Everyone who owns an Indonesian company may claim any tax incentives such as tax reductions or tax exemptions for which the company is eligible. Through these tax incentives, the company owner will be able to save a significant amount of money and thus increase the overall revenue of the company.
Every company owner would like to reduce the amount of tax which they pay. The same is true of the company owners of Indonesia. For this as well as other reasons, the government of Indonesia has provided several methods by which company owners may reduce the amount of tax to be paid. Although there are certain tax reductions and exemptions in Indonesia which are applied to individuals, none of them apply to companies. Companies of Indonesia have their own set of tax reductions and exemptions as specified by the government regulations of Indonesia.
Although companies which are operational in Indonesia may enjoy tax reductions and exemptions, they are nevertheless not excused from having to pay an amount of corporate tax according to the government’s regulations. Local and foreign companies alike which have been set up in Indonesia are required to pay their share of corporate tax.
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One important tax reduction available is intended for owners of companies of below a certain level of revenue. If a company in Indonesia has a gross turnover of less than 50 billion rupiah, the company is entitled to a tax reduction of close to 50%. All small and medium-sized enterprises which earn less than 600 million rupiah on an annual basis are not legally required to pay any value added tax (VAT). Every company based in Indonesia which has a gross turnover of less than 4.8 billion rupiah over the course of one financial year is eligible for a tax exemption of 0.5% on its gross revenue. There are also several other exemptions provided by the government of Indonesia which are related to VAT and import duty. These exemptions help companies with the importation of goods into the country without having to spend an excessive amount of money. The imported goods which are eligible to receive the tax relief may be re-exported, destroyed, or moved if the requirements established by the authorities are not fulfilled. However, such actions may only be taken after two years and only the companies which are of little to no value to the Indonesian economy are permitted to destroy such goods.
The primary reason for the tax reductions and exemptions which Indonesian company owners may receive is to allow the country to increase its level of economic growth. Such tax incentives will help the companies to save more money and increase their level of spending on the required goods. All of the tax incentives in Indonesia will support companies’ investment in other sectors or industries in foreign countries for the purposes of business expansion. Companies based in Indonesia will thus have more money for investment in the company so that they may generate a greater level of profit. They will also be spared from having to take any unnecessary loans. Having a larger amount of disposable income will also permit them to carry out corporate social responsibility activities.
Indonesian companies may only make use of tax reductions or exemptions if the original location of their company is in the country. The individuals operating the company must have their residence in Indonesia. However, this does not apply to foreign-owned companies as they do not have permanent residence in Indonesia. They have to pay the taxes as per the government laws without making use of any of the tax incentives. Nevertheless, Indonesia’s rapid rate of economic growth and increasing openness to contributions made by foreign business owners mean that there are also advantages present for foreigners who start a company in Indonesia.
Anyone who needs assistance with understanding the tax exemption laws in Indonesia or any other tax laws may use the services which are provided by Paul Hype Page & Co. We have a team of tax experts who can help you with managing the tax exemptions which are available in Indonesia. We will also assist you with the selection of all tax exemptions for which your company is eligible so that your company’s overall tax burden will be reduced.