Last modified: 08/07/2023 11:48

Corporate taxation

	Rate
Corporate income tax rate	22
Branch tax rate	20

1. General flat rate of 22% applies
2. Public companies that satisfy a minimum listing requirement of 40% and other conditions are entitled to a tax cut of 3% off the standard rate, giving them an effective tax rate of 19%
3. Small enterprises, i.e. corporate taxpayers with an annual turnover of not more than IDR 50 billion, are entitled to a 50% discount of the standard tax rate which is imposed proportionally on taxable income of the part of gross turnover up to IDR 4.8 billion. 
4. Certain enterprises with gross turnover of not more than IDR 4.8 billion are subject to Final Tax at 0.5% of turnover.

Residence: A company is defined as a group of persons and/or capitals that are domiciled in or have a place of management or control in Indonesia, whether they are doing business or not, and includes a limited liability company, a commanditaire company, other companies, state-owned enterprises or regionally-owned enterprises in whatever name and form, a firm, a joint venture, a cooperative, a pension fund, a partnership, an association, a foundation, a mass organization, a socio-politic organization, or other organizations, institution and other forms of corporate including collective investment contracts and permanent establishments.

Basis: Resident companies are taxed on their worldwide income, subject to tax credits for foreign income which has been subject to tax. Non-resident company is a company incorporated outside Indonesia is taxed only on Indonesia-sourced income, subject to tax relief under the double taxation agreements

Taxable income: Corporate income tax is calculated on the basis of normal accounting principles as modified by certain tax adjustments. Generally, a deduction is allowed for all expenditure incurred to obtain, collect and maintain taxable business profits. A timing difference may arise if an expenditure recorded as an expense for accounting cannot be immediately claimed as a deduction for tax.

Significant local taxes on income: 1. General flat rate of 22% applies 2. Public companies that satisfy a minimum listing requirement of 40% and other conditions are entitled to a tax cut of 3% off the standard rate, giving them an effective tax rate of 19% 3. Small enterprises, i.e. corporate taxpayers with an annual turnover of not more than IDR 50 billion, are entitled to a 50% discount of the standard tax rate which is imposed proportionally on taxable income of the part of gross turnover up to IDR 4.8 billion. 4. Certain enterprises with gross turnover of not more than IDR 4.8 billion are subject to Final Tax at 0.5% of turnover.

Alternative minimum tax: See above under “Significant Local Tax on Income”

Taxation of dividends: 1. In principal, dividend received from Indonesian Company is non-tax object. Please note that Dividend that Non-Object Income Tax are based on Shareholders Meeting (RUPS) or interim dividend 2. Dividend received from Indonesian Company is non-tax object if it is received by resident individual taxpayers who reinvest it in Indonesia within certain period 3. If the resident individual does not meet the investment requirement in Indonesia, thus, it is subject to final income tax of rate 10% 4. Dividend received by a non-resident taxpayer is subject to a 20% final withholding tax subject to tax treaty agreements.

Capital gains: Generally, capital gain will be subject to CIT at 22%. However, gains from transfer of land and buildings are subject to final income tax at rate 2,5% of transaction value or the government determined value, whichever is higher. Capital gain of shares listed on the Indonesian stock exchange is subject to final WHT of 0,1% of the gross sales consideration. An additional tax of 0.5% applies to the share value of founder shares at the time an initial public offering takes place.

Losses: Tax Loss may be carried forward for a maximum of five years. Subject to approval from Directorate of Tax, this period may be extended for up to 10 years for certain region or business. The carrying back of losses is not allowed.

Foreign tax relief: Foreign source income is included in taxable income, subject to tax credits for foreign income which has been subject to tax. If the home country has a Double Tax Agreement (DTA) with Indonesia, there is a tax relief in form of tax exemption or reduce tax rate.

