This presentation gives a general overview on the tax system in Indonesia.

1. Indonesian
Tax system

2. Table of contents
● Tax System
● Tax Incentives
● Individual Income Tax
● Corporate Income Tax
● Withholding Tax
● Branch Profit Tax
● Wage Tax
● Double Taxation
● VAT
● Land and Building Tax
● Capital Tax
● Stamp Tax
● Transfer Tax
● Environmental Tax
● Luxury-goods Sales Tax
● Custom and Excise Tax

3. Tax System
Tax Incentives

4. Tax System of Indonesia
There is a wide variety of taxes in Indonesia that companies,
investors, and individuals need to comply with.
This includes corporate income tax, individual income tax,
withholding taxes, international tax agreements,
value-added tax (VAT), luxury-goods sales tax, customs
& excise, tax concessions, and land & building tax.
The presentation provides with detailed information about
taxes that are in effect and should be considered when
investing in Indonesia.

5. Tax Incentives
Import Duty
Exemption
Tax
Allowance
Tax
Holiday

6. Tax Incentives
Import Duty Exemption - Regulation of Ministry of Finance No. 76/PMK.011/2012
● Exemption from import duty on the import of machines, goods & materials for
production for a period of 2 years.
● Import duty exemption granted for 2 years based on the installed machine capacity for
production purpose and available for 1 year extension.
● If the company uses at least 30% local machineries, import duty exemption is available for
additional product for 4 years.
Requirements: Imported machine, goods and raw material are:
1. Not yet being locally produced
2. If the local machines are available, yet unable to fulfil criteria of required machines
3. If the local machines are available, yet unable to fulfil the total required machines

7. Tax Incentives
Tax Allowance - Government Regulation No. 9 of 2016 Facilities
● Total net income reduction - 30% of investment, charged 5% per year in the 6 years period.
● Imposition of income tax on dividends paid to foreign tax subject of 10%, or a lower rate
according to the avoidance of double taxation agreement
● Compensation losses longer than 5 years but not more than 10 years with the certain
conditions for the companies that are:
1. Located in industrial or bonded zone,
2. Developing infrastructure
3. Using at least 70% domestic raw material ,
4. Absorbing 500 to 1000 labours
5. Having Research and Development (R&D) program ,
6. Reinvesting capital
7. Exporting at least 30% of selling product

8. Tax Holiday - Regulation of Ministry of Finance No. 159/PMK.010/2015
● Tax Holidays are available for 5 to 15 years and is possible for the extension up to 20 years .
● For Communication, Information and Telecommunication Industry, the value of Investment plan
could be lowered from Rp500 billion to Rp1 trillion for exemption up to 50%.
● If the investment value exceeds Rp1 trillion, the exemption is available up to 100%.
The types of industries that are eligible for Tax Holiday:
1. Upstream metal,oil refinery, organic basic chemical industry based on oil/natural gas
2. Machinery industry producing industrial machine,processing industry based on agriculture
3. Telecommunication, information and communication industry, maritime transportation
4. Processing industry that are main industry in Special Economic Zone (SEZ)
5. Economic infrastructure not in the scheme of Government and Business project (KPBU)
Tax Incentives

9. Individual
Income Tax

10. Individual Income Tax - Residency
Resident taxpayers are defined as individuals:
• domiciled in Indonesia
• stay in Indonesia for more than 183 days in any 12-month period
• are present in Indonesia during a tax year and intending to reside in Indonesia.
-a foreigner,qualifying to be a resident taxpayer becomes a tax resident from the date of
arrival in Indonesia until the date of final departure from Indonesia.
-a Indonesian national is considered a tax resident from birth unless he or she leaves
Indonesia permanently.

