The agreement will take effect next year, Indonesian Ambassador to China and Mongolia Soegeng Rahardjo said here on Wednesday.
Under article 8 of the China-Indonesia double taxation avoidance agreement signed in November 2001, Garuda which operates flight services to the Chinese cities of Beijing, Shanghai, and Guangzhou is exempt from corporate tax, but was subjected to business tax, which is as much as 3 percent of net sale.
However, several other foreign airlines operating services to Chinese destinations were also exempt from business tax. So, Garuda Indonesia was less competitive than other foreign airlines.
The Indonesian government so far has not imposed business tax on Air China planes flying to Indonesia.
"With such business tax-free privilege, Garuda Indonesia will now become more competitive in connecting the peoples of the two countries and boosting the relationship between the two countries," he stated.
Garuda Indonesias General Manager in Beijing Asa Perkasa noted that the abolition of business tax would provide the national flag carrier a competitive advantage in the Chinese market.
"As a fast growing economy, China is a potential market," he added.
To take optimum advantage of the Chinese market, Garuda Indonesia has started chartered services from 10 Chinese cities to Bali and other cities in Indonesia, he revealed.(*)
Editor: Heru Purwanto
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