Participation exemption: See above under “Significant Local Tax on Income” and “Taxation of Dividend”

Holding-company regime: There is no holding tax regime

Tax-based incentives: 1. Reduction of CIT rate for public companies (see above under “Significant Local Tax on Income”) 2. Tax holiday regime is available for a new investment or business expansion in certain pioneer industries 3. Tax Allowance facility are available to companies with a specified minimum level of capital investment in certain geographic locations where the necessary conditions are satisfied 4. Super tax deduction facility 5. CIT facilities in special economic zone

Group relief/fiscal unity: No consolidated filing

Small company/alternative tax regimes: See above under “Significant Local Tax on Income” and the tax table.

Corporate taxation: compliance

Tax year: Generally, a fiscal year is the calendar year. An approval from the Directorate General of Tax must be obtained in order to change the fiscal year period

Consolidated returns: No

Filing and payment: A self-assessment procedure applies. The submission deadline is within four months after the book year end and the payment deadline is before the tax return is submitted.

Penalties: Penalty for late payment in the form of interest is applied on a monthly basis, maximum 24 months (the rate is stipulated based in Ministry of Finance Decision). Penalties for late filing or failure to file is IDR 1 million per tax return.

Rulings: Rulings may be obtained from the tax authorities on various Indonesia tax matters.

Taxation of individuals

Taxable Income’s Layer
	Rate
Up to Rp 60.000.000	5%
Above Rp 60.000.000 up to Rp 250.000.000	15%
Above Rp 250.000.000 up to Rp 500.000.000	25%
Above Rp 500.000.000 up to Rp 5.000.000.000	30%
Above Rp 5.000.000.000	35%

1. For individuals who do not have Tax Id Number, the rates are 20% higher than the standard rate
2. Non-taxable turnover threshold of IDR 500 million per Fiscal Year is also applicable for individual taxpayer on certain income with annual gross turnover of not more than IDR 4.8 billion that is subject to Final Tax
3. Annual non-taxable income for resident individuals is as follows: IDRTaxpayer      54.000.000Spouse        4.500.000Each dependant (max. 3)        4.500.000

Residence: An individual living in Indonesia, staying in Indonesia for more than 183 days within any 12-month period, or intending to reside in Indonesia is taxed on worldwide income. Foreign tax credit imposed on foreign income can be credited to Indonesia tax due subject to domestic rule.

Basis: Resident individuals are taxed on their worldwide income, regardless of the source. They also required to declare their worldwide assets and liabilities. In principle, benefit-in-kind (BIK) related to activities of earning, collecting, or maintaining income may be tax deductible for employers and taxable for employees. BIK that are not taxable for employees are limited to: 1. Food/drink provided for all employee; 2. BIK in certain area 3. BIK due to work requirement (e.g. work safety equipment, uniforms, etc.) 4. BIK sourced from State and Regional Budgets; 5. BIK with certain types and limitations

Taxable income: For resident taxpayers, income tax payable is calculated by multiplying the net taxable income, minus deductions and reliefs, by the graduated tax rates. Taxable income of resident individual taxpayers: 1. Employment income (e.g. salary) 2. Income from business or profession 3. Passive income (e.g. interest and royalties) 4. Capital gains 5. Benefits-in-kind (BIK)

Capital gains: Generally, capital gain will be subject to at max.35% for individual tax rate. However, gains from transfer of land and buildings are subject to final income tax at rate 2,5% of transaction value or the government determined value, whichever is higher. Capital gain of shares listed on the Indonesian stock exchange is subject to final WHT of 0,1% of the gross sales consideration.

Deductions and allowances: In principle, taxpayers may deduct from gross income a zakat or religious donation that are compulsory. Please also see above under “Taxation of Individuals Table”

Foreign tax relief: Tax paid/due related to income received/accrued abroad can be credited with proof of tax paid in foreign country (subject to DTA provisions). For exempted income items, tax paid abroad will not be allowed as a credit or deduction or refunded for Indonesian tax purposes.

Taxation of individuals: compliance

Tax year: Calendar year, or 1 January to 31 December

Filing and payment: Most part of individual income tax is collected through withholding system by third parties. Article 21/26 Income Tax are required to withheld by Employers on a monthly basis from the salaries and other compensation paid to their employees. Typically, the amount of tax withheld from this income (Article 21 Income Tax) is based on normal tax rates. Tax withheld for the income paid to non-employee individuals and certain professionals, such as lawyers, notaries, accountants, architects, doctors, actuaries, and appraisers, are subject to a tax calculation norm which is based on 50% of the gross income at the prevailing rates. Filing and payment: A self-assessment procedure applies. The submission deadline is within three months after the tax year end and the payment deadline is before the tax return is submitted. An individual taxpayer can submit an annual tax return through the e-filing system provided by the Indonesian Tax Office (ITO).

