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Tax

Based on Article 1 Number 6 of Law Number 28 of 2007, Taxpayer Identification Number / Nomor Pokok Wajib Pajak (NPWP) is an identity or identification issued by the Directorate General of Taxes to taxpayers.

Advantages:

  1. As a unique code that is always used in all tax matters
  2. Managing overpayment refund process
  3. Higher rate on Income Tax for those who do not have Tax Identification Number.

Personal Income Tax
If a person meets one of the following conditions, he / she is considered a taxpayer in Indonesia (unless the tax treaty overrides this rule):

  • The individual lives in Indonesia;
  • The individual has been in Indonesia for more than 183 days in a 12 months period;
  • The person is in Indonesia during the fiscal year and intends to reside in Indonesia.

Meanwhile, non-resident individuals are subject to a 20 percent withholding tax on income sourced from Indonesia.

The following progressive rates are charged to taxable annual income:

Individual Income Tax
Tax Rate
Up to IDR 50 million
5%
Over IDR 50 million to IDR 250 million
15%
Over IDR 250 million to IDR 500 million
25%
Over IDR 500 million
30%

Most of the individual income taxes are collected through withholding by employers. Employers deduct income tax each month from salaries and other compensation paid to employees. In the event that the employee is a resident taxpayer (residing in Indonesia), the tax rates stated above apply. If the person is a non-resident taxpayer, the withholding tax is 20 percent of the gross amount (in tax treaty terms, the amount may vary).

Withholding Tax (for payments to residents)
Tax Rate
For interest, dividends & royalties
15%
For services
2%
for land and building rental (final tax)
10%
These withholding taxes are considered corporate tax prepayments
Withholding tax calculated on sales/revenue is considered a final tax
Withholding Tax (for payments to non-residents)
Tax Rate
Normal rate (can be reduced by using tax treaty provisions, or exempt services that qualify as business profits)
20%

Corporate Income Tax
The company is subject to tax obligations set by the Indonesian government if the company is domiciled in Indonesia. Likewise, foreign companies that have a (permanent) establishment in Indonesia – and carry out business activities through this local entity – are included in Indonesia’s tax regulations. If the foreign company does not have a permanent establishment in Indonesia but generates income through business activities in Indonesia, it must settle its tax obligations through withholding tax by the Indonesian party who pays the income.

In general, the 25 percent corporate income tax rate applies in Indonesia.

Corporate Income Tax
Tax Rate
Normal rate
25%
Public company with >40% of its shares traded on the IDX
20%
Companies with a gross turnover below IDR 50 billion
12,5%
Companies with a gross turnover below IDR 4.8 billion
1%

One of the tax collection systems applied in Indonesia is the Withholding Tax System (tax deduction / collection). In this system, third parties are given trust to carry out the obligation to withhold or collect tax on income paid to the recipient of income at the same time deposits it into the state treasury. At the end of the tax year, the tax has withheld or collected and already deposited into the state treasury will be deducted from taxes or credits tax for parties withheld by attaching proof of withholding or collection.

The Withholding Tax system in Indonesia is applied to the Tax withholding / collection mechanism Income (Pajak Penghasilan, PPh). The term withholding is intended to denote the amount of tax withheld by income giver for the amount of income given to the income recipient, so that causes a reduction in the amount of income he receives (eg Ph. Article 21 and Income Tax Article 23). Meanwhile, what is meant by collection is the amount of tax collected on an amount payment that have the potential to generate income to the recipient of the payment (eg Income Tax Article 22).

Withholding Income Tax Article 21
Income Tax Article 21 is a tax withheld from income in connection with work, services, and activities carried out by Domestic Individual Taxpayers (WP), namely income in the form of salaries, wages, honoraria, allowances, and other payments in whatever name and form.

Article 22 Income Tax Collection
Income Tax Article 22 is a tax collected by:

  • Government treasurers related to payment for delivery of goods originating from funds State Revenue and Expenditure Budget (APBN);
  • Certain entities related to income from activities in the import sector or business activities in other fields; and
  • Certain corporate taxpayers related to payments from buyers for sales of goods classified as very high luxury.

Withholding Income Tax Article 23
Income Tax Article 23 is a tax withheld from the income of Domestic Taxpayers and Permanent Establishments / Bentuk Usaha Tetap (BUT) originating from the use of capital (dividends, interest, and royalties), provision of services (rent, compensation for services), or organizing activities (prizes, awards, and bonuses) other than those that are deducted Income Tax Article 21.

Withholding Income Tax Article 26
Income Tax Article 26 is a tax withheld from the income of foreign taxpayers on non-income originating from running a business or activity through a PE originating from Indonesia. Cutting Income Tax Article 26 is final (cannot be used as a tax credit), unless otherwise specified.

Withholding Income Tax Article 4 paragraph (2)
Income Tax Article 4 paragraph (2) is a tax withheld from income with separate treatment regulated through government regulations and is final. Income withheld from Income Tax Article 4 (2) is between other income in the form of interest on deposits and savings / current accounts, and discount on Bank Indonesia Certificates, income from sale of shares on the stock exchange, income in the form of interest and discounts bonds sold in the capital market, income in the form of interest on deposits paid to cooperative members (WP Orang Pribadi), venture capital income from the sale of shares / transfer of the company’s partner’s capital investment, leasing land and / or buildings, transfer of rights to land and / or buildings, construction service business income, and income on discounted State Treasury Bills.

