Entrepreneurs, digital nomads, HNWI or any taxpayer are supporting high taxation rates in their home country and is looking for new places to establish their business or become a tax resident in a place to balance their lifestyle and tax residency. For those looking for a place to establish a tax residency and optimize their taxation, Bali can be a great option to relocate. Combined with an offshore company, taxpayers can support taxes between 0 to 10% only.
Tax Residency in Indonesia
Indonesian tax ministry defines residency following one of the three criteria:
- Having a residence permit in Indonesia showing your intention to live in Indonesia
- Having your main economic activity and interest in Indonesia
- Spending more than 183 days per year in Indonesia
By having a residence permit named as a KITAS, foreigners can easily establish their tax residency in Indonesia. A KITAS can be obtained in different ways, such as:
- Setting up a company and applying for an investor visa
- Saving 130,000 USD on a bank account in Indonesia
- Being a digital nomad under some criteria
- Working in Indonesia under a working permit
- Being a family member of a KITAS holder
The immigration authorities issue the KITAS after granting the visa and the foreigner has crossed the border to activate it. Once they receive the KITAS, the foreigner must apply for a Tax Card (NPWP) at the tax office. The tax card makes the person a resident who must report his personal tax the following year at the obtention of the NPWP (personal tax card). The report has to be submitted between January and March the following year.
Also read : Indonesia Minimum Wages increase by 6.5% in 2025
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Personal income tax in Indonesia
The personal income tax in Indonesia follows the worldwide income rule. If they meet certain conditions, foreign citizens can limit their tax liability to Indonesian-sourced income for up to four years. This means that, in theory, the taxpayer has to report income from all over the world. Indonesia has a high taxation on salaries, and we do not recommend becoming a tax resident if your income comes from a salary as a worker.
Income Tax Brackets
- IDR 0 – 60,000,000: 5%
- IDR 60,000,001 – 250,000,000: 15%
- IDR 250,000,001 – 500,000,000: 25%
- IDR 500,000,001 – 5,000,000,000: 30%
- IDR 5,000,000,001+: 35%
However, Bali, Indonesia, has signed interesting treaties with the rest of the world and places Indonesia with a low tax rate on Dividend at 10% or lower depending on where the income comes from. Combined with an oversea company providing dividends the taxpayer can expect to pay a maximum rate of 10%. For people living in countries with high taxation and being able to relocate their business, this combination can be a great opportunity.
However, taxpayers may be exempt from income tax on certain types of offshore income if they reinvest or use it for business activities in Indonesia within a specified period:
- Income received by an Indonesian taxpayer from a permanent establishment (PE) abroad;
- Dividends paid by foreign companies; and
- Active business income earned by an Indonesian taxpayer from abroad (excluding income from a PE or foreign subsidiary).
Taxpayers must reinvest at least 30% of the after-tax profit from a PE and dividends from non-listed foreign subsidiaries. Any shortfall between the reinvested amount and the 30% threshold will be subject to income tax in Indonesia.
Indonesia taxes crypto income at a low rate of 0.1%–0.2%, making it attractive for crypto residents. While not a 0% tax haven, with the correct setup, Indonesia—especially Bali—is a great place for residency. Opening a bank account is also easy for Russians and many other nationalities.
Contact us to know more about how to become a tax resident in Bali or the rest of Indonesia and setting up the right structure with the right visa.