Penalties: Penalty for late payment in the form of interest is applied on a monthly basis, maximum 24 months (the rate is stipulated based in Ministry of Finance Decision). Penalties for late filing or failure to file is IDR 100k per tax return.

Rulings: See above under “Corporate Taxation”

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	0%/15% (1)	0%/10% (1)	20%/Tax Treaty	20%/Tax Treaty
Interest	10%/15%/20%  (2)	10%/15%/20% (2)	20%/Tax Treaty	20%/Tax Treaty
Royalties	15%	15%	20%/Tax Treaty	20%/Tax Treaty
Capital gains	2.5%/0.5%/0.1% (3)	2.5%/0.5%/0.1% (3)	5% / Tax Treaty (3)	5% / Tax Treaty (3)

1. – Dividend paid to the Indonesian Company is exempted from WHT provided that the dividend distributed is based on Shareholder’s meeting (RUPS) and/or an interim dividend.  Other than the above, Dividend is subject to 15% WHT.- Dividend paid to an individual is exempted from WHT provided that the dividend is invested in Indonesia (type of investment is provided in the regulation).  If the dividend is not invested in Indonesia, the dividend is subject to final tax of 10%.
2. Interest income from time deposit and Bank of Indonesia Certificate (SBI) is subject to final tax rate 20%, while from Bond is subject to Final tax rate of 10%. Other than that, interest is subject to WHT rate of 15%.
3. – Gains from transfer of land and buildings are subject to final income tax at rate 2,5% of transaction value or the government determined value, whichever is higher. Capital gain of shares listed in the Indonesian stock exchange is subject to final WHT of 0,1% of the gross sales consideration. An additional tax of 0.5% applies to the share value of founder shares at the time an initial public offering takes place. – Transfer of shares in Indonesian’s entity by a foreign shareholder to another foreign shareholder is subject to 5% WHT or reduced rate based on relevant tax treaty.

Branch remittance tax: No

Anti-avoidance legislation

Transfer pricing: The tax rules require that related party transactions must be conducted in an arm’s length principle. Thus, the tax authorities require specific transfer documentation to prove this arm’s length basis. Under the new tax rule, taxpayers under certain criteria should prepare transfer price documentations such as master file, local file, and country by country report. Also, certain specific disclosures are required in the corporate income tax return. Detailed transfer pricing disclosures are required in the CIT return, which include the following: • The nature and value of transactions with related parties. • The transfer pricing methods applied to those transactions and the rationale for selecting the methods. • Whether the company has prepared transfer pricing documentation. The master and local files must be available 4 months after fiscal year-end, in either Bahasa or English (however, an English version must be accompanied by Bahasa translation). The CbC report is due within 1 year after fiscal year-end. The ITO has published a list of countries that have suitable exchange of information arrangements. There is an extensive list of information to be disclosed in the CbC report.

Interest restriction: The allowable Debt-to-Equity Ratio is 4:1

Controlled foreign companies: CFC as a foreign unlisted corporation in which Indonesian resident individual or corporate shareholders, either individually or as a group, hold (directly or indirectly) 50 percent or more of the total paid-in capital. Certain income of a CFC is subject to deemed dividend rules in Indonesia. This income includes dividends, interest, rentals, royalties, and gains from sales or transfer of assets, with certain limitations. The scope of CFC income also covers income from indirectly owned CFCs with a minimum of 50% ownership by another CFC, collective ownership by an Indonesian taxpayer’s CFC, or collective ownership by a number of CFCs (including under the same or different Indonesian taxpayers). The ownership threshold that is used to determine the CFC status is the ownership percentage at the end of the Indonesian taxpayer’s fiscal year, which is based on either the percentage of paid-up capital or the percentage of paid-up capital with voting rights. Listed corporations are not CFCs.

