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Various forms of taxes from Indonesia that you should know

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Various forms of taxes from Indonesia that you should know

In investment matters, tax is a key issue, no matter where you are. As one of the major contributors to the income of a country, for investors considering joining a market country, the amount of tax levied is often a deciding factor.

No exception is Indonesia. It imposes both corporate taxes on companies doing business in Indonesia and taxes on individuals' personal income.

Here we explain Indonesia's key taxes:

1. Charge on Corporate Profits

For tax purposes in Indonesia, a corporation is considered a citizen. Thus, as residents, business owners have tax responsibilities. As long as its establishment is in Indonesia, a company will assume the same tax obligations as a resident. Foreign companies with a permanent establishment in Indonesia can pay their taxes by direct payment, withholdings from third parties, or both.

Level of Tax:

A flat corporate tax rate of 22 per cent is applied to net taxable income as of 2020. A flat corporate tax of 20 per cent will be paid in 2022. A few exemptions, however, exist;

 

  • Companies with annual revenue of up to IDR 50 billion have the right to a tax deduction. Plus, they will apply for a tax discount of up to 50%.

 

  • Companies with gross revenue of less than 4.8 billion earn a 1 per cent tax limit.

 

  • A tax rate of 5 per cent applies to companies listed on the Indonesian stock exchange that offers a minimum of up to 40 per cent of their total share.

 

  • The revenue accumulated from the permanent establishment is taxed at 20 per cent by foreign companies with an Indonesian branch.

2. Tax on Personal Income

The income tax applies to both Indonesian citizens and non-residents. A person is obliged to pay tax if he or she meets the requirements set out below.

  • Lives in Indonesia.

 

  • Stays in Indonesia for more than 183 days over the span of 12 months.

 

  • Present in Indonesia with the intention of remaining in the country during the fiscal year, except in cases where less than 183 days have been spent.
  • People working overseas but still earning some sort of income in Indonesia

 

Note: In cases where tax treaties circumvent the requirements, the tax exemption is applicable;

Level of Tax:

  • The tax rates of residents depend on the income of the person, ranging from 5% to 30%.

 

  • Earnings of up to 50 million IDR per year = 5 per cent

 

  • About 50 -250 million = 15%

 

  • 250-500 million = 25%

 

  • 0 to 500 million = 30%

 

  • Non-residents are subject to a tax rate of 20 per cent on their Indonesian wages.

3. Tax with value-added

Value Added Tax (VAT) refers to the procurement of taxable goods or services within the scope of Customs Ares. Categories of taxable products and services include;

Some taxable goods for importation and export

 

  • Export of services subject to taxes and intangible goods

 

  • Taxable goods shipped between the head office and the branch or branches of the same company

 

  • Goods movement on consignment

 

  • Consumption of offshore-origin taxable intangible goods and services

Level of Tax:

There is a general VAT of 10 per cent. However, according to government legislation, it can be raised to 15 per cent or reduced to 20 per cent.

4. Luxury-Sales Tax on Commodities (LGST)

In addition to value-added tax, certain expensive products are subject to the luxury tax. Generally, luxury goods include automobiles, apartments, and other items that upper-income people consume.

Level of Tax:

 

  • 10 per cent minimum and 125 per cent maximum.

 

In conclusion, the types of tax and the rates of tax vary from each other. In order to find the rate appropriate to your company, it is best to also speak to your tax advisor. Read more about the Wallex Indonesia tax scheme. Contact us and read all about how to avoid disadvantageous exchange rates and premature disbursements.

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