Tax advisory & planning
in Indonesia.

Whether you are planning to optimise your taxes in Indonesia or going to expand internationally, what you need is a tax planning strategy.

Tax advisory & planning in Indonesia

Reduce your taxes & boost business profitability.

Your tax system optimised

Let us help you minimise your tax liabilities in Indonesia by optimising the current system, which includes eliminating the risk of double taxation, identifying and mitigating tax inefficiencies and leaks, tax health checks and so on.

Identifying new opportunities

We can help you get back any money you may have been unintentionally paying to the government by putting to good use the cash repatriation, tax concessions and incentives systems.

Strategic tax planning

Our tax experts can help businesses who are planning to expand to other markets in Asia or making significant transactions by providing them with guidance on how to execute the actions tax-efficiently.
Corporate & personal tax advisory

Our tax advisory services.

Corporate tax.

  • Corporate tax advisory

    • We will provide general consultation regarding the tax implications of your day to day transactions via phone calls, e-mail correspondences or any other communication channels. If you require a written explanation, we can provide a letter of advice.
    • We will assist in reviewing your company or other company’s compliance level and help you identify the potential tax exposures, which will be useful for your decision-making process.
    • Provision of written advice outlining the tax implications on specific transactions or cases.
    • Provision of end-to-end assistance in handling any questions from the tax authorities on your annual income tax return, preparing and handling any tax objection, including representing your company as a proxy before the tax office.
    • Provision of end-to-end assistance in handling any tax audit, including representing your company as a proxy before the Indonesian Tax Authority.
    • Provision of advice and assistance with an application to obtain a Certificate of Residence from the Directorate General of Taxation to claim double tax treaty benefits in another country.
  • Transfer pricing advisory

    If your business is related in importing or exporting products, we can provide you with a transfer pricing guide. This report will help you identify transfer pricing rules and the direction of pricing your goods and services, and also a comparison of other transactions made in the market.

    What is transfer pricing?

    Transfer pricing in Indonesia.

    Tax authorities all around the world are focusing on transfer pricing to ensure that goods and services flowing across borders are priced appropriately. The worldwide BEPS (Base Erosion and Profit shifting) collaboration amongst 135 countries brings transfer pricing into sharp focus.

    Hong Kong adopts the internationally agreed arm’s length principle for the determination of prices for transactions between related parties. The arm’s length principle is the international standard to guide transfer pricing. It requires the related party to make a transaction under comparable conditions and circumstances as a transaction with an independent party.

    Hong Kong has a series of regulations which require Hong Kong companies to prepare transfer pricing documentation unless they are exempt. The exemptions are for companies that satisfy either Test A or Test B:

    A. Business size exemption – meet 2/3 criteria below:
    • Total annual revenue < HK$400 million (US$51.6million)
    • Total assets < HK$300 million (US$38.7 million)
    • The average number of employees < 100
    B. Related party transaction value-based exemption:
    • Transfer of property (excluding financial assets and intangibles) < HK$220 million (US$28.4 million)
    • Transactions of Financial Assets < HK$110 million (US$14.2 million)
    • Transfer of Intangibles < HK$110 million (US$14.2 million)
    • Any other transactions < HK$44 million (US$5.68 million)

    If the company is not exempt, it must prepare the following documentation as stipulated by OECD:

    • Master file: provides a high-level overview of the multinational’s global operations and value chain
    • Local file: provides detailed analysis of the local entity’s operations and transfer pricing practices
    • Country by country report: provides a wide range of specific information regarding the value chain and operations of the multinational as a whole

    Tax authorities all around the world are focusing on transfer pricing to ensure that goods and services flowing across borders are priced appropriately. The worldwide BEPS (Base Erosion and Profit shifting) collaboration amongst 135 countries brings transfer pricing into sharp focus.

    Indonesia adopts the internationally agreed arm’s length principle for the determination of prices for transactions between related parties. The arm’s length principle is the international standard to guide transfer pricing. It requires the relevant party to make a transaction under comparable conditions and circumstances as a transaction with an independent party.

