Introduction to taxation in Indonesia.

Introduction to taxation in Indonesia

This is the ultimate guide to taxation in Indonesia.

Companies and individuals in Indonesia should know which taxes they are entitled to in order to file and return all related tax obligations and comply with the Indonesian laws.

Let’s get started with the first type of tax.

Corporate income tax

Year of assessment and corporate tax return

When is the year of assessment for Indonesian companies?

The most common tax year in Indonesia is the same as the calendar year which is 1 January to 31 December. However, the tax year will follow the company’s financial year as stated on the article of association.

When to file and pay corporate income tax return?

Companies in Indonesia have to pay corporate income tax by the end of the fourth month after the year-end and must file the corporate income tax returns by the end of the fourth month after the end of the reported tax year. You may apply for extensions for a maximum of two months if you submit a written notice to the Directorate General of Taxation before the tax return deadline.

Tax rate and basis of taxation

What are the tax rates for Indonesian companies?

The corporate income tax (CIT) rate in Indonesia is 25%. For fiscal year 2020/2021, the CIT rate is 22%, and for fiscal year 2022 onwards, the CIT rate will be 20%.

Additional tax reduction for qualified companies

Public companies that have a minimum listing requirement of 40% and other specific conditions are eligible to a 3% discount from the standard CIT rate.

For the 2020 fiscal year, the reduction will be at 3%, giving fiscal year 2020/2021 a CIT rate of 19%.

For the year 2022 and onwards, the CIT rate will be 17%.

Small companies will be qualified for a 50% proportionate tax discount from the standard CIT rate and small and medium-sized enterprises (SMEs) with gross revenue of not more than IDR 4.8 million are subject to a CIT rate of 0.5% from the gross revenue.

What is a tax resident company?

A company in Indonesia is considered as a tax resident if the company is incorporated or the domicile is in Indonesia.

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Personal income tax

Taxable income in Indonesia

Personal resident taxpayers must file individual income tax returns through a self-assessment system and are subject to tax rates of 5% to 30%.

Indonesia has endorsed a worldwide income tax system which Indonesian tax residents pay tax from the income they earn inside Indonesia and abroad.

If you are a non-resident taxpayer, you will only pay tax for the income you earned in Indonesia. Non-resident taxpayers are subject to pay a single tax rate of 20% on income earned.

Who is considered as a tax resident in Indonesia?

You are considered as a personal resident taxpayer if you have been in Indonesia for at least 183 days within 12 months or have been in Indonesia during a fiscal year and plans to live in Indonesia for longer.

Personal income tax rates in Indonesia

Resident-taxpayer’s tax rates

Taxable incomeRateTax (IDR)
Up to IDR 50 million5%2.5 million
Over IDR 50,000,001 but not exceeding IDR 250 million15%30 million
Over IDR 250,000,001 but not exceeding IDR 500 million25%62.5 million
Over IDR 500,000,00130%30% of the relevant amount

Income subjected to pay personal income tax include:

  • Employment income
  • Onshore and offshore dividends, interest income and royalties
  • Onshore and offshore rental income and capital gains

Deductions available for personal income tax

There are several deductions for an individual when determining the personal taxable income.

Personal deductions

Basis of deductionDeductible amount per year
Individual taxpayerIDR 54,000,000
SpouseIDR 4,500,000 (additional 54,000,000 for a wife whose income is combined with her husbands)
Dependents (maximum three)IDR 4,500,000 each
Occupational support5% of gross income up to a maximum of IDR 6,000,000
Pension costs5% of gross income up to a maximum of IDR 2,400,000
Contribution to approved pension fundAmount of self-contribution
Compulsory tithe or religious contributionsActual amount, provided that valid supporting evidence is available, and all requirements are met

Withholding tax

Withholding Tax in Indonesia

Some income tax is collected through withholding taxes mechanism, which the payer must withhold and submit the tax to the tax offices on a monthly basis.

Withholding tax deadline

The monthly payment deadline is the 10th of the following month, and the monthly filing deadline is the 20th of the following month.

Withholding tax rates in Indonesia

Tax rate

NameResidents Non-residents
Dividends15%20%
Interest15%20%
Royalties15%20%
Prizes and awards15%20%
Rental and other income related to the use of property2%20%
Technical, management, consulting and other services2%20%

Value Added Tax

What is VAT?

Value-Added Tax (VAT) is the tax imposed on most products and services in Indonesia. It is the consumption tax applied to each of the production stages up until selling the product.

