Tax Residence – Corporate

When a company has its establishment or place of management in Indonesia, then that certain company is treated as a resident of Indonesia for the tax purpose. Those foreign companies that carry out business activities through a permanent establishment (PE) in Indonesia will generally have the same tax obligations as a resident taxpayer.

Tax Neutral-Mergers

Transfers of assets in business mergers, consolidations, or business splits must generally be at market value. Gains resulting from this kind of restructuring are assessable while losses are generally claimable as a deduction from income. However, a tax-neutral merger or consolidation, under which assets are transferred at book value, can be conducted but subject to… Read More

Non-Deductible Expense

Disallowed deductions There are a number of non-deductible expenses. These non- deductible expenses are specified in the law or in associated regulations and pronouncements. Major categories of non- deductible expenses include: Benefits-in-kind (BIKs) (e.g., free housing, 50% of the acquisition and maintenance costs of certain company provided cars), except food and drink provided to all… Read More

Deductible Expenses

Calculation of Income – Deductible Expenses Under the new Income Tax Law, all legitimate business expenses directly or indirectly related to earning, collecting, or maintaining income are deductible from the assessable income to calculate the taxable income. These expenses include but are not limited to: 1. Expenses that are directly or indirectly related to business… Read More

Tax Rates

Normally, corporate income tax that is used in Indonesia is as much as 25%. This rate starts for the fiscal year of 2010 onward. Public companies that satisfy a minimum listing requirement of 40% and other special conditions are entitled to a tax cut of 5% off the standard rate. Thus, it gives them a… Read More

Tax Holiday

New corporate taxpayers in certain pioneer industries may enjoy a CIT exemption for a period of five to ten years from the start of commercial production. After the end of the CIT exemption, the company will receive a 50% CIT reduction for two years. To be eligible for the above facilities, taxpayers should be newly… Read More

Profit Distribution

Tax is withheld from dividends as follows: 1. Resident recipients Dividends received from an Indonesian company by a limited liability company incorporated in Indonesia ( Perseroan Terbatas/PT), a cooperative, or a state-owned company, are exempt from income tax if the following conditions are met: The dividends are paid out of retained earnings; and The company… Read More

Controlled Foreign Company

Controlled Foreign Company (CFC) Rules 1    The Income Tax Law, through a Minister of Finance Decree,      determines the time of receipt of dividend by a resident taxpayer on capital participation in a business entity abroad other than a business entity that sells its shares on a stock exchange in these cases: ·    The amount of… Read More

Non Taxable Income

Non-Taxable Income (applies to corporate and individual taxpayers) The law specifies a number of categories of income that are exempted from tax. These are: ·     Aid, donations, zakat, religious donations or gifts received, provided there is no business, work, or ownership relationship between the parties concerned; ·     Inheritances; ·     Dividends received by… Read More

Corporate Tax Facilities

Companies investing in certain business sectors and/ or in certain less developed regions having high priority on a national scale can be granted tax facilities in the form of: ·    Additional net income reduction, up to a maximum of 30% of the amount of investment; ·    Accelerated depreciation and amortization; ·    The period of loss… Read More