The new challenges in the context of international taxation emerged along with the rapid development of information technology that has a significant impact on the development of digital economy. In response to this condition, Indonesia establishes a unilateral policy with the obligation of Over the Top (OTT) Service provided by foreign business entities to establish permanent establishment in Indonesia through Circular Letter of the Minister of Communication and Information No. 3 of 2016. Referring to Tax Treaty Indonesia - Singapore, Facebook Singapore Pte. Ltd. which has a business activity in the form of sales and marketing support services does not cause PE in Indonesia, resulting in inconsistency between the policy with Tax Treaty Indonesia - Singapore. This study aimed to see whether the policy is appropriate and how the taxation techniques that can be applied in taxing the income of Facebook Singapore Pte. Ltd. sourced from Indonesia when referring to BEPS Action Plan 1. This study is a qualitative-descriptive research with case study approach. Based on Tax Treaty Override and Tax Avoidance theory, the Circular Letter of Minister of Communication and Information No. 3 year 2016 can not be applied in Indonesia because it is contradictory to Tax Treaty Indonesia- Singapore even though Indonesia should be able to impose tax on income of Facebook Singapore, Pte. Ltd. sourced from Indonesia based on benefit theory of taxation. In addition, the policy alternatives offered in BEPS Action Plan 1 in the form of significant economic presence, withholding tax, and equalization levy are still not possible to be applied in Indonesia without revising the terms of the Tax Treaty Indonesia-Singapore.

Keywords       : base erosion and profit shifting; digital economy; tax treaty override