Company Tax
Foreign business owners in Indonesia face numerous tax compliance obligations that can be confusing to manage. Monthly and annual taxes must be filed and paid properly to avoid penalties.
Some taxes that may need to be paid by your business are:
PB1
Hospitality tax collected from hotels, restaurants, villas and tourism venues, set percentage of which is charged to customer bills to the tax authorities monthly. Requires registration of NPWPD local tax ID number to properly track, pay and report.
WHT 25
Separate 11% state tax charged on annual profits once a business earns over 4.8 billion IDR revenue or operates for 3+ years. A 22% rate applies to profits above 50 billion IDR. This tax is based on prior year earnings, remitted and reported monthly in installments.
PPh 21
Income tax withheld from employee salaries and benefits paid monthly. Rates set annually by government regulation, with the deadline for remitting by the 15th of each month and income reporting by the 20th.
PPN
This applies to all businesses that are not based in the hospitality sector (such as real estate, manufacture and wholesale etc.) Standard 11% VAT rate applies to all sales of goods and services once company annual revenues exceed 4.8 billion IDR (approx $340K USD). Required monthly VAT reporting and payment submissions are necessary when threshold is reached.
PPh 23
Withholding tax on income types like dividends, interest, rents, royalties and services. 15% tax withheld on dividends, interest and royalties paid to recipients. Meanwhile, PPh 23 tax at a rate of 2% is imposed on service and rental income. Services in PPh 23 include engineering services, management services, construction services, consultant services and other services Companies that use the services of other companies are required to withhold taxes, deposit them and report them every month.
PPh 24
A mechanism through which taxpayers can utilize their tax credits abroad, to reduce the value of tax owed in Indonesia and prevent double taxation.
PPh 22
A tax imposed on certain business entities, both government-owned and private, which carry out export, import and re-import trading activities.
PPh 4 (2)
A final 10% tax on pre-paid rentals (or land lease for x period of years). The Law No. 36 of 2008 concerning Income Tax, or PPh 4 paragraph 2, refers to a tax deduction for income related to certain services and sources such as construction services, renting land/buildings, transferring rights to land/buildings, prize draws and others.The final tax rate is 10% for Indonesian tax ID holders, and 20% for entities that do not hold Indonesian tax ID.
PP55
Preferential 0.5% income tax rate offered to newly incorporated limited liability or partnership companies. Lasts for 3 years (for PT firms) and 4 years (for CV partnerships) as long as revenue remains under 4.8 billion IDR annually. Tax is remitted monthly based on 0.5% of gross revenue.
In addition, corporations face annual compliance deadlines like:
- Corporate Tax Return - Due on April 30th.
- Personal Tax Return - All directors are required to report global assets annually by the end of March.
As you may have already experienced, understanding which taxes you need to pay as well as keeping up to date with regulations changes within Indonesia can be cumbersome. However, ensuring your taxes are filed properly is necessary if you wish to avoid disruptions to your business, revoked licenses or penalties.
Additionally, employers hiring workers must register personnel for BPJS Work Social Security. This covers income loss from injuries, retirement or death through pensions, disability/illness allowances, worker accident compensation, as well as survivor benefits for families.
Employing companies are subject to contribute to their employees health insurance and work social security too, known as BPJS. BPJS stands for Badan Penyelenggara Jaminan Sosial (Social Insurance Administration Organization).
Rate for BPJS Employment: 3% deducted from an employee and 6,24% is payable by a hiring company.
Rate for BPJS Health: 1% deducted from an employee and 4% is payable by a hiring company.
If you need assistance or expert advice, we would be more than happy to help you figure things out.
Tax ID Registration (NPWP, NPWPD, EFIN)
Monthly Tax Reporting & Payment
Annual Tax Reporting
Ongoing Advisory on Indonesian Tax Laws
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