Value added tax (VAT)
Indonesia operates a VAT system, which taxes the supply goods and the provision of services at a standard rate of 10%. Certain goods and services are exempt. Insurance and banking are not subject to VAT. VAT on exports is charged at a zero rate, so the payment of VAT on inputs is refunded. VAT applies to intangible goods (including royalties) and to virtually all services provided outside Indonesia to Indonesian business. VAT applies equally to all manufactured goods, whether produced locally or imported. Manufacturing is defined as any activity that changes the original form or nature of a good, creates a new good or increases its productivity. The VAT on inputs is creditable against the VAT on outputs. VAT has become a major source of revenue for the government.
Sales tax on luxury good
A luxury goods tax is levied on a variety of goods at rates ranging from 10% to 75%. The tax is levied upon importation. This tax applies at the point of import or manufacture and is additional to VAT. It is a non-creditable one-off tax and applies to a wide range of goods.
A number of excise duties are levied, primarily on alcohol and tobacco products.
Stamp duty applies to financial transactions, deeds and receipts, at rates ranging from IDR 3,000 to IDR 6,000 depending on the amount of the transaction or type document. Sanctions levied on unpaid or under-paid stamp duty is penalty of 200% of the duty payable or underpaid. Criminal sanctions may also be imposed for certain actions such as stamp forgery, storing of equipment to forge stamps.
A fiscal tax of, currently, Rp 2,500,000 is payable by permanent residents, including both nationals (don’t have NPWP) and expatriates, upon departure from Indonesia, at the point of embarkation. Indonesian permanent residents who have tax identification number (NPWP), foreign diplomats, foreign employees of specified international organizations, foreign consultant holding service visas and certain overseas students excluded from fiscal tax.
A land and building tax payable annually on land, buildings and permanent structure. The rate is typically not more than 0.5% of the value of the property, although higher rates apply to certain high value housing and large estates.
Generally, the full cost of benefits in-kind is excluded from the taxable income of an employee, and at the same time are not an allowable deduction from gross income in determining the taxable income of the employer. Benefits-in-kind are considered to be any benefits received by the employee or his or her family from his employer not in the form of cash. For example, the medical expenses of an employee paid directly by the employer to a hospital are excluded from taxable income because the benefit was not received as cash and was paid directly to a third party. Such benefits also include housing (except in isolated areas), home leave, motor vehicles, children’s education expenses and tax borne by an employer on behalf of an employee.
Customs examination shall be applied for imported goods, in which includes verification of documents and physical inspection. In order to obtain accurate data and to evaluate the lodged Customs Declaration, customs examination shall be carried out upon imported goods through the inspection of the goods and verification of documents.
Employers have three choices for the personal income tax calculation:
- Employee’s salaries are classified as Gross and tax is calculated on this, withheld from employee and paid via the banking system to the tax office
- Employee’s salaries are classified as Net and then grossed up to establish a gross amount from which the tax is calculated to bring the remainder back to the net amount as expressed in the employment letter
- The tax is calculated on the net and treated as a fringe benefit.