Individuals classified as tax residents engaging in business, freelance endeavors, or earning income surpassing the Non Taxable Income threshold have to register for an NPWP (Tax card). They need to pay a personal income tax in Indonesia. Married persons meeting their tax obligations independently from their spouses have to obtain an NPWP at the tax office.

Generally, tax residents are liable for taxes on their global income , but with the implementation of double taxation agreements (DTAs), these obligations can be alleviated for those who have income from working on their own behalf, such as working remotely. The provision under the Income Tax Law, specifying that foreign individuals transitioning to tax residency in Indonesia may be taxed solely on income sourced within Indonesia (even if received offshore), subject to specific skill requirements. This favourable arrangement is applicable for the initial four years of tax residency. It’s important to note that this territorial taxation system may not apply if a foreign individual receives income from overseas and utilises the relevant tax treaty between Indonesia and the source country to avoid taxation on both sides.

WHO PAY A PERSONAL INCOME TAX IN INDONESIA?

An individual is an Indonesian tax resident if the person:

  • Resides in Indonesia
  • Presents in Indonesia for 183 days or more in any twelve-month period
  • Presents and intends to reside in Indonesia (this option is more rarely applied)

For non-resident individuals, a general withholding tax (WHT) of 20% is imposed on their Indonesian-sourced income. However, concessions are available in the presence of an active DTA.

TAXABLE INCOME IN INDONESIA

Taxable income for 2023 (IDR)Tax rate (%)
Up to IDR 60 million5
Above IDR 60 million to IDR 250 million15
Above IDR 250 million to IDR 500 million25
Above IDR 500 million to IDR 5 billion30
Above IDR 5 billion35

DEAD LINE : 31 March following the previous year

TAXATION ON SEVERANCE PAY

Taxable income (IDR)Tax rate (%)
Up to IDR 50 million0
Above IDR 50 million to IDR 100 million5
Above IDR 100 million to IDR 500 million15
Above IDR 500 million25

Taxpayers have the convenience of extending the deadline for filing annual income tax returns by up to two months. They can simply notifying the Tax Authority. It’s a hassle-free process that provides you with additional time to ensure accurate and timely submissions.

Keep in mind that late tax payments incur a 2% monthly surcharge. Should there be any tax underpayment resulting from voluntary amendments to tax returns, a surcharge of 2% per month or 50% to 150%, depending on the case, will apply. Timeliness is key, as late reporting comes with a penalty of IDR 100,000 for annual individual income tax returns. Taxpayers who are working in Indonesia have to contribute to the social security system.

CAPITAL GAINS

Ordinarily, capital gains are included in an individual’s overall income and taxed at standard rates. Notably, exceptions apply to the sale of land, buildings, and exchange-traded shares listed on the Indonesian stock exchange. These transactions are subject to final tax at the point of sale.

DIVIDEND INCOME

Dividends received from an Indonesian limited liability company attract a final income tax of 10%. However, this tax is waived if the recipient is a domestic individual taxpayer and the dividends are reinvested in Indonesia within a specified timeframe.

INTEREST INCOME

Interest income from time deposits and savings with Indonesian banks or their overseas branches, as well as interest from time deposits placed through Indonesian branches of foreign banks (in any currency), is currently subject to a final income tax rate of 20%. Additionally, interest on bonds incurs a final income tax at 10%, collected through withholding by the payer. Stay informed about these specific tax treatments for optimal financial planning.

Contact us about these tax implications to make well-informed financial decisions for yourself and your family.