Double Taxation Agreements Indonesia’s Double Taxation Agreements (DTAs/tax treaties) provide for tax benefits in the form of withholding tax exemptions for service fees and for reduced withholding tax rates on dividends, interest, royalties and branch profits received by tax residents of its treaty partners. Tax exemption on service fees is typically granted only if the… Read More
Withholding Taxes
General Indonesian income tax is collected mainly through a system of withholding taxes. Where a particular item of incomeis subject to withholding tax, the payer is generally held responsible for withholding or collection of the tax. These withholding taxes are commonly referred to using the relevant article of the Income Tax (Pajak Penghasilan/PPh) Law, as… Read More
Social security system
Employers are responsible for ensuring that their employees are covered by a social security program. Employees’ contributions are collected by the employers through payroll deductions. These must be paid together with the employer’s contributions. From 1 January 2014, a comprehensive social security program covers all Indonesian citizens is in place. The transition from the previous… Read More
Benefits-in-kind (BIKs)
BIKs, such as cars, housing, education, home leave and reimbursement of an employee’s Indonesian tax liability provided by the employer, are typically not assessable in the hands of the employee. This also applies to BIKs which are required for the execution of a job, for example protective clothing, uniforms, transportation costs to and from the… Read More
Tax payments
A substantial part of individual income tax is collected through withholding by third parties. Employers are required to withhold Article 21/26 income tax on a monthly basis from the salaries and other compensation payable to their employees. If an employee is a resident taxpayer, the amount of tax withheld should be based on the normal… Read More
Registration and filing
Resident individual taxpayers who receive or earn annual income exceeding the PTKP threshold must register with the ITO and file annual income tax returns (Form 1770). The tax return should disclose all the individual’s income, including compensation from employment, investment income, capital gains, overseas income and other income, as well as providing a summary of… Read More
Tax residence
An individual is regarded as a tax resident if he/she fulfils any of the following conditions: • He/she resides in Indonesia; • He/she is present in Indonesia for more than 183 days in any 12-month period; • He/she is present in Indonesia during a fiscal year and intends to reside in Indonesia. Note: The provisions… Read More
Main Personal Relief
Annual non-taxable income (Penghasilan Tidak Kena Pajak/ PTKP) for resident individuals is as follows:
Individual Income Tax
Normal tax rates Most income earned by individual tax residents is subject to income tax at the following normal tax rates: Concessional tax rates The final tax rates for severance payments (if paid within two years) are as follows: The final tax rates for lump-sum pension payments from a government-approved pension fund, old-age security saving… Read More
Transfer Pricing
The Income Tax Law defines related parties as: a. Taxpayer has capital participation directly or indirectly at least 25% upon another Taxpayers; the relationship between Taxpayers through ownership at least 25% upon two or more Taxpayers; or relationship between two or more Taxpayers mentioned later; b. Taxpayer controls the other Taxpayer or two or more… Read More
INDONESIAN TAX 