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Investment Taxation for Expats in Indonesia

Submitted:October 2014

Taxable income in this category includes:

 

Non-residents and Form DGT-1

Expats should be aware that in order to receive the reduced withholding tax rates available to non-residents on various kinds of income, as specified in tax treaties, it may be necessary to provide the payer of the income a copy of Form DGT- 1. This form is a Certificate of Domicile endorsed by your home tax department, and is valid for twelve months.

 

Interest

For residents, interest income from bank deposits or other savings accounts is subject to a 20% withholding tax which is a final tax. Interest income from other Indonesian sources is subject to withholding tax at a rate of 15%. The 15% withholding tax paid can then be used as a tax credit on the resident’s self-assessment tax return, in which both Indonesian and foreign-source interest income is treated as ordinary income and taxed at progressive rates. Interest income from government bonds traded on the Indonesian Stock Exchange are subject to a final withholding tax at a rate of 20%. For non-residents, interest income from Indonesian sources is subject to a 20% final withholding tax. The rate may be reduced if a suitable tax treaty is in place; for further information, see Taxation - Tax Treaty Considerations for Expats in Indonesia.

 

Rental income

For residents, rental income worldwide is generally taxed as ordinary income, and must be reported on the resident’s self-assessment tax return. Rental payments are subject to withholding tax of 2% which can then be used as a tax credit. In the case of rental income from land or buildings, this income can be subject to a final withholding tax of 10%. For non-residents, rental income from an Indonesian source is subject to a final withholding tax rate of 20%.

 

Dividends

For residents, dividends are subject to a withholding tax which is charged at a rate of 10%. The withholding tax paid can then be used as a tax credit on the resident’s self-assessment tax return, in which both Indonesian and foreign-source dividend income is treated as ordinary income and will be taxed at progressive rates. Exemption from the withholding tax applies in the case of dividends paid to a resident Indonesian PT (perseroan terbatas – limited liability company), provided the PT owns 25% or more of the paying company, and the dividend is paid out of retained earnings. For non-residents, dividends are subject to a final withholding tax which is charged at 20%.

 

Capital Gains

For residents, capital gains are generally taxed as normal income and must be reported on the resident’s self-assessment tax return. Sales of shares listed on the Indonesian stock exchange are liable to a final 0.1% withholding tax on the entire proceeds of the sale. Capital gains from Government bonds traded on the Indonesian Stock Exchange are subject to a final withholding tax at a rate of 20%. For non-residents, capital gains are generally subject to a final withholding tax charged at a rate of 20% on 20% of the estimated net income. If a suitable tax treaty is in place, capital gains made from the sale of unlisted shares are exempt of tax. 

 

 

 




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