5 Facts About Deemed Dividends in Indonesia CFCs 2026
If you own foreign subsidiaries from Bali, deemed dividends in controlled foreign companies are now impossible to ignore. Indonesia can tax you even when no cash comes home, purely because profits sit offshore.
CFC rules say that certain passive income in those entities is treated as if distributed. The idea is simple: stop Indonesian residents from parking returns in low-tax hubs and never paying Indonesian tax on them.
For many Bali-based shareholders, the shock comes when their accountant mentions deemed dividends in controlled foreign companies long after the overseas year end. Tax is due, but no dividend has been wired.
To stay ahead, you need to understand control thresholds, which income is in scope, and when deemed dividends in controlled foreign companies must be recognised. This is no longer a niche issue only for large groups.
Good advisors now map out CFC structures annually and explain deemed dividends in controlled foreign companies in plain English. Official summaries from the Directorate General of Taxes help, but you still need tailored advice.
This guide walks you through Indonesia’s approach to deemed dividends in controlled foreign companies in 2026—what counts as a CFC, how the calculation works, how timing interacts with cash flow, and what planning is still realistic.
Table of Contents
- Why Deemed Dividends in Controlled Foreign Companies Matter in 2026
- CFC Tests for Deemed Dividends in Controlled Foreign Companies
- How Deemed Dividends in Controlled Foreign Companies Are Calculated
- Real Story — Deemed Dividends in Controlled Foreign Companies for a Bali Founder
- Timing Rules for Deemed Dividends in Controlled Foreign Companies
- Managing Cash Flow from Deemed Dividends in Controlled Foreign Companies
- Linking Deemed Dividends in Controlled Foreign Companies to Global Minimum Tax
- Checklist to Control Deemed Dividends in Controlled Foreign Companies in 2026
- FAQ’s About Deemed Dividends in Controlled Foreign Companies
Why Deemed Dividends in Controlled Foreign Companies Matter in 2026
For Indonesian residents, deemed dividends in controlled foreign companies turn “paper profits” abroad into taxable income at home. Waiting for cash is no longer a defence if CFC rules apply.
Bali-based founders often use Singapore, Hong Kong or Dutch entities. Once control crosses the threshold, those structures can trigger deemed dividends in controlled foreign companies, especially on passive income.
Ignoring this leads to unpleasant surprises: extra corporate or personal tax, amended returns, and audit questions on why deemed dividends in controlled foreign companies were never reported.
At the core of deemed dividends in controlled foreign companies is the control test. Indonesian residents alone or together need at least 50% of capital or votes in a non-listed foreign entity.
Control includes direct and indirect holdings. A Bali parent owning a Singapore company that owns a BVI company can still fall under deemed dividends in controlled foreign companies rules if the chain adds up to 50%.
Listed foreign companies are usually excluded. But once you shift assets into non-listed holding vehicles, deemed dividends in controlled foreign companies can come back onto the radar very quickly.
Under 2019 revisions, deemed dividends in controlled foreign companies only look at passive income. That means dividends, interest, rents, royalties and certain capital gains, not full trading profit.
The foreign company calculates net passive income after local tax. Your Indonesian share of that pool drives deemed dividends in controlled foreign companies—for example 60% ownership means 60% of the base.
Careful tracking is vital. Later, when a real dividend is paid, part of it may already have been taxed as deemed dividends in controlled foreign companies, and Indonesian rules let you credit that to avoid double tax.
Arya owns 70% of a Singapore company holding overseas apartments. For years, rents stayed offshore and no dividends were declared, so he assumed Indonesian tax would wait. Then deemed dividends in controlled foreign companies hit.
His accountant explained that net rental income was in the passive basket, triggering deemed dividends in controlled foreign companies based on his 70% share. Tax was due in Indonesia even though no money came home.
After a painful first year, they re-structured. Some properties moved into an Indonesian entity, and new deals were modelled with deemed dividends in controlled foreign companies impact before closing, not after.
Timing is where deemed dividends in controlled foreign companies surprise people. Indonesia ties recognition to the foreign company’s local tax-return deadline, not to any board decision on dividends.
Roughly, deemed dividends in controlled foreign companies must be recognised by a fixed number of months after the foreign fiscal year end. If no local filing is required, an alternative deadline applies.
That means Bali taxpayers need the foreign accounts and passive-income breakdown early. If you wait until the last minute, deemed dividends in controlled foreign companies can crash into closing your Indonesian return.
The biggest pain from deemed dividends in controlled foreign companies is paying Indonesian tax without receiving cash. The only real fix is forward planning on both dividend policy and funding.
Many groups now schedule interim dividends from key CFCs to follow soon after deemed dividends in controlled foreign companies are recognised. That way, Indonesian tax bills are paired with incoming cash.
Others use shareholder loans, but those must be priced and documented carefully. Done badly, they can trigger more challenges than the deemed dividends in controlled foreign companies they were meant to ease.
Indonesia’s global minimum tax interacts with deemed dividends in controlled foreign companies in subtle ways. Both tools aim to stop profits sitting in lightly taxed pockets of a group.
Large groups now test whether foreign subsidiaries fall below the minimum rate and whether deemed dividends in controlled foreign companies already pull some of that profit into Indonesian tax.
Done well, modelling avoids paying twice: once under deemed dividends in controlled foreign companies, and again under top-up rules. Done badly, inconsistencies between the two regimes confuse auditors and investors.
Start each year with a map of all entities that might trigger deemed dividends in controlled foreign companies. Note ownership percentages, listing status and local tax-return deadlines.
Next, ask each finance team for a breakdown of passive vs trading income. You cannot manage deemed dividends in controlled foreign companies if no one tracks dividends, interest, rents and royalties separately.
Finally, build a calendar. Mark when deemed dividends in controlled foreign companies will fall due, when actual dividends might be declared, and when Indonesian returns must be filed. Make this part of your Bali board pack.
No. Deemed dividends in controlled foreign companies can hit any Indonesian resident with 50% control in a non-listed foreign company, even smaller owner-managed structures.
Only passive income is counted for deemed dividends in controlled foreign companies—dividends, interest, rents, royalties, and certain capital gains, not active trading profit.
Not if you fall into deemed dividends in controlled foreign companies rules. Indonesia can tax your share of qualifying passive income even when no cash is distributed.
Dividend exemptions may apply to actual dividends under certain conditions, but deemed dividends in controlled foreign companies still need to be assessed and reported separately.
Keep detailed records. Amounts taxed as deemed dividends in controlled foreign companies can usually be credited against Indonesian tax on later actual dividends from the same CFC.
List all foreign entities, test control thresholds, and discuss deemed dividends in controlled foreign companies with an Indonesian tax advisor before filing the 2026 return.
Need help modelling deemed dividends in controlled foreign companies for your 2026 Bali structure? Talk to our tax team today.
