Indonesian income tax is collected mainly through a system of withholding taxes. Where a particular item of income is subject to withholding tax, the payer is generally held responsible for withholding or collection of the tax.
Application of Withholding Taxes
These withholding taxes are commonly referred to using the relevant article of the Income Tax (Pajak Penghasilan/PPh) Law, as follows:
Employers are required to withhold PPh 21 from the salaries payable to their employees and pay the tax to the State Treasury on their behalf. The same withholding tax is applicable to other payments to nonemployee individuals (e.g., fees payable to individual consultants or service providers). Resident individual taxpayers without an NPWP are subject to a surcharge of 20% in addition to the standard withholding tax.
PPh 22 is typically applicable to the payments of the following events:
| Events | Tax Rate (%) | Tax Base |
| The import of: a. Certain end customer goods b. End consumer goods other than (a) c. Goods other than (a) and (b) using an Importer Identification Number (Angka Pengenal Impor/API): i) Soybeans, wheat and flour wheat ii) Other than (i) d. Goods other than (a) and (b) without an API |
| Import value (i.e., CIF value plus duties payable) |
| The auctioned imported goods | 7.5 | Auction prices |
| The purchase of goods by the Government requiring payment from the State Treasury and Proxy of Budget User (Kuasa Pengguna Anggaran/KPA) | 1.5 | Selling prices |
| The purchase of goods by State Owned Enterprises (Badan Usaha Milik Negara/ BUMN) and some of their subsidiaries | 1.5 | Selling prices |
| The purchase of oil fuel by gas stations from Pertamina and its subsidiaries | 0.25 | Selling prices |
| The purchase of oil fuel by gas stations from parties other than Pertamina and its subsidiaries | 0.3 | Selling prices |
| The purchase of oil fuel by parties other than gas stations | 0.3 | Selling prices |
| The purchase of gas fuel | 0.3 | Selling prices |
| The purchase of lubricants | 0.3 | Selling prices |
| The purchase of cement by local distributors | 0.25 | Selling prices |
| The purchase of paper products by local distributors | 0.1 | Selling prices |
| The purchase of steel products by local distributors | 0.3 | Selling prices |
| The purchase of automotive products by local distributors | 0.45 | Selling prices |
| The purchase of pharmaceutical products by local distributors | 0.3 | Selling prices |
| The purchase of motor vehicles from Sole Agents (Agen Tunggal Pemegang Merek/ATPM), Agents (Agen Pemegang Merek/APM) and general importers | 0.45 | Selling prices |
| The purchase of forestry, plantation, agriculture, cattle breeding, and fishery products by manufacturers or exporters | 0.25 | Selling prices |
| The export of coal, metal and non-metal minerals by exporters other than those engaged in a Mining Cooperation Agreement or a Contract of Work with the Government | 1.5 | Export value |
| The purchase of coal, metal and non-metal minerals from companies or individuals holding a mining license (Izin Usaha Pertambangan/IUP) | 1.5 | Selling prices |
| The purchase of gold bars | 0.45 | Selling prices |
| The purchase of very luxurious goods | 5 | Selling prices |
Resident companies, PEs, representatives of foreign companies, organisations and appointed individuals are required to withhold final tax from the following gross payments to resident taxpayers and PEs:
| Description | Tax Rate |
| Rental of land and/or buildings | 10% |
| Proceeds from transfers of land and building rights | 2.5% |
| Fees for construction work performance | 2/3/4% |
| Fees for construction work planning | 4/6% |
| Fees for construction work supervision | 4/6% |
| Interest on time or saving deposits and on Bank Indonesia Certificates (SBIs) other than that payable to banks operating in Indonesia and to governmentapproved pension funds | 20% |
| Interest on bonds other than that payable to banks operating in Indonesia and government-approved pension funds | 15% |
| Proceeds from sale of shares on Indonesian stock exchanges. To use this rate, founder shareholders must pay tax at 0.5% of the market price of their shares upon listing, otherwise, gains on subsequent sales are taxed under normal rules | 0.1% |
| Income from lottery prizes | 25% |
| Certain income received by individuals and corporate (except PEs) with gross turnover of not more than Rp 4.8 billion in one fiscal year | 0.5% |
Certain types of income paid or payable to resident taxpayers are subject to PPh 23 at a rate of either 15% or 2% of the gross amounts:
- PPh 23 is due at a rate of 15% of the gross amounts on the following:
a. Dividends (but see pages 12-13 concerning
profit distributions);
b. Interest, including premiums, discounts and loan
guarantee fees;
c. Royalties;
d. Prizes and awards. - PPh 23 is due at a rate of 2% of the gross amounts on the fees for the following:
a. Rentals of assets other than land and buildings;
b. Compensation with respect to technical services, management services, consultation
services and other services, except those have been withheld of Income Tax as referred to Article 21.
Resident taxpayers, organisations and representatives of foreign companies are required to withhold tax at a rate of 20% from the following payments to nonresidents:
- On gross amounts:
1. Dividends;
2. Interest, including premiums, discounts and guarantee fees;
3. Royalties, rents and payments for the use of assets;
4. Fees for services, work, and activities;
5. Prizes and awards;
6. Pensions and any other periodic payments;
7. Swap premiums and other hedging transactions;
8. Gains from debt write-offs;
9. After-tax profits of a branch or PE. - On Estimated Net Income (ENI), being a specified percentage of the gross amount:
| ENI | Effective Tax Rate | |
Insurance premiums paid to insurance companies: | 50% 10% 5% | 10% 2% 1% |
| Sale of non-listed Indonesian company shares | 25% | 5% |
| Sale of a conduit company located in tax haven country where this company serves as an intermediary for the holding of Indonesian company shares or a PE | 25% | 5% |
| Sale of luxurious jewelleries, diamonds, gold, luxurious watches, antiques, paintings, cars, motorcycles, yachts and light aircrafts with sale value of above Rp 10 million | 25% | 5% |
Where the recipient is resident in a country which has a tax treaty with Indonesia, the withholding tax rates may be reduced or exempted. Contact us for free consultation: [email protected].
20% off today. Whatsapp us!