11. ● The Indonesian tax regime adopts the worldwide income concept for resident
taxpayers.
● Income is defined as any increase in economic prosperity received or accrued,
originating within or outside Indonesia, used for consumption or to increase the
wealth of the taxpayer, in whatever name or form.
● Indonesian tax resident companies and permanent establishments are required to
withhold income tax from the salaries payable to employees on a monthly basis and
pay the tax to the State Treasury on their behalf; and then report to the Tax Office.
● Employment income in Indonesia is subject to tax, regardless of where the income is
paid.
● Taxable employment income includes bonuses, commissions, overseas allowances,
and fixed allowances for education, housing, and medical care.
Worldwide Income

12. Resident Taxpayer
Taxable Income Rate
Up to Rp 50,000,000 5%
Over Rp 50,000,000 but not exceeding 250,000,000 15%
Over Rp 250,000,000 but not exceeding 500,000,000 25%
Over Rp 500,000,000 30%
Non - Resident Taxpayer
Single rate of 20% is imposed on gross income, except for income on sale of shares in
Indonesian incorporated company and certain assets which is subject to 5% final tax on the
sales proceeds.
Income Tax

13. Personal Deductions
Basis of Deduction Deductible Amount Annually
Taxpayer Rp 36,000,000
Spouse Rp 3,000,000 (additional Rp 36,000,000 for a wife whose
income is combined with her husband’s)
Dependents Rp 3,000,000 each (up to a maximum of 3 individuals related by
blood or marriage)
Occupational Support 5% of gross income up to a maximum of Rp 6,000,000
Pension Cost 5% of gross income up to a maximum of Rp 2,400,000
Contribution to Approved Pension Fund Amount of self-contribution
Religious Contributions Actual amount, provided that valid supporting evidence is
available and certain requirements are met

14. ● Cash and cash equivalents: cash on hand, savings, time deposits.
● Real property: house, apartment, factory, warehouse.
● Investments: shares, bonds, mutual funds, warrants.
● Means of transportation: bicycle, motorcycle, car.
● Movable property: precious metals,stones, art works, yacht, airplane, helicopter.
● Liabilities: loans from banks, credit cards.
Assets and Liabilities Reporting

15. Sanctions and Important Dates
Failure to settle tax payment on time
2% monthly interest charge on the tax payable.
Failure to file on time
Administrative sanction for late filing:
• Monthly Return: IDR 100,000 per return
•Annual Return: IDR 100,000 per return
Failure to file a return due to tax criminal act
such as negligence or fraud
Fine and imprisonment of up to 6 years
(maximum).
1st January
Beginning of the Indonesian fiscal year
15th of each following month
Settlement of the provisional monthly tax payable
31st March of the following year
Normal filing deadline of annual individual income
tax return
31st May of the following year
Extended filing deadline of annual individual
income tax return
31st December
End of the Indonesian Fiscal Year

16. Real Property Tax
- Land and building tax is payable annually on land, buildings and permanent structures.
- Rate is 0.3% of the value of the property, higher rates apply to certain high-value housing
-The sale of land/or buildings by an individual is subject to a tax of 5% of the gross proceeds.
- Exemptions are granted for the transfer of land and/or buildings as a part of a grant or inheritance
and the sale of land valued at less than IDR 60 million by an individual taxpayer whose annual
income does not exceed the non taxable income threshold.
-A land and building acquisition duty of 5% is payable when a person obtains right to land or a
building with a value greater than IDR 60 million.
-A taxpayer receiving such rights with inheritance is entitled to a nontaxable threshold of a minimum
of IDR 300 million.

17. Corporate Profit
Tax

18. Corporate Profit Tax
● Tax Rates and Possible Deductions
● Tax Residency
● Tax Assessment and Payments
● Tax Prepayments and Final Payments
● Taxable Base and Deductions
● Tax Losses
● Summary

19. Corporate Profit Tax Rates
● The corporate tax rate is 25%
● Public companies that satisfy a minimum listing requirement of 40% and other conditions
are entitled to a tax cut of 5%, giving them an effective tax rate of 20%
● Small enterprises with an annual turnover not more than Rp50bln are entitled to 50%
discount of the standard tax rate which is imposed proportionally on taxable income of the
part of gross turnover up to Rp4.8bln
● Certain enterprises with gross turnover of not more that Rp4.8bln are subject to Final Tax
at 1% of turnover

