ARTICLE 31

Termination

The Convention will remain in force indefinitely unless it is terminated by either Contracting State in accordance with this Article. Either State may terminate the Convention after it has been in force for 5 years by giving notice through diplomatic channels at least 6 months in advance. In that event, the Convention will cease to have force and effect for withholding taxes on dividends, interest and royalties paid, and for taxes on other income of taxable years beginning, on or after January 1 next following the expiration of the notice period

of 6 months or more.

PROTOCOL 1

The Protocol sets forth agreements with respect to the interpretation of these points. Each has been mentioned in connection with the relevant article.

Nothing in this Convention restricts the legal rights of a resident of a Contracting State to pursue claims with respect to the taxation of income from the operation of ships or aircraft in international traffic derived in years prior to the entry into force of the Convention.

The use of facilities in a Contracting State or the maintenance of a stock of goods or merchandise in a Contracting State belonging to a resident of the other State for the purpose of occasional delivery of such goods or merchandise does not constitute a permanent establishment of the resident in the first-mentioned State.

Paragraph 4 of Article 11 (Dividends) permits the United States to tax any excess of interest deducted by the U.S. permanent establishment of a resident of Indonesia over the interest paid by that permanent establishment, in accordance with Section 884 of the Internal Revenue Code, but subject to the limitation that the rate of tax on such "excess interest" may not exceed 15 percent.

EXCHANGE OF LETTERS

An exchange of side letters confirms the understanding of the two States about the interpretation of the territorial definition of Indonesia contained in Article 3 (General Definitions). It is understood by both States that Indonesia applies the arch pelagic States principles in accordance with the provisions of Part IV of the 1982 United Nations Convention on the Law of the Sea and respects international rights and obligations pertaining to transit of the Indonesian arch pelagic waters in accordance with international law as reflected therein.

PROTOCOL 2

TREASURY DEPARTMENT TECHNICAL EXPLANATION OF THE PROTOCOL TO THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED

STATES OF AMERICA AND THE GOVERNMENT OF INDONESIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME, WITH A RELATED PROTOCOL AND

EXCHANGE OF NOTES, SIGNED ON JULY 24, 1996

The Protocol, signed at Jakarta on July 24, 1996, (“the Protocol”) amends the Convention between the Government of the United States of America and the Government of the Republic of Indonesia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with

Respect to Taxes on Income, with a related Protocol and exchange of notes, signed on July 11, 1988 ("the Convention").

The technical explanation is an official guide to the Protocol. It does not provide a complete comparison of the Protocol to the Articles of the Convention that it amends.