    Indonesia has a series of regulations which require Indonesian companies to prepare transfer pricing documentation if they fall in the following categories:

    • Gross turnover in the previous financial year of > IDR50 billion (US$3.2 million)
    • Related party transactions in the previous financial year that were more than
      • IDR20 billion (US$1.28 million) of tangible goods
      • IDR5 billion (US$320,000) for each service transaction, payment of interest, utilisation of intangible goods or other related party transaction
    • The related party on the other side of the transaction is located in a country or jurisdiction with a lower income tax rate than Indonesia’s rate (currently 22% until 2021 and 20% from 2022 onwards). There is no minimum value threshold on transactions in this case. For example, transactions with related parties in Singapore, Hong Kong and even the U.S. would now be caught under this test.
    • A resident taxpayer company qualifies as the parent company of a business group that has worldwide income over IDR 11 trillion (US$750 million)

    If a company satisfies one or more of the above tests, it must prepare the following documentation as stipulated by OECD:

    • Master file: provides a high-level overview of the multinational’s global operations and value chain
    • Local file: offers detailed analysis of the local entity’s operations and transfer pricing practices
    • Country by country report (CbCR): provides a wide range of specific information regarding the value chain and operations of the multinational as a whole.*

    *An Indonesian resident subsidiary may not be required to prepare and submit the full CbCR to Indonesian tax authority as long as the parent or constituent entity submits it on their country. Indonesia can obtain the CbCR from such country using the exchange of information mechanism. If this is the case, the Indonesian entity will only require submitting a one-page CbCR notification.

    The master file and local file must be available for inspection by the tax authorities within four months of the end of the fiscal year. The country by country reports must be available within 12 months.

    Indonesia’s tax treaties also incorporate provisions that guard against treaty abuse and provide for the exchange of information upon request in line with the internationally agreed standard.

    Where your company is involved in the import/export of goods and services, our tax professionals can provide you with a transfer pricing report which will analyse the correct method of pricing your goods and services and include a comparability analysis with other similar transactions in the market.

    Our service includes the preparation of an Advance Pricing Agreement (APA) to be agreed with the Indonesian Director General of Tax (DGT) under their transfer pricing policies. The process involves meeting with the DGT to discuss the APA in advance, which we can facilitate. Concluding an APA provides certainty in pricing goods and services that flow cross border.

  • CRS and FATCA

    When a company opens a bank account, the bank will require the company to make a statement as to the company’s status under either CRS or FATCA. A CRS statement will be required from any entity whose beneficial owners are no U.S. citizens. A FATCA statement will be required where any beneficial owners are U.S. citizens. The classification process is far from straightforward, with the bank’s how-to guides stretching to 20 pages or more. An Acclime professional can assist with the correct classification for your company.

    What is CRS and FATCA?

    CRS and FATCA.

    The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding bank accounts on a global level, between tax authorities. It was developed by the Organisation for Economic Co-operation and Development (OECD) in 2014 to combat tax evasion.

    The Foreign Account Tax Compliance Act (FATCA) generally requires financial institutions (FI) and certain other non-financial entities that are foreign to the U.S. to report on assets held by their U.S. account holders or be subject to withholding on withholdable payments.

    CRS classifications

    There are three categories of classification of companies under CRS. The category will determine whether a bank is required to report the existence of the account to the Indonesian Director General of Tax (DGT), who would then share the information with the tax authority where the beneficial owner is tax resident.

    A. Business size exemption – meet 2/3 criteria below:
    • Financial institution (FI) – An FI is an investment entity (managing investments on behalf of others), a custodial entity, a depository institution or a specified insurance company. Each of these definitions have several subparts making the classification somewhat complex.
    • Active non-financial institution (Active NFI) – This is a company that is not a FI but carries on an active business, and not more than 50% of its assets are passive assets (e.g. money sitting in a bank account). For operating companies, most will fall in this classification, unless they have substantial bank balances (e.g. from profits not yet distributed).
    • Passive non-financial institution (Passive NFI) – This is a company that is not an Active NFI.
    B. Related party transaction value-based exemption:
    • Transfer of property (excluding financial assets and intangibles) < HK$220 million (US$28.4 million)
    • Transactions of Financial Assets < HK$110 million (US$14.2 million)
    • Transfer of Intangibles < HK$110 million (US$14.2 million)
    • Any other transactions < HK$44 million (US$5.68 million)

    If the company is not exempt, it must prepare the following documentation as stipulated by OECD:

    • Master file: provides a high-level overview of the multinational’s global operations and value chain
    • Local file: provides detailed analysis of the local entity’s operations and transfer pricing practices
    • Country by country report: provides a wide range of specific information regarding the value chain and operations of the multinational as a whole

    Depending on your entity’s classification, and where it’s resident for tax purposes, it may be a Reportable Person. That means details of the account will be reportable to the tax authority in Indonesia. That authority will then send your details to the tax authority where your entity or controlling person(s) is/are tax resident.

