Tax can be quite a pain when it comes to living and working abroad. Here is an overview of the Indonesian tax system to help you in your planning.
Imagine a government which has to manage the tax system of a country whose population amounts to some 250 million inhabitants. Indonesia's tax law and related administrative procedures can be quite complex. This is why is it best to inquire on the country's tax system beforehand if you intend to settle there.
All Indonesian residents are required to declare their income if they are working in the country, regardless of their origin. The following rates apply:
- 0% if annual income is above 24 million Indonesian rupiah
- 5% for annual income between 24 million and 50 million Indonesian rupiah
- 15% for annual income between 50 million and 200 million Indonesian rupiah
- 25% for annual income between 200 and 250 million Indonesian rupiah
- 30% for annual income above 500 million Indonesian rupiah.
Non-taxable income or Penghasilan Tidak Kena Pajak (PTKP) for Indonesian residents applies as follows:
- 15,840,000 rupees to the taxpayer
- 5% of gross income for professional fees,
- 1.32 million rupees for the spouse 2 persons maximum load.
Value Added Tax (VAT) also exists in Indonesia like anywhere else in the world. It is levied at a 10% rate.
The SPPT / PBB is an annual tax which applies to land and buildings following evaluation by local authorities.
Kegiatan Menbagun – PPN is a value added tax which applies to new building construction costs at a rate of:
- 4% of the construction costs, if you did the work yourself, without a builder
- 10% of the construction costs if you hired a builder or manufacturer, supported by a contract.
Note that land and buildings whose surface is less than 200 m² are not concerned by the PPN.
The BPHTB is a tax which applies to the sale and purchase of property at a rate of 5% both on the sale and purchase of a property.
The Pajak Sewa applies to the value of income from a lease document, that is 10% of the rent price. It is to be paid by the landlord. Lease documents should clearly mention who will be responsible of settling the Pajak Sewa.
Tax on luxury goods is levied at a 20% rate of the purchase price. It also applies to any acquisition of property (apartments, studios, villas certain) which is considered as luxurious by the Indonesian government.
Corporate tax is based on the net income of a company which is domiciled in Indonesia (CV, PT, PMA). It is levied at a 25% of profits.
Road tax applies to all motor vehicles and is calculated according to the vehicle's value. It has to be paid every year.
Obtaining a NPWP
All adult Indonesian residents are required by the Direktorat Jenderal Pajak, which is the Indonesian Tax Office, to obtain their own tax identification number which is known as the Nomor Pendaftaran Pajak Wajib (NPWP). Hence, foreigners have to register with the nearest tax office to their place of residence so as to be able to determine if they will have to pay income tax and how o proceed. Make sure to verify if your home country has signed any agreement with Indonesia regarding double-taxation.
Residents having to apply for a NPWP are the following:
- any employee whose salary exceeds the maximum non-taxable income
- any employee who earns extra remuneration, in addition to his main salary
- any employee or taxpayer who receives income from trade, business, self-entrepreneurship
- any taxpayer who earns his income from capital
- any foreigner living in Indonesia for 183 consecutive days over a 12 months period and holding a KITAS, a Kitap, a business or social and cultural visits visa.
You may seek the assistance of tax specialists so as to avoid any mistake in the procedures and to help you comply with existing regulations.
The registration process will take place at the nearest tax office to your place of residence. Those living in Jakarta have to visit the KPP Badora which is the tax office for expatriates and foreign agencies.
Documents to be produced are the following:
- a duly filled and signed registration form
- a photocopy of your passport's pages
- a copy of your work permit
- your employer's and your proof of residence
- an authorization letter indicating that your representative is able to save and manage your tax affairs in Indonesia in your absence.
Once you have obtained your tax identification number, you are required to settle your income tax at the latest on the 15th of the planned month. You also have to prove it to the tax authorities not later than the 20th day of the same month.