Under the prevailing Indonesian tax law, a company is treated as a resident of Indonesia for tax purposes by virtue of having its establishment or its place of management in Indonesia. A foreign company carrying out business activities through a permanent establishment (PE) in Indonesia will generally have to assume the same tax obligations as a resident taxpayer
Income tax in Indonesia is progressive and applied to both individual (s) and enterprises. A self-assessment method is used to calculate the tax.
The Tax Rate For Individual(s)
Taxable annual income Income Tax Rate
Up to Rp 50 million 5%
Over Rp 50 million to Rp 250 million 15%
Over Rp 250 million to Rp 500 million 25%
Over Rp 500 million 30%
The Tax Rate For Corporate(s)
Year Income Tax Rate
2010 and onwards 25 %
Limited Company which 40% of their shares trade in stock exchange market 5 % Lower than normal rate
Gross turnover up to Rp.50.000.000.000 50 % deduction from normal rate
The normal tax period is January to December. If corporate taxpayers would like to use a different tax period, e.g. July to June, they would have to obtain an approval from the Director General of Tax (DGT) and then maintain the approved tax period consistently.
Land and building tax (PBB) is a type of property tax chargeable on all land and buildings, which is due annually at 0.5% of the government-determined sales value. In land and building transfer, the acquirer is liable for duty on the acquisition of land and buildings rights (BHPHTB) at 5% of the greater of the transaction value or government-determined value.
Stamp duty is nominal only at either Rp. 3,000 or Rp. 6,000 on certain documents. The rate of Rp. 6,000 is applicable for letters of agreement and other letters, Notary Deed and Land Deed including its copies. For all documents bearing a sum of money, the rate is Rp. 6,000 when the value stated in the document is more than Rp. 1 million, and Rp. 3,000 when the value is between Rp. 500,000 and Rp. 1 million. Below Rp. 500,000 is not subject to stamp duty. For cheques, the rate is Rp. 3,000 regardless of money value stated.
To avoid incidental double taxation on certain income such as profits, dividends, interests, fees, and royalties, Indonesia has signed agreements (tax treaties) with the 59 countries as follows:
Korea, Republic of
Korea, Democratic Peoples Republic of
Uni Arab Emirate
United States of America
Withholding tax rates applied to residents of these countries signing tax treaty with Indonesia, may be reduced based on the provisions of the particular tax treaty.
Basically the government provides loss carry forward facility for a period of 5 (five) years and addtional 5 (five) years if fullfill certain conditions (Government Regulation No. 1/2007 jo. No. 62/2008)
(Government Regulation No. 1/2007 jo. No. 62/2008 and other tax implementation regulations)
Depreciation cost on assets is deductible from the income before tax. Depreciable assets are grouped into four categories depending on the useful life of the assets.
Investors may choose either the straight line method (for periods of less than 20 years) or the fast declining balance method (except for buildings)
Depreciation rate is determined according to the useful life and utilization such as :
Physical (Tangible) Asset Useful Life (years) Method of Calculation
Straight Line (%) Double Declining Balance (%)
l. Non Building
Group 1 4 25 50
Group 2 8 12.5 25
Group 3 16 6.26 12.5
Group 4 20 5 10
Permanent 20 5
Non Permanent 10 10
Non-Physical Asset Useful Life (years) Method of Calculation
Straight Line (%) Declining Balance (%)
Group 1 4 25 50
Group 2 8 12.5 25
Group 3 16 6.25 12.5
Group 4 20 5 10
In normal cases, 10% Value Added Tax (VAT) is applied to imports, manufactured goods and most services. In addition, there is also sales tax on luxury goods ranging from 10% to 75% (See Government Regulation No. 12/2001 jo. No. 43/2002 jo. 46/2003 and other related tax implementation regulations).
According to the government regulation No. 7 Year 2007;
1. Value Added Tax (VAT)
Free Charge of Value Added Tax (VAT) to the importation of certain VAT charged goods having the strategic term,
a. Capital Goods in the form of machineries and factory equipments, either in installed or separated, including spare parts
b. Feed of poultry and fish and raw materials to make feed
c. Seed and or seeding of agricultural material, plantation, forestry, livestock, aquaculture, or fishery
d. Agricultural products;
2. Free Charge of Value Added Tax Imposition (VAT)
Free charge of Value Added Tax (VAT) to the delivery of certain VAT charge goods having the strategic term, consist of;
a. Capital goods in the form of machineries and factory equipment, either in installed or separated, excluding spare parts, which is directly needed to produce VAT charge products
b. Feed of poultry and fish and or raw material to make the feed
c. Seed and or seeding of agricultural material plantation, forestry, livestock, aquaculture, or fishery
d. Agriculture products.
|All investment projects of PMA as well as PMDN projects which are approved by the Investment Coordinating Board or by the Office of Investment in the respective districts, including existing PMA and PMDN companies expanding their projects to produce similar product(s) in excess of 30% of installed capacities or diversifying their products, will be granted the following facilities:|
|There are many incentives provided for exporting manufacture products. Some of these incentives are as follows;|