For individuals or developers dealing with contractors or a construction company in Bali, Indonesia, it is crucial to understand the tax involved in the construction of their project. Contractor tax on villa, apartment or hotel can differ from the service provider. In 2022, Indonesia has introduced Government Regulation No. 9 of 2022, which modifies Government Regulation No. 51 of 2008 regarding the final income tax on earnings from construction services.
Contractor tax rate in Indonesia
Since 2022, this regulation has included updates to the classifications of construction services and adjustments to the final income tax rates in Indonesia:
Tax for contractor with a business licence in Indonesia
- 1.75% for construction work carried out by service providers holding a small qualifying business entity certificate. The same tax rate applies or an individual with a work competency certificate.
- 2.65% for construction work executed by service providers with certificates other than those for small or individual businesses.
- 2.65% for integrated construction projects (combining construction work and consulting services) carried out by service providers with business entity certificates.
- 3.5% for construction consulting services by service providers with a business entity certificate or an individual work competency certificate.
Tax for contractor without a business licence in Indonesia
- 4% for construction work conducted by service providers without a business entity certificate or an individual work competency certificate.
- 6% for construction consulting services by providers without a business entity certificate or an individual work competency certificate.
If the service provider is a permanent establishment (type BUJKA), the income tax rates mentioned above do not include tax on the profits after the final income tax.
Never worry about taxes and accounting again
Dealing with finances, taxes, and accounting can feel overwhelming, especially as a foreigner in Indonesia. Let us guide you through processes like tax calculation, payroll, personal or corporate tax, short-term investments, balance sheet analysis and much more.
With ILA by your side, nothing can go wrong. Schedule a free consultation today or learn more about our tax and accounting services.
Who pays the construction tax in Indonesia?
In the event the contractor provides a service to a company taxpayer, the company has to withhold the tax at the tax rate mentioned above. The buyer needs to withhold the tax and pay the contract on a net basis.
On the other hand, if the taxpayer is an individual, the payment of the tax is fulfilled by the contractor.
Also read: Personal Income Tax in Indonesia for Residents & Expats
