Indonesia’s tax treaties help prevent double taxation and support international investment. Tax Treaty Indonesia agreements provide opportunities for businesses to optimize taxes while complying with regulations. Leveraging these treaties ensures smoother cross-border transactions and enhances financial efficiency.
Withholding Tax System in Indonesia
For companies and individual taxpayers dealing with or in Indonesia, the tax rate to withhold is always an important question. Despite it being uncommon in most countries, the payer is responsible for withholding the tax and paying the tax to the Indonesian tax office if both parties are companies. When a transaction involves a company and an individual, it is the company’s responsibility to withhold the tax. Additionally, this ensures compliance with applicable tax regulations.
When it comes to payment to non resident, the taxpayer has to withhold a tax of 20% (Article 26). When payments are made to Indonesian taxpayers, the applicable tax rate ranges from 2–15% (Article 23). Additionally, if the taxpayer acts as a VAT collector, the company may need to charge VAT—set at 11% in 2024 and increasing to 12% in 2025—to ensure compliance.
Tax Treaty Indonesia agreements include specific tax rates for services provided by certain countries. For example, a withholding tax of 5% applies to services from Switzerland and the UAE, 7.5% from Germany, 10% from countries like Cambodia, India, and Luxembourg, and 15% for Pakistan.
Indonesia Tax Treaty Data with Other Countries
| Country with Double Tax Treaty with lower Withholding Tax Rate | ||||
| Country | Parent company | Holding | Interest Rate | Royalties |
| Algeria | 15% | 15% | 15% | 15% |
| Armenia | 10% | 15% | 10% | 10% |
| Australia | 15% | 15% | 10% | 15% |
| Austria | 10% | 15% | 10% | 10% |
| Bangladesh | 10% | 15% | 10% | 10% |
| Belarus | 10% | 10% | 10% | 10% |
| Belgium | 10% | 15% | 10% | 10% |
| Brunei | 15% | 15% | 15% | 15% |
| Bulgaria | 15% | 15% | 15% | 10% |
| Cambodia | 10% | 10% | 10% | 10% |
| Canada | 10% | 15% | 10% | 10% |
| China | 10% | 10% | 10% | 10% |
| Croatia | 10% | 10% | 10% | 10% |
| Czech Republic | 10% | 15% | 10% | 12.50% |
| Denmark | 10% | 20% | 10% | 10% |
| Egypt | 15% | 15% | 15% | 15% |
| Finland | 10% | 15% | 10% | 10% |
| France | 10% | 15% | 10% | 10% |
| Germany | 10% | 15% | 10% | 10% |
| Hong Kong | 5% | 10% | 5% | 10% |
| Hungary | 15% | 15% | 15% | 15% |
| India | 10% | 10% | 10% | 10% |
| Iran | 7% | 7% | 7% | 10% |
| Italy | 10% | 15% | 10% | 10% |
| Japan | 10% | 15% | 10% | 10% |
| Jordan | 10% | 10% | 10% | 10% |
| Korea (North) | 10% | 10% | 10% | 10% |
| Korea (South) | 10% | 15% | 10% | 10% |
| Kuwait | 10% | 10% | 10% | 5% |
| Laos | 10% | 15% | 10% | 10% |
| Luxembourg | 10% | 15% | 10% | 10% |
| Malaysia | 10% | 10% | 10% | 10% |
| Mexico | 10% | 15% | 10% | 10% |
| Mongolia | 10% | 10% | 10% | 10% |
| Morocco | 10% | 10% | 10% | 10% |
| Netherlands | 10% | 15% | 5% | 10% |
| New Zealand | 15% | 15% | 15% | 10% |
| Norway | 15% | 15% | 10% | 10% |
| Pakistan | 10% | 15% | 10% | 15% |
| Papua New Guinea | 15% | 15% | 15% | 10% |
| Philippines | 15% | 20% | 15% | 15% |
| Poland | 10% | 15% | 10% | 10% |
| Portugal | 10% | 10% | 10% | 10% |
| Qatar | 10% | 10% | 5% | 10% |
| Romania | 12.50% | 15% | 12.50% | 12.50% |
| Russia | 15% | 15% | 15% | 15% |
| Serbia | 15% | 15% | 10% | 10% |
| Seychelles | 10% | 15% | 10% | 10% |
| Singapore | 10% | 15% | 10% | 10% |
| Slovakia | 10% | 10% | 10% | 10% |
| South Africa | 10% | 15% | 10% | 10% |
| Spain | 10% | 15% | 10% | 10% |
| Sri Lanka | 15% | 15% | 10% | 15% |
| Sudan | 10% | 10% | 10% | 10% |
| Suriname | 15% | 15% | 10% | 15% |
| Sweden | 10% | 15% | 10% | 10% |
| Switzerland | 10% | 15% | 10% | 10% |
| Syria | 10% | 10% | 10% | 10% |
| Taiwan | 10% | 10% | 10% | 10% |
| Tajikistan | 10% | 10% | 10% | 10% |
| Thailand | 15% | 20% | 10% | 15% |
| Tunisia | 12% | 12% | 12% | 15% |
| Turkey | 10% | 15% | 10% | 10% |
| Ukraine | 10% | 15% | 10% | 10% |
| United Arab Emirates | 10% | 10% | 5% | 10% |
| United Kingdom | 10% | 15% | 10% | 10% |
| United States | 10% | 15% | 10% | 10% |
| Uzbekistan | 10% | 10% | 10% | 10% |
| Venezuela | 10% | 10% | 10% | 10% |
| Vietnam | 15% | 15% | 10% | 15% |
| Zimbabwe | 10% | 10% | 10% | 10% |
To apply the tax rate, the tax office must approve the justification that the receiver is the actual beneficial owner. Moreover, a DGT form must be submitted to comply with tax treaty Indonesia rules and avoid a requalification to the 20% rate.
This rate applies specifically to certain services or revenue types and does not extend beyond the outlined scope.
Also Read: Comprehensive Guide For Your Tax In Indonesia
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Final Tax for Companies in Indonesia
Companies paying withholding tax under the article 4 are subject to a final tax.
| Income | Tax rate (%) |
| Lease of land or building and rental income | 10 |
| Income from property sales (Freehold not lease) | 2.5 |
| Contractor (depending on the licence) | 1.75/2.65/4 |
| Consulting company in construction (depending on the licence) | 3.5/6 |
| Contractor and Consulting combined (depending on the licence) | 2.65/4 |
| Turnover received by companies with annual income not exceeding IDR 4.8 billion in one fiscal year (applicable for 3 years) | 0.5 |
Different tax rates may apply to bonds, cryptocurrency, or financial products. Therefore, we strongly recommend reaching out to us to determine which tax rate is applicable or needs to be withheld in your specific case.
