Taxation in Indonesia is based on Law No. 6 of 1983 regarding General Procedures and Provisions for Taxation as was recently amended by Law No. 16 of 2009. There are a wide variety of taxes in Indonesia that are based on corporate income tax, personal income tax, value added tax, and luxury tax. With the Indonesian government aiming to improve the country’s rapidly changing business climate, these laws have been amended to accommodate Indonesia’s current economic outlook. Furthermore, the government introduced the Tax Amnesty Programme in 2016 as a means to boost tax compliance in Indonesia as well as increase much-needed tax revenue that could significantly contribute to the country’s economic development.

Taxation in Indonesia is determined on the basis of residency which is applied to individual residents or corporations that are domiciled in Indonesia; international companies that are permanently based in Indonesia are also subjected to the country’s tax regime. Moreover, individual resident taxpayers must also stay in Indonesia for more than 183 days in any 12-month period or are present in Indonesia during a tax year and reside in the country. Tax returns in Indonesia are filed by taxpayers based on a self-assessment system whereas groups of companies are taxed as individual companies.

Taxation in Indonesia covers the following:

Corporate Income Tax in Indonesia

A company is subject to taxation set forth by the Indonesian government if it is based in Indonesia. International companies that have a permanent base in Indonesia are subject to the same tax laws and regulations. The applicable standard corporate income taxes are:

• Basic rate of 25%;
• Companies with an annual gross revenue of up to 50 billion IDR in one tax year are entitled to a tax reduction from the applicable standard corporate income tax;
• Companies listed on the stock exchange (that offer a minimum 40% of their total share capital are subject to a 5% tax rate);
• Companies with a gross turnover below 4.8 billion IDR in one tax year are subject to a 1% tax rate;
• International companies can establish an Indonesian branch under permanent establishment (PE) are subjected to 20% tax on the income accumulated from the PE.

Personal Income Tax in Indonesia

Residents of Indonesia are taxed on their worldwide income whereas non-residents of Indonesia are subject to a final tax of 20% on income obtained from Indonesia only. The individual taxpayer is legally responsible for ensuring that they are registered with the Tax Office and obtain a Tax ID number. Individual taxpayers are required to file annual individual tax returns through filing forms SPT 1770 (for resident taxpayers with business incomes), or 1770 S (for resident taxpayers who receive income from employment or other income), or 1770 SS (for resident taxpayers with annual gross income not exceeding 60 million IDR).

The applicable tax rates for residents are as follows:

 

The following personal deductions are available for resident taxpayers:

The tax rates for severance payments:

 

Value Added Tax in Indonesia

Value added tax (VAT) is due on the transfer of taxable goods or the provision of taxable services. VAT is due for the following events, among others:

• Import and export of taxable goods (tangible and intangible);
• Export of taxable services;
• Consumption of services or intangible goods originating offshore within the Indonesian customs area;
• Movement of goods on consignment;
• Supply of goods through a third party or a Government auctioneer;
• Movement of taxable goods between the head office and a branch as well as between branches of the same enterprise;
• Supply of goods through a finance lease arrangement;
• Remaining taxable goods in the form of inventories or assets, which were originally not for sale, upon a company’s dissolution.

The VAT rate of 10% is imposed on importers, manufacturers, wholesalers and retailers. Currently products with a rate other than 10% are cigarettes and used cars. A VAT rate of 0% applies to the export of taxable tangible and intangible goods as well as the export of services.

The export of taxable services includes:

• Toll manufacturing;
• Construction service related to immovable goods located outside the customs zone;
• Repair and maintenance services which are attached to services of movable goods utilised outside the customs area.

Luxury Goods Sales Tax in Indonesia

Imports of certain manufactured taxable goods can be subjected to luxury goods sales tax of 10% and a maximum of up to 125%. Luxury goods are those that fulfil the following criteria:

• Does not constitute a basic staple;
• Consumed by upper-income consumers;
• Luxurious residential properties;

The following examples are items that are subject to luxury tax:

 

Free Trade Zones in Indonesia

The Indonesian government has established Free Trade and Free Port Zones on Batam Island, Bintan Island, and Karimun Island which enables companies to not require registering as VAT entities. Furthermore, the import of goods and taxable services in a Free Trade Zone is exempted from the imposition of VAT and/or luxury goods sales tax.

For more information about taxation in Indonesia or finding a local partner in Indonesia, contact GBG Indonesia.

Global Business Guide Indonesia - 2017

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)

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