Article 1 of the Protocol amends Article 11 (Dividends) of the Convention to reduce the

rate of tax that may be imposed at source on dividends and the rate at which branch taxes may be imposed under Article 11

Paragraph 1 of Article 1 of the Protocol amends paragraph 2 of Article 11 of the Convention to reduce in certain cases the rate of tax allowed at source on dividends from 15 percent to 10 percent. The 10-percent rate applies to dividends paid by a company that is a resident of one of the Contracting States if the beneficial owner of the dividends is a company that is a resident of the other Contracting State and the beneficial owner owns directly at least 25 percent of the voting stock of the company paying the dividends. The rate of tax that may be imposed at source on all other dividends remains at 15 percent.

Paragraph 2 of Article 1 of the Protocol amends paragraph 4 of Article 11 of the Convention to reduce from 15 percent to 10 percent the rate of tax that may be imposed under Article 11 on the profits or interest payments allocable to permanent establishments. The limitation applies to both the U S and Indonesian branch profit taxes.