Rev. Rul. 69-388

The Republic of Indonesia by the "Ordinance Indonesian Corporation Tax, 1925," as amended, and its territory of Irian Barat (West Irian) by the "Ordinance for Company Tax, 1925," as amended, impose a general income tax on the income of foreign enterprises operating in Indonesia and West Irian, respectively. Article 17 of Chapter VI of Indonesian Law No. 1 of January 10, 1967, authorizes the Government of Indonesia to grant, by individual contract, certain tax incentives to foreign enterprises investing capital in Indonesia. The contract stipulates a method of computing taxable income and the amount of tax payable, which differs from, and is a substitute for, the taxing provisions of the general income tax laws of Indonesia and its political subdivisions including West Irian. Held, tax paid pursuant to a contract executed under the authority of Indonesian Law No. 1 of January 10, 1967, is a tax in lieu of an income tax within the meaning of section 903 of the Internal Revenue Code of 1954 and is creditable against United States income tax under section 901 of the Code subject to the applicable limitations of section 904 of the Code.