Indonesia Corporate Tax

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Indonesia Corporate Tax2023-08-21T17:52:43+08:00

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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.

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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.

Public companies

Public companies that meet specific criteria, such as a minimum listing requirement of 40% and other conditions, are eligible for a 3% reduction from the standard CIT rate. This means that for the fiscal year 2020/2021, these qualified public companies will enjoy a CIT rate of 19%. From the year 2022 and onwards, the reduced CIT rate for these companies will be 17%.

Small companies

Small companies, defined as corporate taxpayers with an annual revenue of not more than IDR 50 billion, are entitled to a proportionate tax discount of 50% from the standard CIT rate. This reduction applies to their taxable income.

Additionally, certain small and medium-sized enterprises (SMEs) with gross revenue of not more than IDR 4.8 million are subject to a special CIT rate of 0.5%. It is important to note that this 0.5% CIT rate is calculated based on the SMEs’ gross revenue, rather than their taxable income.

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.

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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:

  • Benefits-in-Kind by employers to employees
  • 50% Reduction for Operation and Maintenance Costs such as company cars
  • Gifts and Donations except those specified as deductibel
  • Income Tax
  • Tax penalties
  • Expenses under final tax regime
  • Salary of partners in a partnership

Your Questions, Answered

We’ve picked the top questions that we get asked the most when it comes to Indonesia corporate tax. Check them out here.

What is the corporate tax rate in Indonesia?2023-08-16T09:17:32+08:00

The corporate tax rate in Indonesia for the 2023 fiscal year is 22%.

How can companies get assistance with corporate tax matters in Indonesia?2023-08-16T09:14:41+08:00

Companies can seek assistance from professional tax advisors, accounting firms, or tax consultants who specialise in Indonesian tax regulations to ensure compliance and optimise tax planning strategies.

What are the requirements for claiming tax incentives in Indonesia?2023-08-16T09:13:31+08:00

The requirements for claiming tax incentives vary depending on the specific incentive. Generally, companies need to meet certain criteria, submit necessary documentation, and comply with relevant regulations.

Are there any tax incentives available for companies in Indonesia?2023-08-16T09:11:50+08:00

Yes, there are various tax incentives available, such as tax holidays for certain industries, reduced tax rates for specific activities, and accelerated depreciation for qualifying assets.

What are the criteria to be a tax resident company in Indonesia?2022-07-14T16:30:48+08:00

The primary criterion for a company to be considered a tax resident of Indonesia is having a permanent establishment or primary place of management in Indonesia. Resident companies of Indonesia are taxed based on the income they earn anywhere in the world.

Is Indonesia a tax haven?2022-07-14T16:30:22+08:00

As of now, Indonesia is not considered a tax haven’t country as taxes are not as low as other countries and there are obligations for all to pay taxes in the country. One of the tax haven in Southeast Asia is Singapore.

Does Indonesia have VAT?2022-07-14T16:28:46+08:00

Value-added tax (VAT) is the consumption tax imposed on each product stage of both goods and services until product sales and is taxed at 11% in Indonesia. The VAT rate is set to increase to 12% in 2025.

Who is not eligible for tax incentives?2021-11-08T10:27:25+08:00

You must have a tax identification number, paid all of the clearance levy charges required, paid for any tax liabilities which may still be outstanding, and presented the latest income details for the most recent financial year before being legally permitted to claim any tax exemptions in Indonesia. If not, you are not eligible for tax incentives.

Why is the Indonesian government lowering corporate taxes?2021-11-08T10:27:00+08:00

One of the many reasons for lowering the corporate tax rate in Indonesia is to attract more foreign direct investments in the country.

What is a Tax ID number?2021-11-08T10:26:28+08:00

Tax Identification Number (TIN) is known in Indonesia as Nomor Pokok Wajib Pajak (NPWP). It is a set of numbers given to taxpayers (both individual and entity) for personal identification in carrying out their taxation rights and obligations (i.e. Income Tax, and VAT). NPWP is given to eligible taxpayers who have fulfilled the subjective and objective requirements as stipulated in taxation laws and regulations.

Does foreigners need to pay taxes in Indonesia?2021-11-08T10:25:51+08:00

If you are living in Indonesia for a cumulative total of 183 days within a tax year, you are required to filing and pay for taxes.

Which Companies are Tax Residents of Indonesia?2020-04-02T14:23:57+08:00

The primary criterion for a company to be considered a tax resident of Indonesia is having a permanent establishment or primary place of management in Indonesia. Resident companies of Indonesia are taxed based on the income they earn anywhere in the world.

What expenses are Deductible in Indonesia?2022-07-15T12:08:22+08:00

Certain expenses in Indonesia are tax-deductible. These expenses include certain expenses directly related to a company’s operations as well as certain donations. Among these expenses are occupational expenses, pension contributions, donations for disaster relief, and donations for social infrastructure, among others.

How has Indonesia’s Corporate Tax Rate changed over the years?2020-04-02T14:21:46+08:00

The latest change to Indonesia’s corporate tax rate took place in 2010. In that year, the tax rate fell from 28% to 25%. The highest corporate tax rate to have ever existed in Indonesia was 39%. 

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.

Indonesia Corporate Tax Services

As corporate tax specialists in Indonesia, we ensure that your tax compliance meets the requirements for all corporate tax submissions and tax filings. We will also advise you on your tax exemptions and incentives.

Keeping you updated with Indonesia’s corporate tax regulations and compliance requirements

Monitoring the statutory deadlines and meet the compliance filing deadlines

Preparation for filing of your estimated chargeable income and review of tax provision calculations

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