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Corporate Tax in Indonesia
Corporate tax in Indonesia is charged at a flat rate of 25%. However, the obligations and regulations vary depending on the tax residency of the company.
Indonesia Tax Rate and Basis of Taxation
The corporate income tax (CIT) rate in Indonesia is subject to certain variations. Currently, the standard CIT rate is 25%. However, for the fiscal year 2020/2021, the CIT rate has been reduced to 22%. From the year 2022 onwards, the CIT rate will be further decreased to 20%.
It is crucial for businesses to carefully consider their eligibility for any applicable tax reductions or discounts and accurately calculate their CIT liabilities based on the relevant rates and criteria set by the Indonesian tax authorities. Consulting with tax professionals or referring to the latest tax regulations is recommended to ensure compliance and optimise tax planning strategies within the given framework.
Requirements for Tax Reporting in Indonesia
When it comes to reporting your corporate taxes in Indonesia, it is essential to have the necessary documents prepared and ready. Here is a list of important documents that should be in order you should prepare in advance.
Download the full Indonesia corporate tax checklist.
Year of Assessment and Corporate Return
In Indonesia, the most commonly used tax year aligns with the calendar year, running from 1 January to 31 December. This means that companies typically report their financial activities and calculate their tax liabilities based on this standard tax year. However, it is important to note that the tax year can also be adjusted to align with the company’s specific financial year, as stated in its article of association.
The flexibility to align the tax year with the company’s financial year is provided to accommodate businesses that operate on a non-calendar fiscal year basis. The article of association, which outlines the company’s internal regulations and governance, specifies the chosen financial year for the company.
For example, if a company’s financial year runs from 1 July to 30 June, the tax year for that company would also follow this period. In such cases, the tax reporting and calculations would be based on the company’s financial activities and transactions during this specific financial year.
It is crucial for companies to adhere to their chosen tax year consistently, whether it aligns with the calendar year or the company’s financial year. This ensures accurate and consistent reporting of financial information and tax liabilities to the Indonesian tax authorities.
Tax Allowance in Indonesia
In an effort to encourage investments in targeted industries and less developed areas of national importance, companies can avail themselves of tax incentives that include:
These tax allowances serve as a means to incentivize investments in specific sectors and less developed areas, contributing to their growth and development. By providing tax relief and favorable treatment, the government aims to attract companies to invest in priority industries and regions, fostering economic progress and creating employment opportunities.
Deductible and Non-Deductible Expenses for Companies in Indonesia
Deductible Expenses for Companies:
| Expense Type | Description |
|---|---|
| Business Expenses | These expenses are incurred during a company’s business activities, such as materials, salaries, travel, interest, rent, and royalties. |
| Promotion and Selling Expenses | These are expenses during the promotion and selling of products or services, such as advertising costs, product exhibitions, and sponsorship expenses. |
| Cancellation of Uncollectible Receivables | This includes write-off of uncollectible receivables, subject to specific conditions and requirements. |
| Donation and Expenses | These expenses cover donations made through authorised institutions for natural disaster management, R&D, and educational facilities. |
Non-Deductible Expenses for Companies:
Indonesia Corporate Tax Articles
Get insights on the Indonesia corporate tax landscape so you understand the exemptions that you can have for your business and more.
