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Overview of Tax Issues for Expats in Indonesia

Submitted:October 2014

The Indonesian tax year runs from 1 January to 31 December.

Tax Residence

If you work in Indonesia for less than 183 days during any 12-month period, you will generally be considered non-resident and taxed on Indonesian-source income only. If you stay longer than 183 days you will generally be considered resident, and become liable for tax on your worldwide earnings. There are some circumstances where you may be considered resident even if you are in Indonesia for less than 183 days in a year. For more details, please see: Taxation - Employment Taxation for Expats in Indonesia.

 

Employment/Business Taxes

For residents, your employer deducts a withholding tax from your wages or salary. The marginal (highest) tax rate is 30%. You may have to fill in a tax return after the end of the year to claim allowable deductions, and calculate the final amount of tax payable. If you are self-employed, you will pay income tax based on the profits of your business after deduction of costs. For more details, please see: Taxation - Employment Taxation for Expats in Indonesia.

If you come to Indonesia to set up in business and start a company, you will be liable for corporate tax on the profits from your trade or business. The general rate of corporate tax is 25% for trading income. There are lower rates available for companies with low turnover. New companies must complete a complex registration. Companies must make monthly payments of preliminary tax during the course of the year based on the previous year’s tax bill. After the end of the year, they must submit a tax return by the last day of the fourth month of the accounting period following the period year in which the income was generated. For more details, please see: Taxation - Business Taxation for Expats in Indonesia.

 

Other Taxes

For individual residents in Indonesia, investment income in the form of interest paid by financial institutions is subject to withholding tax at a rate of 20%. Other forms of interest are generally subject to withholding tax at 15%. Dividend income is subject to withholding tax at a rate of 20%. Rental income is generally subject to withholding tax at a rate of 2%. Capital gains are treated as ordinary income.

For non-residents, dividend, interest and rental income from Indonesian sources is subject to withholding tax at a rate of 20%. Capital gains are also subject to withholding tax at a rate of 20%, but only on 20% of the estimated net income from the sale. For more details, please see: Taxation - Investment Taxation for Expats in Indonesia.

 

Tax Treaties

Indonesia has signed tax treaties with over 60 countries worldwide. In signatory countries, withholding tax rates on interest and royalty payments made to taxpayers in other countries can be reduced. The treaties also mean that the amount of withholding tax the originating country charged can be reduced on money flowing into Indonesia. The amount that can be charged under a treaty is often reduced to 10%. For more details, please see: Taxation – Tax Treaty Considerations for Expats in Indonesia.

 

 

 



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