Services that was most recently amended by
MoCI Regulation No.82015 regarding the Fourth Amendment of Decree of the Minister of Communication No.KM.212001 regarding the Provision of Telecommunications Services.
- MoC Decree No.332004 regarding Supervision of Healthy Competition in the Provision of Fixed Network and Basic Telephony Services.
- MoC Decree No.KM.42001 dated January 16, 2001 regarding the Determination of Fundamental Technical Plan National 2000 for National Telecommunications Development most recently amended by MoCI Regulation
No.09PERM.KOMINFO062010 dated June 9, 2010 regarding the sixth amendment of MoC Decree No.KM.42001 regarding the Determination of Fundamental Technical Plan National 2000 for National Telecommunications Development.
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2. Telecommunications Regulators
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