Tax in Indonesia

Tax In Indonesia

A Contractor’s Guide to Taxes :

One of the most consistently challenging aspects of contracting in Indonesia is complying with the country’s tax system. As well as paying tax in Indonesia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

How do I calculate my taxable income:

If you’re working in Indonesia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Indonesia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Indonesia, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Indonesia through PAYE is left with the prospect of doing everything themselves.

Do you know much about Indonesian Tax Law? Does Indonesia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Indonesia can range from 5 to 30 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator:

If you are a contractor and want a calculation on your tax and net retention in Indonesia, we can supply it to you free of charge.

Using an Umbrella Company for Income Tax :

Contractors in Indonesia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Indonesian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Indonesian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Indonesian tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax:

We work with numerous umbrella companies in Indonesia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Indonesia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Indonesian work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Indonesia but without the overhead of directly dealing with the Indonesian tax authorities. Get in touch with us today for some reliable advice on tax in Indonesia!

When Do You Need to Lodge Your Tax Return?:
The tax year in Indonesia is the calendar year. Tax returns may be filed from 1 January.
Tax Filing Deadline :
31 March
Can you file it online? :
Yes, https://djponline.pajak.go.id
Currency:
Indonesian Rupiah (IDR)
Tax-free Threshold in:
None
Grossed Income:
Up to 50,000,000
Tax Rate:
5%
Grossed Income:
50,000,001 to 250,000,000
Tax Rate:
15%
Grossed Income:
250,000,001 to 500,000,000
Tax Rate:
25%
Grossed Income:
Above 500,000,000
Tax Rate:
30%
How long does it take to set up:
22 days
How much does it cost:
IDR 1,000,000 + notary fee dependent on the start-up capital
Is it easy? :
Starting a Business Rank: 144 (Source: World Bank)
How to File Taxes in:

Income taxes in Indonesia can be filed directly at a Tax Service Office, posted by mail to a Tax Service office or electronically. The electronic method is the easiest and most efficient. The process for filing taxes electronically involves:

Step 1: Register as a taxpayer with the Indonesian Tax Office (Direktorat Jenderal Pajak) and obtain a Tax ID number (‘NPWP’). This can be done at the Tax Service Office in your city of residence. Documents to bring include:

  • a completed registration form
  • photocopies of all the pages in your passport
  • photocopy of your work permit
  • certificate of domicile for you and your employer
  • photocopy of your employer’s NPWP

Step 2: Obtain an e-Filing number (e-FIN) from the Tax Service Office (KPP) in order to access the e-filing system. This must be done by the taxpayer and cannot be delegated to another party. Documents to bring include:

  • Original and photocopy of your passport
  • Original and photocopy of your Tax ID number (NPWP)

Step 3: Register for a tax service account for DJP Online(link is external). Enter your Tax ID, EFIN number and security code and then click ‘veri kasi’ (verify). Fill in the required data and create a password. An email will be sent to you requesting you to activate your account.

Step 4: Log into DJP Online here(link is external) using your NPWP and password.

Step 5: Download the e-SPT application.

Step 6: Fill out the required electronic form and upload any attachments as a PDF. Alternatively, you can print out the forms and deliver it to the tax office.

  • Form 1770: annual individual income tax return form for independent contractors and individuals with business activity.
  • Form 1770S: annual individual income tax return form for ordinary employees and taxpayers who have income from more than one employer.

Step 7: Pay your tax due using e-billing(link is external). First, you must generate an e-billing code either through DJP online, SMS, internet banking or a teller (this code lasts for 7 days). You then use this code to pay your taxes through a teller, an ATM, internet banking or mobile banking.

Guides for e-filing

Official websites

Indonesian Tax Office: https://www.pajak.go.id/(link is external)

Notes:

Personal income is taxed at progressive rates in accordance with the above table.

Non-resident taxpayers are subject to a flat rate of 20% on Indonesian-sourced income.

Termination pay is taxed differently. The following progressive tax rates apply:

Termination pay

Tax Rate
Up to 50,000,000

Tax exempt
50,000,001 to 100,000,000

5%
100,000,001 to 500,000,000

15%
Above 500,000,000

25%
Does the 183 day rule apply in:

Yes

When do you become a tax resident in:

You become a tax resident in Indonesia if:

  • You are present in Indonesia for more than 183 days within a 12 month period, or
  • Within the calendar tax year, you reside in Indonesia with the intent to stay.
  • Note: An Indonesia national who works overseas for more than 183 days within a 12 month period is considered a non-resident.
Am I taxed on my global income in:

Yes, if you are a tax resident. Non-residents are subject to tax on Indonesian-source income only.