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While it is possible to get an audit exemption, companies in Indonesia are required to submit annual audited financial statements and corporate income tax returns to the country’s Taxation Office. Companies should also submit a monthly tax statement even if no business activities or tax liabilities have been recorded. Taxation in Indonesia is determined on the basis of residency. Apart from other taxes, the country also has a Value Added Tax (VAT) based on the Input and Output mechanism and currently stands at 10 percent. Some of the events that are taxable under the VAT include the import of taxable goods and the consumption of taxable intangible goods. However, under the PMK-32, there is a zero-rate VAT tax for export services produced within the bounds of Indonesia that benefit those outside the country.
Indonesia Corporate Income Tax
For the financial year 2020 to 2021, a corporate income tax (CIT) rate of 22 percent applies in Indonesia for both domestic and international incomes. A 5 percent lower than normal rate is applied to a company where at least 40 percent of shares are traded on the stock exchange (IDX). Also, a 50 percent deduction from the normal rate is applied to companies with a gross turnover up to IDR 50 billion.
Do note that a foreign company that has a permanent establishment in Indonesia – and carries out business activities through this local entity – falls under the Indonesian tax regime. If the foreign company does not have a permanent establishment in Indonesia but does generate income through business activities in Indonesia, then it needs to settle its tax liabilities through the withholding of the tax by the Indonesian party paying the income. This is 20 percent but can be reduced by using tax treaty provisions, or exempt for services that qualify as business profits. Companies can also carry forward their losses for five years.
Indonesia Personal Income Tax
Meanwhile, individuals who have resided in Indonesia for at least 183 days per year, are taxed at progressive rates ranging from 5 to 30 percent. A large part of personal income tax is collected through withholding by employers, who are then obligated to pay this on to the Indonesian government. This withholding of personal income tax is done on a monthly basis from salaries and other compensation paid to the employees.
- up to IDR 50 million, tax rate is 5 percent
- over IDR 50 million to IDR 250 million, tax rate is 15 percent
- over IDR 250 million to IDR 500 million, tax rate is 25 percent
- over IDR 500 million, tax rate is 30 percent
It is worth mentioning that Indonesian tax residents are taxed on their worldwide income, though foreign tax credits are available on foreign income of residents under certain conditions.
How Can We Help
Regardless of the type of tax – corporate or personal income – that you would like to file in Indonesia, it is pivotal to be mindful of the distinctive regulatory and legal requirements. To assist you in accurately filing your taxes in Indonesia, InCorp Group is undoubtedly the leading corporate services provider that you can rely on for our expertise. Contact us today for more information.
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Frequently Asked Questions on Personal and Corporate Income Tax in Indonesia
- The FY 2020-2021 Indonesia corporate income tax rate is at 22% and it is applicable to both domestic and international incomes in Indonesia.
- Foreign companies which have permanent establishments in Indonesia and carry out business activities through the local entity are subjected to corporate income taxes.
For foreign companies with no permanent establishment in Indonesia but generate income through business activities in Indonesia, tax liabilities should be settled through the withholding tax.
- Individuals who have resided in Indonesia for at least 183 days per year are subjected to the Indonesia personal income tax. Individuals are taxed at progressive rates ranging from 5% to 30%.