Withholding Income Tax Article 15
Income Tax Article 15 is a tax withheld from income using calculation norms specifically for certain groups of taxpayers, in order to make it easier for the taxpayers to perform their obligations taxation, such as shipping companies or international airlines; outside insurance company country; oil, gas and geothermal drilling companies; foreign trading company; and companies investing in the form of build, operate and transfer. To calculate the amount of taxable income for a certain class of WP, the Minister Finance is given the authority to set Special Calculation Norms to calculate the amount net income from that particular WP.

Withholding Tax revenue in 2010 amounted to Rp.587.65 trillion, an increase to IDR 730,418 trillion in 2011, and is targeted to be IDR 849.706 trillion for 2012 or 83.61% of the total 2012 tax revenue target of IDR 1,016.237 trillion. Remember the important role of Withholding Tax in securing state revenues from the tax sector, then the Directorate General of Taxes requires all tax cutters and collectors to deposit and report their tax obligations in accordance with applicable regulations

The subjects of the United Nations are individuals and bodies that actually have the following:

  • Have rights to the earth.
  • Benefit from the earth.
  • Own buildings.
  • Master the building.
  • Get benefits for the building

Exception of Land and Building Tax Objects

In fact, not all building earth objects can be subject to PBB. There are also tax objects that cannot be subject to PBB. However, the tax object must have certain criteria stated in Law Number 12 Year 1994 regarding Land and Building Tax. The following is a list of these criteria:

  • The tax object is used solely for public interest in the fields of worship, social, health, education and national culture, which are not intended to gain profit.
  • Used for graves, ancient relics, or the like.
  • The tax objects are protected forest, nature reserve forest, tourism forest, national park, cultivation land controlled by a village, and state land that has not been encumbered with a right.
  • The tax object is used by diplomatic representatives and consultants based on the principle of reciprocal treatment.
  • The tax object is used by bodies or representatives of international organizations determined by the minister of finance.

Land and Building Tax Rates
The land and building tax rate that has been in effect since the past until today is still the same, which is 0.5%.

Tax holidays are one form of tax incentive that is most often provided in an effort to attract foreign investment. The tax holiday itself takes the form of corporate income tax exemption or it can also be in the form of a reduction in the corporate income tax rate for companies that invest new capital in the country for a certain period of time. This incentive is intended to stimulate foreign investment.

Other modifications can also be in the form of a combination of the two, namely obtaining corporate income tax exemption and followed by a reduction in a certain period. It is therefore not surprising that tax holidays are considered the most ‘generous’ tax incentive.

Tax holidays are often placed in specific industries to encourage growth. However, not all industries can enjoy a tax holiday. The investor must meet the requirements of a pioneer industry, create many jobs, bring new technology, enter small and underdeveloped areas, and provide added value to the industry.

The provision of these facilities is regulated in Article 31A of Law Number 7 of 1983 concerning Income Tax as amended several times, most recently by Law Number 36 of 2008 (Income Tax Law). Facilities are provided in the form of:

  • reduction in net income is no more than 30% of the total planting done;
  • accelerated depreciation and amortization;
  • compensation for losses that are longer, but not more than 10 years; and
  • the imposition of Income Tax on dividends as referred to in Article 26 at 10%, unless the tariff according to the applicable taxation agreement stipulates a lower rate.
  • Meanwhile, tax holidays are also given to pioneering industrial companies making new investments in Indonesia that do not get the facilities as referred to in Article 31A of the Income Tax Law. This provision has been regulated in Article 29 of Government Regulation Number 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year.

Provisions regarding the granting of tax holiday facilities for investment in certain business fields and / or in certain areas are further regulated in Government Regulation 18 of 2015.

Taxpayers who have obtained the tax holiday facility must submit periodic reports to the Directorate General of Taxes and the verification committee regarding:

  • reports on the use of funds placed in banks in Indonesia; and
  • an audited report on investment realization.
  • the provisions regarding this reporting procedure are regulated by the Director General of Taxes Regulation.

Who Has the Right to Get It?

In Article 4 of the Minister of Finance Regulation Number 159 / PMK.010 / 2015, it is stated that taxpayers who can receive tax holiday facilities must meet the following criteria:

  1. is a new taxpayer;
  2. is a Pioneer Industry;
  3. has a new investment plan that has been approved by the competent authority, at least in the amount of Rp1,000,000,000,000.00;
  4. comply with the provisions on the ratio between debt and capital as referred to in the Regulation of the Minister of Finance concerning the determination of the ratio between debt and company capital for the purposes of calculating Income Tax;
  5. submit a statement of commitment to place funds in banks in Indonesia at least 10% (ten percent) of the total investment plan as referred to in letter c, and the funds are not withdrawn prior to the commencement of the implementation of investment realization; and
  6. must have the status of an Indonesian legal entity whose ratification was established on or after August 15, 2011.

The pioneer industry which is intended includes 9 sectors as follows:

  1. Upstream metal industry;
  2. Petroleum refining industry;
  3. Organic basic chemical industry sourced from petroleum and natural gas;
  4. Machinery industry that produces industrial machines;
  5. Agricultural, forestry and fishery product-based processing industries;
  6. Telecommunication, information and communication industry;
  7. Marine transportation industry;
  8. Processing industry which is the main industry in Special
  9. Economic Zones; and / or Economic infrastructure other than those using the Government and Agency Cooperation scheme.

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Emergency Numbers

Nomor telepon Pemadam Kebakaran

PBK Batu Ampar

PBK Duriangkang

PBK Sekupang

PBK Sagulung

PBK Sei Panas

Nomor Telepon RS BP Batam

Fire Department phone number

Batu Ampar Fire Prevention Center

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Sagulung Fire Prevention Center

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BP Batam Hospital Phone Number