Threshold Classiication of passive foreign investment Company “piap”

158

PT Telkom Indonesia Persero Tbk

2. Dividends Any distribution of cash dividends paid by the Company

out of earnings and proits as determined by the principles of the U.S.A Federal income tax, will be imposed with income tax on dividends and will be included in the gross income of the U.S.A Citizen Shareholders at the time it is received. In general, the dividend recipient that is not a Company will be subject to an income tax on dividends of a “qualiied foreign Company” with a maximum of the U.S.A Federal tax rate of 15, instead of the marginal tax rate which is applicable to an ordinary income, so long that they have fulilled the speciic period of ownership requirement. As a note, as of January 1, 2011, dividends from a qualiied foreign Company is treated as an ordinary income with a maximum tax rate of 39.6 applicable to dividends received by non-companies after the end of 2010. A non-U.S.A company other than PFIC, generally, will be treated as an eliglible foreign company i if eligible to get beneits in entirety from the U.S.A tax treaties and which is determined by the Financial Minister of the U.S.A to fulill the purpose of this provision and includes information exchange program or ii with respect to dividends paid in the form of shares or ADSs which is supported by such shares that are ready to be traded on a stock exchange established in the United States of America. Upon the completion of applicable tax treaty between the US and Indonesia, which has been determined by the Minister of Finance has fulilling this purpose and we believe that we are eligible to get beneit from the treaties. In addition, because the ADSs are listed on NYSE, an established securities market in the U.S.A, therefore, it is considered to be easily traded on the stock exchange. The amount of cash distributed in Rupiah shall equal with the U.S.Dollars value of the Rupiah at the date of receipt of the distribution, regardless of whether the amount is actually converted into the U.S.Dollars at that time. The proit or loss, if any, is recognized on the subsequent sale, conversion, or other disposition in Rupiah, and generally will be a source of regular income or loss. Generally, dividends received from the ADSs or common stocks are not qualify for deduction of dividends received by the company. Dividends will generally be regarded as income from foreign sources for credit purposes of the U.S. foreign tax. The U.S. shareholders may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect with a foreign withholding tax imposed on dividends received because of ADSs or common stocks. The U.S shareholders who did not decided to claim a foreign tax credit for foreign taxes withheld, not to claim a deduction, for federal income tax purposes which in respect of the withheld, but only for a year in which the shareholders choose to do so for all credited foreign income taxes. 3. Sale or Transfer of ADSs or Common Stocks In general, shareholders who are United States nationals declare capital gains and losses arising from the sale or transfer of ADS or common stock, in the amount of the diference between the realization amount upon such transfer, with the tax base adjusted for the aforementioned shareholders of ADS or common stock. Capital gains or losses shall be long-term in nature, in the event that such ADS or common stock has in the possession of the shareholder for more than one year, and shall be a source of gains or losses for the US for the purposes of the US foreign tax credit.

4. Consequences of a PIAP In the event that the Company is classiied as a PIAP

within a certain iscal year, U.S. Shareholders are required to comply with special regulations that are generally aimed at reducing or eliminating the beneits of Federal U.S. income tax postponements, that may be gained by U.S. Shareholders from their investments in non- U.S. Companies that do not distribute all their gains on the current basis. In this regard, U.S. Shareholders may be subject to regular income tax fees over i gains recognized upon the sale of ADS or common stock and ii distribution surplus paid upon ADS or common stock in general, distributions that exceed 125 of the annual distribution average that we pay over the period of three prior iscal years. Furthermore, U.S. Shareholders shall be subject to interests on such gains or distribution surpluses. Aside from that, the maximum tarif of 15 of the Company’s dividends shall not be applied if the Company is to be considered as a PIAP.

5. Income Tax Reserves and Information Disclosure Requirements

U.S. income tax reserves and information disclosure requirements generally apply towards several payments made to certain non-cooperative shareholders. A tax- paying party shall be required to withhold its income tax 159 PT Telkom Indonesia Persero Tbk reserve from the payment of dividends, or from the result of sales or the payment of ADS or common stock in the U.S. territory or by a U.S. buyer or broker to a shareholder, except for exempted recipients, in the event that such shareholder fails to provide the correct tax identiication number or is unable to fulill the exceptions to the requirements concerning income tax reserves. The size of the income tax reserve has been 25 in the years leading to 2014. Income tax reserves are not additional taxes, and are eligible to be credited to Federal U.S. income tax liabilities of U.S. Shareholders, or, in the event that it exceeds hisherits liabilities, the tax would be returned by the Internal Revenue Service “IRS” if a tax return claim has been submitted to the IRS.

C. Tax Incentives

In December 2015, The Company used the economic policy package V in the form of tax incentives with a special tax rate for revaluation of assets as stated in the Ministry of Finance Regulation No.191PMK.010.2015 jo PMK No. 233PMK.032015. In accordance with the regulation, The company should reassess the ixed assets in fair value which appraised by the Public Appraiser Service Oice or other appraisals which lincensed by the Government before December 31, 2016. The Company paid the inal Income Tax amounted to Rp750 billion and iled a letter No.C.Tel.282KU000COP-I0000002015 dated December 29, 2015 regarding to application of Revaluation of Assets in the purpose of taxation in 2015. It was submitted on December 30, 2015. As of the date of approval and authorization for the issuance of the consolidated inancial statements, the assesing of revaluation of assets is still in process. Materiality Limitation Materiality in our Consolidated Financial Statement was based on According to BAPEPAMLK decision letter No. KEP-347BL2012 about Presentation and Disclosure of Financial Statements Public Company dated June 25, 2012, with appendix Regulation No. VIII.G.7:about Presentation of Financial Statements of the Company or Public Company where items is 5 of the total assets for asset items, 5 of the total liability for the liabilities items, 5 of the total equity for equity accounts, 10 of revenue for items of comprehensive income, and 10 of the proit from continuing operations before taxes for the efect of an event or transaction. Material Contract In 2015 and 2014, we did not enter into any new material contracts nor did we amend any existing material contracts, other than contracts entered into or amended in the ordinary course of business as disclosed at Note 39 of our Consolidated Financial Statement. Material Informations Of Investment, Expansion, Divestment, Acquisition And DebtCapital Restructure In 2015, we did some activities related to investments, divestments, acquisitions and debtcapital restructuring. The activities are as follows:

a. Investment

1. Metra On November 30, 2015, Metra acquired 13,850 shares of

TelkoMedika equal to 75 ownership with acquisition cost amounting to Rp69.5 billion. TelkoMedika engaged in health services, procurement services and medicine services, including the establishment of pharmacies, hospital, raw treatment, clinic, or other health care support.

2. Telin On May 19, 2015, Pachub Acquisition Co. On

Telekomunikasi Indonesia International USA has 100 direct ownership.On May 29, 2015, Telkom USA and Pachub Acquisition Co entered into an agreement and business combination plan with AP Teleguam Holdings, Inc. As of the date of approval and authorization for the issuance of the consolidated inancial statements, the business combination is still in process.

b. Expansion

In 2015, we have no expansion transaction.

c. Divestation

In 2015, we have no divestation transaction.

d. Acquisition

In 2015, Based on notarial deed No.09 dated December 18, 2015 of Utiek Rochmuljati Abdurachman, SH., MLI,