Tax rates in Indonesia

Company Tax

22%

Tax Rate For Foreign Companies

Resident corporations are taxed based on worldwide income. A non-resident company carrying out business activities through a permanent establishment in Indonesia will generally be subject to taxation as a resident taxpayer.
Branch profits are taxed at the ordinary CIT rate of 22%. After-tax profits are subject to a 20% withholding tax (WHT), known as branch profits tax (BPT), regardless of whether the profits are remitted to the home country. However, a reduced WHT rate may apply if a tax treaty is in place. The BPT can be exempted if the profits are fully reinvested in Indonesia.

Capital Gains Taxation

Capital gains earned by a resident company are typically taxed as ordinary income and considered taxable income. Gains from selling shares listed on the Indonesia Stock Exchange incur a final tax of 0.1% of the gross transaction value. An additional final tax of 0.5% applies to founder shares based on their price at the initial public offering (IPO), regardless of whether these shares are held or sold post-IPO. Gains from the sale of land and/or buildings are generally subject to a final income tax of 2.5% of the transaction value.

Different rates apply to specific transactions, such as the sale or transfer of low-cost residential accommodation (1%) and transfers to the government for public interest purposes (0%). Capital gains from the sale of Indonesian assets held by nonresidents are taxed at 5% of the gross proceeds, subject to relief under an applicable tax treaty.

Main Allowable Deductions and Tax Credits

In general, all legitimate and documented business expenses directly or indirectly related to earning, collecting, or maintaining income are deductible from the assessable income.
The costs of incorporation and expansion of the capital of an enterprise can be claimed in full in the year in which the expenditure is incurred or can be amortised using either the declining balance or straight-line method.
Interest incurred in the ordinary course of business is deductible as long as the related loan is used for business purposes. Bad debts are deductible for tax purposes, under certain conditions.

Donations for national disasters, education facilities, sport development, and social infrastructures, may be deductible in the fiscal year when the donations are provided. Most benefits received in kind by employees, such as free housing, are not tax-deductible to the entity providing the benefit. Expenses for meals and transportation are tax-deductible when they are made available to all staff. Salary expenses and insurance premiums can be deducted. Land and buildings tax and regional taxes may be deducted from taxable income.

Losses may be carried forward for up to five years. Loss carryback and offsetting losses within a corporate group are not permitted.

Tax incentives are granted to companies operating in certain strategic industries (especially in the oil industry and manufacturing) or in geographical zones in the form of tax reduction of up to 30% of the investment (5% of reduction each year for six years). Other incentives include an extension of loss carryforward to 10 years (instead of five) and a reduction of withholding taxes on dividends paid to non-residents to 10% (as opposed to the ordinary rate of 20%). For companies in pioneer industries which have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy, a tax holiday of 100% of the corporate income tax due is granted for 5 to 20 years (according to the investment amount) from the start of commercial production, plus two years of 50% reduction after the full-reduction period. A reduced corporate income tax rate of 19% applies to publicly listed corporate taxpayers with a minimum of 40% of their shares held by public investors that meet certain criteria.
For resident companies not receiving a tax holiday or tax allowance, a "super tax deduction" is available for specific activities: 60% investment allowance for new capital investment or expansion in labor-intensive industries, spread over six years; up to 200% deduction for apprenticeship, internship, and human resource development programs; and up to 300% deduction for R&D activities.

Other Corporate Taxes

Land and building tax is payable annually on land, buildings and permanent structures, at a rate of maximum 0.5% of the estimated sales value of the property determined by the relevant authority.
A transfer of land and buildings will cause income tax on the deemed gain on the transfer/sale to be charged to the transferor/seller. The tax is set at 2.5% of the higher of the gross transfer value or the government-determined value. Similarly, the acquirer is subject to a 5% duty of the greater of the transaction value or the government-determined value (for rights to land or a building with a value greater than IDR 60 million).
A 0.1% withholding tax applies to the transaction value of shares sold on the Indonesian stock exchange; a 0.5% tax applies to the share value of founders' shares at IPO; a 5% withholding tax applies to the transfer value of shares of an unlisted resident company by a foreign shareholder when they are transferred.

Employers must ensure their employees are covered by the workers' social security program managed by Badan Penyelenggara Jaminan Sosial (BPJS). Employees' contributions are deducted from their payroll. Employer contributions are 0.24%-1.74% for work accident protection, 0.3% for death insurance, 3.7% for old age savings, and 2% (subject to a salary cap) for the pension plan. The employer's contribution to the healthcare scheme is 4% (subject to a salary cap). Expatriates are not required to contribute to the pension plan.
Stamp duty of IDR 10,000 is levied on certain documents.

A corporate taxpayer may be subject to various regional taxes and retributions. The rates range from 0.2% to 75% of a wide number of reference values determined by the relevant regional governments. The following are regional taxes that may apply:

•     Motor vehicle tax
•     Motor vehicle ownership transfer fee
•     Motor vehicle fuel tax
•     Surface water tax
•     Entertainment tax
•     Advertisement tax
•     Cigarette tax
•     Hotel tax
•     Restaurant tax
•     Road illumination tax
•     Non-metal and rock minerals tax
•     Parking tax
•     Groundwater tax
•     Swallow-nest tax.

Other Domestic Resources

Directorate General of Taxes

Tax Rate

Allowable Deductions and Tax Credits

Personal allowances are available: IDR 54 million, with an additional IDR 4.5 million each for a spouse (additional IDR 54 million for a wife whose income is combined with her husband’s), dependent or adopted children (maximum three).
Deductible employment expenses include occupational expenses (5% of gross income, up to IDR 6 million); employee's contribution to BPJS Ketenagakerjaan for old age security savings (fully deductible); pension contribution (5% of gross income, max. IDR 200,000/month).
Certain donations, such as for national disasters, research and development, education facility, sports development, and social infrastructure, are deductible if the respective requirements are met. Compulsory religious contributions (such as zakat) can be fully deductible, provided that valid supporting evidence is available.

Individuals carrying on a business may deduct expenses from business income. Losses can generally be carried forward for five years.

Special Expatriate Tax Regime

Non-resident individuals are subject to withholding tax at 20% in respect of their Indonesian-sourced income.
A tax resident in Indonesia is generally taxed on worldwide income. However, foreigners who become tax residents can be taxed only on Indonesian-sourced income (including if paid offshore) for the first four years, provided they meet certain skill requirements. This territorial taxation system may not apply if the foreigner receives income from overseas and utilizes a tax treaty between Indonesia and the source country. Indonesian citizens living abroad for more than 183 days in a 12-month period and meeting specific criteria can also be considered foreign tax subjects.
Foreigners who work in Indonesia for at least 6 months need to contribute to social security.