Revocation of Income Tax on Derivative Transactions

The Government recently issued Government Regulation No. 31 of 2011 on the Revocation of Government Regulation No. 17 of 2009 on Derivative Transaction Income Taxes on Futures Contracts on the Stock Market (“Regulation”).

The Government repealed Government Regulation No. 17 of 2009 on Derivative Transaction Income Taxes on Futures Contracts on the Stock Market (“Previous Regulation”), following the Supreme Court judicial review decision (case register No. 22P/HUM/2009), which found that the Previous Regulation was invalid, because it conflicted with Article 4(1) and (2)(c) of Law No. 36 of 2008 on the Fourth Amendment of Law No 7 of 1983 on Income Taxes.

A “derivative transaction” as defined in Article 1 of the elucidation of Government Regulation No.17 of 2009, is a transaction based on a contract or agreement, whose value is derived from the value of the underlying instruments such as interest rate, exchange rates, commodities, equities, and indices and that follow the movement of the funds or instruments.