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Indonesia Tax Return Law

There are a variety of Indonesia Tax Return Law that companies, investors, and individuals need to comply with. This includes corporate income tax, individual income tax, withholding taxes, international tax agreements, value added tax (VAT), luxury-goods sales tax, customs & excise, tax concessions, and land & building tax. Our tax section aims to provide detailed information about taxes that are in effect and should be considered when investing in Indonesia.

 

Individual Income Tax

Law No. 7 of 1983 regarding Income Tax as most recently amended by Law No. 36 of 2008.

Tax Rates

The applicable tax rates are as follows:

Taxable Income Rate
Up to Rp 50,000,000 5%
Over Rp 50,000,000 but not exceeding Rp 250,000,000 15%
Over Rp 250,000,000 but not exceeding Rp 500,000,000 25%
Over Rp 500,000,000 30%

 

The applicable tax rates on severance payment are as follows:

Taxable Income Rate*)
Up to Rp 50,000,000 0%
Over Rp 50,000,000 but not exceeding Rp 250,000,000 5%
Over Rp 250,000,000 but not exceeding Rp 500,000,000 15%
Over Rp 500,000,000 25%

*) These Tax rates are final and only applicable on lump sum payment or payment made within a two-year period. Payment made in the third year and thereafter would be subject to normal tax rates and can be claimed as tax credit.

The applicable tax rates on payment of pension fund or old age saving funds are as follows:

Taxable Income Rate*)
Up to Rp 50,000,000 0%
Over Rp 50,000,000 5%

*) These Tax rates are final and only applicable on lump sum payment or payment made within a two-year period. Payment made in the third year and thereafter would be subject to normal tax rates and can be claimed as tax credit.

Non-resident individuals are generally subject to a 20% withholding tax on income received from Indonesia (Article 26 withholding tax). However, this rate may vary depending on the circumstances and the applicable tax treaty provisions. Specific rates apply for income that is subject to final tax.

 

Tax Registration and Tax Filing

 

  • All individual tax residents (including expatriates) are obliged to register with the Tax Office and obtain a Tax ID number. An exemption from registration is available for those earning below the non-taxable income threshold, those who do not qualify as individual tax residents, and married woman who will fulfill their individual tax obligation jointly with their husband.

 

  • Individual taxpayers are required to file annual individual income tax returns (Form SPT 1770 or 1770 S or 1770 SS). In certain cases, monthly instalment tax payments are also required.

 

  • Individual taxpayers are encouraged to file their individual tax returns electronically through the e-Filing system. They need to separately obtain an e-Filing Number (e-FIN) from the Tax Office in order to access the system.

 

Tax Payments

For processing tax payment, a billing code must first be generated. The specific billing code is valid for 30 days and will need to be given to the bank so that the bank can process the tax payment.

 

Personal Deductions

The following personal deductions are available for resident individual taxpayers in calculating their taxable income, depending on the taxpayer’s personal circumstances.

 

Basis of Deduction Deductible Amount (per year)
Taxpayer Rp 54,000,000
Spouse Rp 4,500,000

(additional Rp 54,000,000 for a wife whose income is combined with her husband’s)

Dependents Rp 4,500,000 each (up to a maximum of 3 individuals related by blood or marriage)
Occupational Support 5% of gross income up to a maximum of Rp 6,000,000
Pension Cost

(available to pensioners)

5% of gross income up to a maximum of Rp 2,400,000
Contribution to approved pension fund, e.g. BPJS Ketenagakerjaan Amount of self-contribution
Compulsory tithe (“zakat”) or religious contributions Actual amount, provided that valid supporting evidence is available and all requirements are met.

 

The Minister of Finance is authorized to re-determine the amounts of the above personal deductions. The above personal deductions were introduced in June 2016 and apply retrospectively from January 2016.

 

Social Security

The national social security schemes are the Manpower scheme (BPJS Ketenagakerjaan) and Healthcare scheme (BPJS Kesehatan), which are mandatory for Indonesian nationals as well as foreigners who work in Indonesia for at least 6 months. Expatriates need to be able to prove their participation in the social security schemes when renewing their work permits.

 

The premium contributions for each scheme are as follows:

Social Security Scheme Areas Covered As a percentage of regular salaries/wages
Borne by employers Borne by employees
BPJS Ketenagakerjaan (Manpower Scheme) Working accident protection 0.24 – 1.74%
Death insurance 0.3%
Old age saving 3.7% 2%
Pension plan(1),(2) 2% 1%
BPJS Kesehatan (Healthcare Scheme)(3) 4% 1%
1% for(4) additional family member

Notes:

  1. The regular salary/wages cap for calculating the pension insurance contribution is Rp 7,703,500 per month. The amount may change in the future.
  2. Contribution to the pension plan is not mandatory for expatriates.
  3. The regular salary/wages cap for calculating the healthcare contributions is Rp 8,000,000 per month. The amount may change in the future.
  4. The mandatory premium covers husband, wife, and 3 dependents. Additional family members can be covered with additional premium.