Hybrid mismatches: No Special Rule. Through the Base Erosion and Profit Shifting (BEPS) Action Plan, Indonesia, which is part of the G-20 countries, is working with the Organization for Economic Co-Operation and Development (OECD) to introduce plans to harmonize non-integrated tax laws between countries to reduce international tax evasion loopholes. Which is also specifically aimed at neutralizing tax treatment due to differences in treatments between countries in viewing an entity, instrument, or transaction that ends in double non-taxation. This action plan is called Neutralizing the Effects of Hybrid Mismatch Arrangements.

Disclosure requirements: See above under “Transfer Pricing”

Exit taxes: Exit tax is imposed on capital gains from deemed transactions on taxpayer assets both in country and abroad, and all owned assets are assumed to have been sold at fair market value when their citizenship status is released. In the Income Tax Law there are two mechanisms for taxing profits, final and non-final.

General anti-avoidance rule: Until now Indonesia does not have GAAR provisions in domestic regulations.

Digital services tax and Other significant anti-avoidance legislation: If a company is deemed to have a significant presence in Indonesia and passes certain thresholds defined by the number of transactions, the transaction value, the number of shipping packages, and the amount of traffic or platform access, the Directorate General of Tax may define this physical presence as a Permanent Establishment (PE) and make those companies liable for paying Corporate Income Tax.

Value-added tax/Goods and services tax

Type of tax: VAT is applicable on deliveries/sales of goods and services within Indonesia including utilization of foreign intangible goods and services provided via e-commerce system to users in Indonesia’s Customs Area.

Standard rate: 11%

Reduced rates: 0%, 1%, 2%

Registration: In general, an entrepreneur that makes a delivery of taxable goods/services exceeding IDR4.8 billion must register its business in order to be confirmed as a Taxable (VAT-able) Entrepreneur. However, small entrepreneurs (with turnover less than the threshold) who choose to be taxable entrepreneurs may also register with the tax office.

Filing and payment: VAT filing is done on a monthly basis, with payment and filing being due no later than the last day of the month following the taxable delivery. Late payment of VAT is subject to monthly interest penalty, maximum 24 months. Late filing of VAT return is IDR500k per return.

Social security contributions

In general, all employees in Indonesia, including expatriates who work for a minimum of six months in the country, must participate in and make contributions to the workers social security program, which provides working accidents protection, death insurance, old age savings, health care, and pension. The program calls for premium contributions from both the employers and the employees. Employers are responsible for ensuring that their employees are covered by the program. Employees’ contributions are collected through payroll deductions. The premium contributions borne by employers are calculated as a percentage of regular salaries/wages, ranging from 0.24% to 4%.

Self-employed

Progressive rate applies for self-employed max. 35% from the taxable income exceeded 5 billion.

Other taxes

Capital duty: No

Immovable property taxes: 1. Land and/or Building Tax is applied. The rate is based on located of the land and/or building. 2. Transfer of land and/or building is subject to final income tax of 2.5% from gross transfer value, normally based on market value unless otherwise determined by the Minister of Finance. 3. Acquisition of land and/or building is subject to final tax of 5%. The law also accommodates this provision regarding duty reduction. However, the implementation of the said duty reduction program on land and/or building acquisition is delegated to the Regional (Government) Regulation of each jurisdiction where the land and/or buildings are located.

Transfer tax: Transfers of shares listed on the Indonesian stock exchange are subject to a final transfer tax of 0.1%. Founder shares are subject to an additional final tax of 0.5% on listing.

Stamp duty: Stamp duty applies on any legal document and payment evidences with IDR10k per document

Net wealth/worth tax: No

Inheritance/gift taxes: Generally, gift is not subject to tax (for recipient) and/or non-deductible expenses (for taxpayer giving the gift). However, inheritance in the form of land and/or building is subject to acquisition of land and/or building levy at the title’s transfer moment.

Other: n/a

Tax treaties

Currently Indonesia is part of double tax agreement (DTA) treaties with 71 countries to avoid double taxation.