20. Corporate Profit Tax - Residency
● A company is treated as a resident of Indonesia for tax purposes by virtue of having its
incorporation or its domicile is in Indonesia
● Non-resident companies are those which are incorporated overseas, but receive or accrue
income from Indonesia
● Non-residents are obliged to register for tax purposes if they have a permanent
establishment (PE) in Indonesia
● A foreign company carrying out activities through PE in Indonesia will generally have to
assume the same tax obligations as a resident taxpayer
● Representative Offices of foreign companies are also required to register as taxpayers
because of the possible necessity to withhold tax on payments to employees and third
parties and lodge relevant tax returns

21. Corporate Profit: Residents VS Non-Residents
IMPORTANT NOTE: INDONESIAN RESIDENT COMPANIES ARE TAXED ON
THEIR WORLDWIDE INCOME. NON-RESIDENT COMPANIES ARE TAXED
ONLY ON THEIR INDONESIAN-SOURCE INCOME, INCLUDING INCOME
ATTRIBUTABLE TO THE PE IN INDONESIA.

22. Corporate Profit Tax Assessment and Payments
● Companies are required to self-assess and lodge annual corporate income tax returns
● The annual corporate tax returns must be lodged with the relevant Tax Office within
four months after the end of the calendar or tax year (deadline can be extended by two
months by notifying the Director General of Taxation)
● Resident taxpayers and PEs have to settle their tax liabilities either by direct payments,
third party withholdings, or a combination of both
● Foreign, non-PE companies in Indonesia have to settle their tax liabilities for their
Indonesian-sourced income through withholding of the tax pay Indonesian party paying
the income

23. Corporate Profit Tax Prepayments and Final Payments
● Monthly tax installments constitute the first part of tax payments to be made by resident
taxpayers and PEs as a prepayment of their current year Corporate Income Tax (CIT) liability
● The above-mentioned monthly tax installments are calculated according to the most recent
CIT return
● The tax withheld by third parties on certain income or tax to be paid in advance on certain
transactions also constitute prepayments for the current year CIT liability
● If prepayments and tax paid abroad are less than the the total CIT due, the taxpayer has to
settle the shortfall before filling its CITR.
● For foreign non-PE companies the tax withheld from their Indonesia-sourced income by the
indonesian party paying the income constitute the final settlement of CIT due.

24. Taxable Income Definition
TAXABLE INCOME IS DEFINED AS ASSESSABLE INCOME LESS
TAX-DEDUCTIBLE EXPENSES. EXEMPT INCOME INCLUDES
CONTRIBUTIONS TO CAPITAL, DIVIDENDS FROM DOMESTIC COMPANIES
AND CERTAIN INCOME FROM INVESTMENT FUNDS AND VENTURE
CAPITAL COMPANIES.

25. Corporate Profit Tax Base
● Taxable business profits are calculated on the basis of normal accounting principles as
modified by certain tax adjustments
● 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
● Disallowed deductions include: Benefits-in-kind, private expenses, non-business gifts and aid,
income tax payments, tax penalties, profit distributions and etc.

26. Tax Losses
● Tax losses can be carried forward for a period of five years
● Under special circumstances the period can be extended to ten years
● No foreign losses can be included in the tax computation
● There are no loss carry back provisions in Indonesian tax law
● Tax consolidation and group relief is not available

27. Withholding Tax

28. Withholding Tax
● Residents are subject to a creditable withholding tax of 15%
with any balance being payable or refundable
● Non-residents are subject to a final withholding tax of 20%
Withholding taxes are collected when the taxable transaction
takes place or payment becomes due.

