Indonesia has blossomed into Southeast Asia’s largest economy and is an emerging market that investors and companies are looking to venture into. Although the pandemic has struck a huge blow in the country’s growth, there are still opportunities for businesses and entrepreneurs to start a business.
Before incorporating a company in Indonesia, it is important to understand the tax compliances and system so to align with your business and financial goals.
Tax Compliance as a Resident or Non-Resident Company
Resident and non-resident companies have different tax compliances and regulations. How a company is classified as a resident or non-resident company is dependent on where the business is established.
Resident company – incorporated and conducting business activities in Indonesia
Non-resident company – incorporated overseas, however, generating revenue from Indonesia
As a resident company, you will be charged as per a resident taxpayer. These include benefits such as:
Income tax relief for setting up businesses in key sectors or in certain locations
5% reduction should your company be listed and fulfil certain criteria
Flexibility of tax payments – direct payment to Director General of Tax (DGT), 3rd party withholding, or a mix of both.
For non-resident companies, it can only be done through withholding tax from income avenues within the country.
Types of Taxes and Tax Rates in Indonesia
There are various types of corporate taxes that one should take note of, including the tax rates and deadline to file these taxes.