VAT rates in Indonesia

The VAT rates in Indonesia are as follows:

General VAT rate. (This rate can be amended to 5% at the lowest or 15% at the highest, which will be regulated under the Government Regulations.)10%
Export of taxable intangible and tangible goods0%
Export of certain taxable services0%

Products and services not subjected to VAT

Products that are considered as non-taxable goods include:

  • Products from drilling or mining that are extracted from the source, such as natural gas, crude oil, coal, limestone, gemstone, phosphate, clay and coal
  • Food and drinks served in hotels and restaurants
  • Gold bars, securities and cash
  • Basic commodities such as salt, rice, soybeans, corn, sago, fresh meat, fruit, vegetables, tubers, ingredients and sugar

Non-taxable services include:

  • Medical and health services
  • Mail services
  • Social services such as funerals
  • Religious services
  • Insurance services
  • Art and entertainment services
  • Educational services
  • Public transportation services
  • Public telephone services
  • Broadcasting services that are not related to advertising
  • Financial services
  • Labour services

Luxury-goods sales tax in Indonesia

Indonesia has a luxury-goods sales tax (LST) which is imposed on the delivery or importation of specific taxable luxury goods, such as luxury cars, apartments or houses. The LST rates are between 10% to 125% with a maximum of 200% allowed.

Which countries have Indonesia signed the double tax treaty with?

Indonesia currently has a total of 74 double tax treaties with countries around the world.

Double tax treaties

AlgeriaJordanSaudi Arabia
AustraliaKuwaitSeychelles
ArmeniaLaosSouth Africa
AustraliaMalaysiaSpain
AustriaMexicoSri Lanka
BangladeshMongoliaSudan
BelarusMoroccoSuriname
BelgiumNetherlandsSweden
BruneiNew ZealandSwitzerland
BulgariaNorwaySyria
CambodiaPakistanTaiwan
CanadaPapua New GuineaTajikistan
Czech RepublicPeople’s Republic of ChinaThailand
Democratic People’s Republic of KoreaPhilippinesTunisia
DenmarkPolandTurkey
EgyptPortugalUkraine
FinlandQatarUnited Arab Emirates
FranceRepublic of CroatiaUnited Kingdom
GermanyRepublic of KoreaUnited States of America
Hong KongRepublic of SurinameUzbekistan
HungaryRomaniaVenezuela
IndiaRussiaVietnam
IranSerbia
ItalySeychelles
JapanSingapore
LuxembourgSlovakia

Indonesia tax deadlines

Type of taxMonthly payment deadlineMonthly filing deadlineAnnual filing deadline
Corporate income tax15th of the following monthN/AEnd of the 4th month after the tax year ends
Personal income tax15th of the following monthN/AEnd of the 3rd month after the tax year ends
Withholding tax10th of the following month20th of the following month
VAT and LSTBefore the VAT return filing deadlineEnd of the following month

Possible penalties in Indonesia

Tax penalties in Indonesia

CircumstancesPenalties
Late reportingIDR 500,000 for monthly VAT return; IDR 100,000 for annual personal income tax return; IDR 1,000,000 for annual corporate tax return; and IDR 100,000 for other monthly tax return.
Late payment2% per month
Voluntary amendments of returns2% per month from the tax underpayment
Issuing incomplete VAT invoice, or not issuing or late in issuing VAT invoice, or reporting VAT invoice not in accordance with the period of issuance of VAT invoice2% of the taxable base

Criminal penalties

CircumstancesFines and imprisonment
Fail to submit a tax return though negligence; or submits an incorrect or incomplete tax return or attaches incorrect information1 – 2 times the tax underpaid or imprisonment from three months to one year
Does not register for tax identification number (NPWP) or as taxable entrepreneur; improper use of NPWP or taxable entrepreneur number; does not file a tax return; submits an incorrect or incomplete tax return; refuses a tax audit; does not remit taxes withheld or collected2 to 4 times the tax underpaid and imprisonment from six months to six years. The sentence will be doubled if you commit another criminal act in the taxation field before one year has passed
Misuses or uses without the right NPWP or taxable entrepreneur number, or submits an incorrect or incomplete tax return and/or information for restitution or compensating or crediting tax2 to 4 times the tax refund requested/compensated/credited and imprisonment from six months to six years
Intentionally issues and/or uses tax documents which are not based on the actual transaction; issues tax invoice but is not yet confirmed as a taxable entrepreneur2 to 6 times the tax amount and imprisonment from two years to six years

Conclusion

Every company and individual must ensure that they comply with the Indonesian tax regulations and pay and file their taxes on time to avoid any penalties.

Contact Acclime and let us help you with your tax obligations.

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