Income tax in Indonesia

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Updated 2020-05-21 15:22

If you stay in Indonesia for more than 183 days in any 12-month period, you will be considered a resident taxpayer. Despite the old stereotype, Indonesia is not a tax haven. The government has been taking measures to ensure all residents are properly paying their taxes, including foreign resident taxpayers. Read this article to find out more about your tax obligations while working and staying in Indonesia.

As a resident taxpayer, you are required to declare your assets and liabilities at the end of each fiscal year, which runs from 1st January to 31st December. You are also required to pay and file your annual individual income tax return from the previous year by 31st March each year. Pay your tax on time or you will be subject to a 2% monthly interest charge on the amount you owe. Failing to file your returns on time may also be considered a criminal at which warrants a fine and even imprisonment.

Make sure to keep yourself updated regarding the terms of any tax treaty that exists between your home country and Indonesia. If you're unsure about the regulations, try contacting the local Tax Service Office as well as your home country's embassy.

Who are considered as taxpaying residents in Indonesia?

A foreign individual is considered as a taxpaying resident in Indonesia when they meet any of these criteria:

  • Individuals staying or intending to stay in Indonesia for more than 183 days during a 12-month period (regardless of visa type)
  • Individuals that are earning any form of income in Indonesia
  • Individuals who receive from any business activities in Indonesia

If you meet any of the criteria above, then you must register yourself as a taxpayer in Indonesia. You will be considered a tax resident in Indonesia until the final date of your departure from the country.

Note that there are some exemptions. Certain expats aren't considered as an Indonesian tax resident if they have any of these special legal statuses:

  • Foreign diplomatic and consular personnel
  • Military personnel
  • Individuals related to international organizations specified by the Indonesian Minister of Finance

The Tax Identification Number (NPWP)

To file a tax return, you must register as a taxpayer and obtain a tax identification number (NPWP). Even though your employers are responsible for deducting tax off their employees' salaries, it's your duty to register as a taxpayer.

The Tax Office requires all taxpaying expatriate residents in Indonesia to have an NPWP. This tax identification number is needed to pay monthly income taxes, file annual tax returns, and pay tax on any income earned outside Indonesia. It's important to obtain an NPWP as soon as possible since those without one can be subject to a surcharge of 20% on top of the basic income tax rates.

Aside from tax-related activities, an NPWP is also required for a variety of other activities, including:

  • Buying a vehicle
  • Registering or renewing the registration of a vehicle
  • Getting a driver's license
  • Opening a bank account
  • Applying for a credit card from a local bank
  • Building or buying a house
  • Transferring money from a local bank account to a foreign one

Registering as a taxpayer in Indonesia

To get your NPWP, you must register at the Tax Service Office in your city of residence. If you live in Jakarta, then you must register yourself at the Tax Office for Foreign Bodies and Expatriates (KPP BADORA).

You can employ a specialist or an accountant to help you with the process, but the process is no longer as tedious as it used to be years ago. Besides, the workers in the Tax Office would be glad to help you as they are trying to widen the Indonesian taxpayer base by offering great and fast service.

Here are some basic documents you'll need to register as a resident taxpayer:

  • A complete registration form (can be downloaded from the official Tax Office website or obtained from your local Tax Service Office)
  • Copies of all the pages in your passport
  • Copy of ID issued by your home country
  • Copy of your work permit
  • Copy of your employer's NPWP
  • Your certificate of domicile
  • Letter of Authorisation (Authorising your representative to register and handle your tax matters, only if you use a specialist's service)

Tax obligations in Indonesia

In Indonesia, the personal taxation system is based on worldwide income. This includes:

  • Your monthly salary (from Indonesia or overseas)
  • Bonuses and commissions
  • Inheritances
  • Allowances (including for housing, education, and medical care)
  • Dividend and interest income (from Indonesia or overseas)
  • Rental income (from Indonesia or overseas)
  • Capital gains from property sale (from Indonesia or overseas)

Tax rates and personal deductions in Indonesia

Indonesia has a progressive tax system, which means the more you earn the bigger the percentage of your income is taxed. Income taxation is subject to provincial regulations, so the rates may vary based on where you live.

That said, the following rates on your taxable income are the standard:

  • 5% - Up to IDR 50 million
  • 15% - From IDR 50 million to IDR 250 million
  • 25% - From IDR 250 million to IDR 500 million
  • 30% - Over IDR 500 million

If you are unsure about your income tax rate, please contact the local Tax Service Office for more information. They will be more than happy to assist you in filing your taxes.

Also, note that you might qualify for certain deductions, such as:

  • Individual taxpayer: IDR 54 million deductible
  • Spouse: IDR 4.5 million deductible
  • Dependent individuals (max. 3): IDR 4.5 million deductible each

Additional Non-Tax contributions in Indonesia

In addition to income tax, expats are also required to pay contributions to social security schemes, such as the country's human resources scheme (BPJS Ketenagakerjaan) and the healthcare scheme (BPJS Kesehatan). These contributions are mandatory for both Indonesian nationals and foreigners who work in Indonesia for a minimum of 6 months. When renewing your work permit, you will need to be able to prove your participation in these social security schemes.

Note that some companies already deduct the amount needed to pay for both BPJS Ketenagakerjaan and BPJS Kesehatan from your monthly salary. Ask your employer for more details about the arrangement.

 Useful link:

Indonesia Tax Service Office official website
Indonesian Tax Guide 2019-2020

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