There are several types of taxes in the country that all individuals, business owners, and investors have to comply with. They include individual income tax, corporate income tax, withholding tax, VAT, customs and excise, etc. This article provides detailed information about the tax system that is effective here and must be considered by residents and non-residents.
Corporate Income Tax
A company domiciled within the territory is obligated to the tax policies set by the government. A foreign company with a permanent address that conducts business through the branch has to pay corporate tax on income earned. This applied to all companies that generate income from business activities carried out here. It has a tax rate of 25 percent, but there are a few exemptions. Some companies receive a 5 percent cut when they offer at least 40 percent of their total share capital to the public on IDX. SMEs with an annual turnover below IDR 50 billion obtain a 50 percent tax discount.
| Income Tax | Rate |
| Normal rate | 25% |
| Public companies with >40% of their shares traded on the IDX | 20% |
| Firms with gross revenue of less than 50 billion Indonesian Rupiah | 12.5% |
| Organizations with gross revenue of less than IDR 4.8 billion | 1% |
Individual Income Tax
A person is said to be liable to taxes if such individual lives here, has resided for more than 183 days within 12 months or during a fiscal year, and intends to reside permanently. Non-resident individuals have to pay a 20 percent withholding tax on income sourced within the nation.
| Income Tax | Rate |
| Up to IDR 50 million | 5% |
| Over IDR 50 million to IDR 250 million | 15% |
| Over IDR 250 million to IDR 500 million | 25% |
| Over IDR 500 million | 30% |
Withholding tax
Employers collect a part of individual income tax through withholding monthly. These can be from salaries, wages, or compensation paid to employees. A resident taxpayer pays the same taxes rates as individual income tax while a nonresident taxpayer pays 20 percent of the total amount.
| Tax | Rate |
| Interest, dividends, and royalties | 15% |
| Services | 2% |
| Land and building rental | 10% |
These withholding taxes are considered corporate tax prepayments. The withholding tax calculated on sales/revenue is final.
Withholding tax (for payments to non-residents)
• Normal rate is 20%
Value-Added Tax (VAT)
Value Added Tax (VAT) is the tax subject to the transfer of taxable goods or the provision of certain taxable services. The VAT rate is 10 percent in Indonesia. However, this can be increased or decreased to 15 percent or 5 percent according to government regulation. When you export taxable tangible and intangible goods, the VAT is fixed at 0 percent. However, specific limitations may apply to exports of services.
Deliveries of taxable goods by an enterprise;
Import of taxable goods;
Deliveries of taxable services by an enterprise;
Use of taxable intangible goods/services originating from abroad;
Export of taxable goods (tangible and intangible) or services by a taxable enterprise.
• Normal rate is 10%
Luxury-Goods Sales Tax
Imports of some taxable goods such as luxury cars, paintings, etc. are liable to extra charges. LGST rates are presently between 10 to 125 percent with a maximum LGST rate of 200 percent.
Customs and Excise
By law, import duties range between 0 to 150 percent of the customs value of the imported good, and the highest rate being 40 percent. Due to its growing economy, the country has signed a couple of free-trade agreements, efficiently removing or significantly reducing import duty rates. However, the government still applies high rates for certain goods. There are also anti-dumping rates applicable to imported products from specific countries.
