Direct foreign investment in Indonesia is governed by Law Number 1 of 1967 on Foreign Investment as amended by Law Number 11 of 1970 (“Foreign Investment Law”). Under these laws, the Indonesian government requires foreign investors who want to operate in Indonesia to form a limited liability company, which is commonly referred to as foreign… Read More

Tax Collection Using Distress Warrant

If a legal tax collection instrument is not paid within the required time, the DGT may by law issue a Distress Warrant (Surat Paksa) to a taxpayer. The instruments include the following documents: • Tax Collection Letters/STP;• Underpaid Tax Assessment Letters/SKPKB;• Additional Underpaid Tax Assessment Letters/SKPKBT;• Tax Objection Decision Letters (which demand an additional payment… Read More

Early Tax Refunds

An early tax refund is available for taxpayers that meet certain criteria, as follows : A.Golden Taxpayers 1)Submit tax returns in a timely manner; 2)Have no tax arrears for all types of taxes, except tax arrears which have obtained a permit to pay tax in instalments or that have been audited; 3)Financial Statement audited by… Read More

Tax Information Exchange Agreements

Indonesia has Tax Information Exchange Agreements (TIEAs) with the following jurisdictions: Notes: 1. The TIEA has been signed, pending the ratification of the TIEA and the exchange of ratification documents.

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

Profit distributions

Tax is liable to be withheld from dividends as follows: a. 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… Read More

Debt to Equity Ratio

A single ratio of 4:1 is generally applicable, which means the amount of debt allowable in order to obtain full deductibility of the financing cost is limited to four times the equity amount. Exemption applies to certain taxpayers.

Disallowed deductions

These include: a. 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 toall employees, employee benefits required for job performance such as protective clothing and uniforms, transportation costs to and from the place of work, accommodation for ship crew and the likes,… Read More

Business profits

Taxable business profits are calculated on the basis of normal accounting principles as modified by certaintax adjustments. Generally, a deduction is allowed forall expenditure incurred to obtain, collect and maintain taxable business profits. A timing difference may arise if an expenditure recorded as an expense for accounting cannot be immediately claimed as a deduction for… Read More