Taxes in Indonesia
Indonesian and non-Indonesian residents, as well as any business registered in Indonesia, are identified by their Tax Identification Number known as the NPWP (Nomor Pokok Wajib Pajak). The NPWP is important to have in order to submit taxes. Once you have your own NPWP, you will be able to pay your monthly income taxes, file annual tax reports, and more.
You need an NPWP in order to:
- Obtain a driver’s license
- Set up a local bank account
- Acquire a credit card from a local bank
- Purchase of a vehicle
- Build a property
- Transfer money from an Indonesian bank account to a foreign bank account
Who is identified as an Indonesian tax subject?
The Indonesian Income Tax Law states that non-Indonesian residents are deemed resident tax subjects if they stay for more than 183 days in a 12-month period or a fiscal year. If you generate an income in Indonesia, own a business or are employed by an Indonesian company, you most definitely have to pay income taxes, or taxes on dividends etc. on all the income you generate within Indonesia.
Foreigners with a Work KITAS (Temporary Stay Permit) are domestic tax subjects in Indonesia that will only be taxed on the money they earn within the country, and not their global income, for four years. The “omnibus legislation scheme” recently changed the tax provisions to provide incentive for expats. Of course, if you are also still registered as a tax resident in another country, you might still have to declare the income you make in Indonesia in your country.
However, foreigners who do not count as tax residents (i.e. staying less than 183 days in Indonesia, cannot present a KITAS and thus does not have an NPWP) and do not have a permanent establishment in the country are subject to a flat withholding tax (WHT) of 20% of their global income when they generate income upon conducting business activity in the country.
Corporate Income Tax (CIT)
A company registered in Indonesia has to pay corporate taxes like in most countries in the world. This can be anything between 20-25% on the profits.
You will become an Indonesian resident after you get a retirement KITAS or a dependent KITAS, and you will be liable to pay the Indonesian Personal Income Tax based on your worldwide income.
Employee Income Tax for Expatriates
If you are a foreign employee with a Work Permit (KITAS) in Indonesia, you are liable to the PPh 21 Income Tax. Your company will take the tax from your pay and pay it to the tax authorities on your behalf.
In Indonesia, both purchasers and sellers must pay specific taxes levied upon the transfer of land and building rights. The seller pays an income tax on the sale of land or property, and the buyer pays acquisition tax on the land and the building rights (Pajak Bumi dan Bangunan). The tax will most likely be included in the contract of the sale.
Only the following are exempt from the buyers acquisition tax:
- State for government administration or development implementation in the public interest
- Diplomatic consulates or representations in terms of reciprocal treatment
- Representatives of international non-profit organizations
Other related property taxes:
- Lease Taxes
In Indonesia, the lease or rental tax is ten percent of the property lease value for tax residents and twenty percent of the property lease value for non-tax residents.
- Construction Tax
In Indonesia, construction tax is only levied once a building has been completed. The value of the construction tax is determined by the building’s construction costs.