Income tax in Indonesia is progressive and applied to both individuals and enterprises.
Tax rate for individuals is depend on the annual income, for example, 5% tax rate for annual income up to Rp. 25 million, and 35% tax rate for annual income over Rp. 200 million. A self-assessment method is used to calculate the tax.
Land and building tax is payable annually on land, building and permanent structures.
The effective rates are nominal, typically not more than one tenth of one percent per-annum (0.1%) of the value of property.
The others categories of issues regarding taxation related to investment process and in doing business in, ie losses, depreciation and amortization rates, value added tax and sales tax luxury goods, withholding tax, stamp duty, avoidance of double taxation agreements, and incentives.
Corporate Income Tax
- 25 percent on all income (normal rate)
- a 5 percent lower than normal rate is applied to a Limited Company of which at least 40 percent of its shares are traded on the stock exchange market (IDX)
- a 50 percent deduction from the normal rate is applied to companies with a gross turnover up to IDR 50 billion
VAT (Value Added Tax)
- Input and Output mechanism
- The current rate is 10 percent
Withholding tax – for payments to residents
- 15 percent for interest, dividends and royalties
- 2 percent for services
- These withholding taxes are considered corporate tax prepayments
- 10 percent for land and building rental (final tax)
- Withholding tax calculated on sales/revenue is considered a final tax
Withholding tax – for payments to non-residents
- 20 percent according to the domestic law, but can be reduced by using tax treaty provisions, or exempt for services that qualify as business profits
Individual Tax – the following progressive rates are charged to taxable annual income
- Up to IDR 50 million, tax rate applied is 5 percent
- Over IDR 50 million to IDR 250 million, tax rate applied is 15 percent
- Over IDR 250 million to IDR 500 million, tax rate applied is 25 percent
- Over IDR 500 million, tax rate applied is 30 percent
- Can be carried forward for 5 years