29. Residents (%)(1) Non-Residents
(%) (1)
Dividends (2) 15 20
Interest 15 20
Royalties 15 20
Prizes and awards 15 20
Rental and other income related to the use of
property, other than land/space rental
2 20
Technical, management, consulting, and
other services
2 20
The Rates of Withholding Taxes

30. Notes
1. All percentage rates are on gross amounts unless otherwise noted.
2. Withholding tax on dividends paid to Indonesian corporate shareholders will be exempt
only if the following conditions are met:
a. The dividend is sourced from retained earnings;
b. The recipient holds 25% share or more in the payer.
3. A 100% withholding tax is imposed, in addition to the applicable tax rate, on individuals
and corporations, other than non-tax residents, who do not possess a tax identification
number.

31. Sale of listed shares(1) 0.1% of the gross proceeds
Additional tax on sale of listed Founder shares; by a founder
shareholder(1)
0.5% of the IPO price
Sale of land or buildings(1) 5% of the sales value (final tax for individuals, foundations
and corporations). An extra 5% stamp duty for the land
and/or building acquisition rights is payable by the purchaser
Interest or discount on Government CDs and savings
deposits and interest or discount on bonds
20% (except for banks and certain approved pension and
mutual funds; and loan interest on simple houses)
Asset revaluation approved by the Tax Office 10% of the difference between the book value and the
revalued amount of the assets (unless current year tax
losses, which will firstly be applied against the revaluation
difference)
Prizes from lotteries 25% of gross proceeds
Land and/or building rental (include service charge) 10% of gross proceeds
Final Withholding Taxes

32. Notes
1. These rates also apply to non-residents (subject to the application of a double tax treaty).
2. No withholding tax is payable in respect of savings, deposits or Government CDs with a
principal amount up to IDR 7,500,000.
Construction Services are subject to final tax with the following tax rates:
● 2% on construction services provided by qualified small enterprises;
● 4% on construction services provided by non-qualified enterprises;
● 3% on construction services provided by enterprises other than those mentioned in (a) and
(b) above;
● 4% on construction planning and supervisory services provided by qualified enterprises;
and,
● 6% on construction planning and supervisory services provided by non-qualified enterprises.

33. Withholding Tax
Types of payment made to Indonesian tax residents and non-residents with
permanent establishment along with their rates:

34. Withholding Tax

35. Withholding Tax

36. Branch Profit Tax
● Permanent Establishment’s of foreign enterprises are subject to
an additional 20% Branch Profits tax on their after-tax income,
unless eligible for a reduced rate by virtue of a tax treaty.
● The 20% is applied to the PE’s net profit after all types of taxes.
● Branch profit tax base = taxable income - amount of final income
tax
● 20% rate may be reduced depending on the respective tax treaty

37. Branch Profit Tax Exemptions
An exemption from branch profit tax applies is all the net profit after tax of a PE is
reinvested in Indonesia in the form of:
● Contribution in a newly established company domiciled in Indonesia as a founder or a
member of the founders
● Capital contribution in an existing company established and domiciled in Indonesia
● Fixed assets to be used by the PE to do business or conduct activities of the PE in Indonesia
● Investment in intangible goods to be used by the PE to do business or conduct activities of
the PE in Indonesia

38. Wage Tax

39. Wage Tax
● The employer is responsible for calculating, deducting and
remitting tax due on employees’ salaries and other
remuneration. The employer must file an employment
withholding tax return on a monthly basis.
● The employer is required to contribute to the general social
security scheme, as follows:
○ 3% to 6% of wages for the health scheme;
○ 3.7% of wages to the retirement scheme,
○ 0.24% to 1.74% to the accident compensation fund;
○ 0.3% to the death compensation fund.

40. Double Taxation

41. Double Taxation
Treaties generally provide for relief from double taxation on all
types of income, limit the taxation by one country of companies
resident in the other and protect companies resident in one
country from discriminatory taxation in the other.
● To enjoy the benefits of the double tax treaties companies
are required to claim the relief by completing and
submitting a specific form

42. Tax Treaty Network

43. VAT

44. Events Involving Transfer of Taxable Goods and Services in the Indonesian
Customs Area
● Deliveries of taxable goods and services in the Customs Area by an enterprise.
● Import of taxable goods
● Use or consumption of taxable intangible goods and services originating from
outside the Customs Area in the Customs Area.
● Export of taxable goods (tangible and intangible) and services by taxable
enterprise.
VAT obligations arise upon the above deliveries with the value exceeding Rp 4.8
billion annually.

