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Income Taxation System in Indonesia

Cekindo
19 August, 2014

Global markets which were affected with crises and still many of them are still fighting for growth.  Emerging markets of countries like Indonesia attract many investors and companies as despite of global conditions these markets are still growing. Indonesia faced to bottom of the easy to start a Business chart. Even you start doing business in Indonesia; the next important thing is to understand the tax system.

Indonesia, like many countries, operates a self-assessed taxation system and divided into state and local taxes. What do state taxes include? Income tax (corporate, individual, withholding), VAT, stamp duty and custom tax.  What do local taxes include? Mainly they are related to commercial subjects such as property, vehicle, promotional and leisure activities. Do you want to start your business in Indonesia? You need to understand about the income tax properly.

Overview of Income Tax

Corporate tax in Indonesia, Important for business establishment is your destination and reside because it defines whether you’ll be taxed as resident or non-resident company.

Being a resident company attracts plenty of benefits. For instance, when you do business in high priority sectors or in certain geographic area, you could receive income tax relieves. It means that you will be eligible for a reduction in net income up to 30% of the amount invested, prorated at 5% for 6 years of production.

The corporate tax rate is generally flat at 25%. Special condition applies to the resident company. In situation your company is listed and meet a certain condition, you will receive 5% reduction. Best treatment is applicable to small business with a gross turnover <IDR 50 billion that entitled for 50% of standard tax rate.

Resident company has flexibility in tax liabilities settlements. You can choose between direct government tax, through withholding tax to direct payment or combination of both. Non-resident company, it could only be done through withholding tax and you will be imposed to 20% on various amounts payable.

For foreigner worker there is also difference be a resident or non-resident. As a resident, the top marginal income tax rate is 30% (for income above IDR 500million) but as a non-resident, the tax rate could be up to 36% because you are subject to a surcharge of 20% on the tax rate.

The payment for both corporate and individual tax liabilities are typically be paid to State Treasury through a designated tax payment bank. Afterwards, you have to submit related tax forms to the tax office in Indonesia. Below there is an overview of taxes:

Income Taxation System in Indonesia

Note:

1) Taxpayers can extend the period of submission of the annual income tax return for two months at the maximum by submitting notification to the Directorate General of Taxation.

2) Except for self-assessed VAT on utilization of intangible taxable goods and/or taxable services from offshore and VAT collected by VAT Collector other than State Treasurer, which is due by the 15th of the following month.

3) Any underpayment of tax must be settled before submission of the annual tax return.

Other Taxes

Usual VAT rate you can find in Indonesia is 10 percent. This is approved rate by Government, the allowed amendment Government is allowed is from minimum 5 percent up to maximum 15 percent. However for imported products the import duty can be up to 150% on the original sales price.

Feel free to contact us and get a free quotation for Accounting and Tax reporting, Payroll processing and outsourcing in Indonesia.



About the Author


Cekindo

Cekindo is market-entry consulting firm operating across Indonesia (Jakarta, Bali, Semarang). We provide one-stop solutions assisting foreign entities and entrepreneurs from various industries to successfully expand their market to Indonesia and beyond. Our main goal is to help you to focus on your business while we handle huge scope of HR, financial and legal services. Cekindo will assist you in setting up your business in Indonesia, supporting your daily operations and administrations, and representing your company in Indonesia.

PT. Cekindo Bisnis Grup, Business Park Kebon Jeruk, Blok H1-2
Jl. Raya Meruya Ilir No.88
Jakarta Barat 11620, Indonesia
Phone: +622180660999, Fax: +622180660901, Email: info@cekindo.com, Website: www.cekindo.com

 

 

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