    Financial institution – Not reportable

    Active NFI – The entity is a reportable entity unless it falls in one of the exemptions (e.g. government-owned, regularly traded on an exchange, charity)

    Passive NFI – The entity is a reportable entity, as is the controlling person(s) of the Passive NFI

    If reporting is required, the person’s name, tax ID number and account balance must be reported as well as any dividends, interest or sales proceeds from financial assets that have been paid into the account during the year.

    As the classification process is quite complicated and there are penalties for getting it wrong, it is advisable to have professional advice regarding the classification of your company. Acclime’s tax experts will be able to assist and advise you as to the correct classification of your company.

    FATCA Classification

    Although the definitions under FATCA and CRS are similar, there are differences which could cause your company to have a different FATCA classification from its CRS classification.

    Indonesia has signed an Inter-Governmental Agreement (IGA) with the U.S. as regards FATCA, so banks in Indonesia need to comply with the reporting obligations.

    FATCA has three categories of company:

    • Financial institution (FI)- This is very similar to the CRS FI definition, but also includes holding companies and treasury centres of financial groups.
    • Non-financial foreign entity (NFFE) – A NFFE is a company that is not a FI but carries on an active business, and not more than 50% of its assets are passive assets (e.g. money sitting in a bank account). For operating companies, most will fall in this classification, unless they have substantial bank balances (e.g. from profits not yet distributed). This is the same definition as Active NFI under CRS.
    • Passive NFFE – This is an entity that is not an NFFE.

    The reporting obligations are similar to CRS for the above entity classifications, with the form that needs to be completed differing based on the classification, and in many cases sub-classification of the entity.

    The classification process is quite complex, and there are penalties for getting it wrong, it is advisable to have professional advice regarding the classification of your company. Our tax experts will be able to assist and advise you as to the correct classification of your company.

Single time- or project-based fee

Personal tax.

  • Personal tax advisory & planning

    To prepare for personal tax return, we will help determine your allowances and tax exemptions, and ensure your tax returns are the most profitable. This includes:

    • Advice about objection or appeals to tax assessment
    • Managing remuneration packages tax-efficiently
    • Tax implications of income and share incentives obtained

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FAQ

Common questions.

What taxes are applicable in Indonesia?

Central government taxes

  • Income taxes, in the form of withholding taxes and annual income tax on self-assessment basis; and
  • VAT and sales tax on luxurious goods;

Regional Government Taxes

  • Land and building tax (Pajak Bumi dan Bangunan)
  • Vehicle tax
  • Hotel tax
  • Restaurant tax
What is the corporate tax rate in Indonesia?
In general, 22% for 2020 and 2021, and 20% starting from 2022. Certain taxpayer may be entitled for reduction of the tax rate and certain business activities may subject to final income tax with specific tax rates.
What is the withholding tax rate in Indonesia?
WHT rate will vary from 0.5% to 20% depending on the nature of transaction and applicable income tax article on such transaction.
Is offshore income exempted in Indonesia?
This depends on the type of income and provisions on the applicable tax treaty between Indonesia and the counter party’s jurisdiction. In general, business profit income shall not be taxed in Indonesia as long as the overseas party does not have a Permanent Establishment in Indonesia.
What is the VAT rate in Indonesia?
The VAT rate is 10%. For export, it can be 0%.
Does Indonesia have a VAT refund?
Yes, Indonesia has a VAT refund mechanism.
What are the import taxes and duties involved when conducting import activities?
Taxes and duties involve on importation are Art. 22 income tax, VAT and sales tax on luxurious goods and import duty.
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Puji Gulo, Business development executive

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+62 21 50847809

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Resources

  • Business guides
  • Accounting & payroll guides
  • Tax guides
  • Immigration guides