45. Tax Rates
● VAT rate- 10% (increased or decreased to 15% or 5%
according to a government regulation)
● Vat on the export of taxable goods (tangible and
intangible) and services – 0%
● Reporting on monthly basis
● Internal deliveries of taxable goods within a company
are subjected to VAT

46. Usually tax base is the transaction value agreed between the parties concerned.
● Market value for transaction between related parties, remaining inventories of taxable goods
upon a company’s dissolution
● Cost of sales for own-use or free gifts and internal deliveries of taxable goods (between
branches, or from the head office to branches)
● Auction price for deliveries of taxable goods through an auction officer
● Agreed price for deliveries of taxable goods through an intermediary trader
● Average selling price for a video and audio recording products
Tax Base

47. Tax Base
● Average result per film for movies
● Rp12 million per copy of imported movie
● 20% of total costs incurred or paid, exclusive of the acquisition price of land if it is for a
self-construction of a building
● Retail selling price for deliveries or imports of tobacco products
● 10% of the actual billing package for a tour and tourism agency service
● 20% of selling price on the deliveries of gold jewelry, including services carried out by factory
in relation to gold jewelry
● 10% of the actual billing on the deliveries of freight forwarding services in which billing
includes freight charges

48. Non-Taxable Goods
● mining or drilling products extracted directly from their source (oil, natural gas, coal, etc.)
● basic commodities (rice, salt, corn, etc.)
● food and drink served in hotels, restaurants
● money, gold bars and securities

49. Non-Taxable Services
a. medical health services
b. social services (orphanages and funeral services)
c. mail services using stamps
d. financial services
e. insurance services
f. religious services
g. educational services
h. art and entertainment services
i. broadcasting services (nor used for advertising)
j. public and air transportation
k. manpower services
l. hotel services
m. public services provided by the government
n. parking area services
o. public telephone services (coins)
p. remittance services by money orders

50. ● A vendor of taxable goods or services charge VAT from a buyer (for vendor output tax)
● If the accumulated output tax for a particular month exceeds the accumulated input tax for a
same period, the taxpayer should settle the issue by the end of the following month and prior
to the VAT report deadline.
● If the issue is unsolvable than the taxpayer may carry over the overpaid VAT to the following
months or ask for a yearly refund
● Reverse charge system for non-resident vendor or service providers applied
Input - Output Mechanism

51. VAT Collectors
State Treasury
State Owned Enterprises
PSC (Production Sharing Contract)
Goal: to collect VAT from venders and to pass taxes directly to the government

52. VAT Exemption Facilities
The deliveries and/or import of taxable goods designated as strategic goods are exempt
from VAT
● capital goods in the form of machinery and plant and equipment required for the manufacturing
of taxable goods
● animal husbandry products, including hunting and trapping, and fishery products, including the
capture and cultivation of fish
● electricity, except household electricity exceeding 6,600 watts
● clean water distributed through pipes by drinking water companies
● cattle, poultry and fish feed, and the raw materials for manufacturing these
● seeds and seedlings for agricultural, plantation, forestry, farm and animal husbandry products

53. ● weapons, ammunition, transportation vehicles and various other appliances for use by the armed forces and
the state police;
● polio vaccines for use in the National Immunisation Program;
● general education and religious books;
● ships and spare parts for use by national commercial shipping companies or national fishing companies;
● aircraft and spare parts for use by national commercial airline companies
● trains and spare parts for use by PT Kereta Api Indonesia
● low-cost housing, basic flats and student accommodation with certain threshold
● train maintenance and repair services received by PT Kereta Api Indonesia
● services received by national commercial shipping companies or national fishing companies, including ship
rental, seaport services and ship maintenance or docking services
● services received by national commercial airline companies, including aircraft rental and maintenance
services
● services rendered for the construction of low-cost housing, basic flats and places of worship
● rental of low-cost houses
VAT Exemption Facilities (continued)

54. Land and Building
Tax

55. Tax rate is maximum 0.3%
Calculated by applying the tax rate on the sale value of the tax object deducted by non-
taxable object (non-taxable object is set at Rp10 million at the minimum)
The non-taxable object are the buildings or lands which are:
• used by central and regional Government for governance purposes
• used for public interest in the areas of religious and social affairs, health, education and
national culture, and non- profit making purposes
• used as a cemetery, ancient heritage site or similar
• constituting protected forests, natural reserve forests, tourism forests, national parks
• used by a diplomatic representative, based on the reciprocal treatment principle
• used by an agency or representative of an international organisation
Tax Rates and Non-Taxable Objects

56. ● Tax is set at 5% of the gross transfer value (tax base)
● However, for transfers of simple houses and simple apartments conducted by taxpayers
engaged in a property development business, the tax rate is 1%
NOTE:
Paid by the time the rights to land and building are transferred to the transferee.
A notary is prohibited from signing a transfer of rights deed until the income tax has been
fully paid.
Tax on Land and Building Transfer

57. Duty on the Acquisition of Land and Building Rights
Qualifying land and building rights transfers include:
1. sale-purchase and trade-in transactions
2. grants, inheritances
3. contributions to a corporation
4. rights separations
5. buyer designation in an auction
-Duty rate 5% minus an allowable non-taxable threshold
-the non-taxable threshold amount varies by region: the minimum is Rp. 60 million (except in
-the case of an inheritance, for which starts from Rp. 300 million)
-Due date- the relevant deed of land and building right transfer is signed before a public notary.

58. Capital Tax

59. No Capital Tax is
Imposed

60. Stamp tax

61. Stamp tax
Certain documents are subject to stamp duty [IDR 3,000 or
IDR 6,000], depending on the amount of the transaction and
type of a document.
• letters of agreement, prepared for the purpose of evidencing
acts, facts or conditions of a civil nature
• national deeds - It is commonly associated with transferring
title to property
• all documents bearing a sum of money (letters of promise to
pay, securities or cheques.

62. Transfer tax

63. Transfer tax
The acquisition of land or building - 5% of the acquisition value.
Sale of shares listed in Indonesian stock exchange - 0.1% tax on
transaction value.
Founders shares - final tax of 0.5% on the share value at time of an
IPO.
The transfer of a resident’s company’s shares by a non-resident -
withholding tax equal to 5% of the transfer value.

64. Environmental
tax

65. Ecotax
No specific environmental taxes imposed.
However, in certain regions, a permit to dump
liquid waste into certain water resources is subject
to retribution collected by the regional
government.

66. Luxury-goods
sales tax

67. Luxury-goods sales tax
On deliveries or imports of certain manufactured taxable goods.
LST must be accounted for every month together with VAT.
The importer or manufacturer is responsible for the settlement of LST.
LST rate are between 10%-125%

68. Luxury-goods sales tax

69. Luxury-goods sales tax: Motor vehicles

70. Luxury-goods sales tax: Motor vehicles

71. Custom tax

72. Import duty
0% -150% on the customs value of imported goods
currently the highest rate is 40%
Customs value is calculated on cost, insurance and freight level (CIF)
Most goods imported from ASEAN countries - 0% import duty

74. Export duty
Calculated based on certain % of customs value

75. Excise tax

76. Excise tax
● Ethyl alcohol (Rp 13,000 - Rp 139,000per liter)
● Alcohol drinks
● Tobacco products (Rp 6 - Rp 110,000 per stick or gram)
● Excise tax will be calculated based on manufacturer's
total production volume.

77. Thank you !