A flat income tax rate of 22% is generally applicable to net taxable income.
However, special tax regimes apply to certain taxable entities or industries. For example, there are discounts for public and small companies (if certain conditions are met, the effective rate is reduced to 19% and 11%, respectively).
The following tax rates apply to personal income in Indonesia:
The standard rate of VAT has been increased from 10% to 11% from 1 April 2022, with further increases to 12% planned from 1 January 2025.
In addition, a zero rate (0% rate) is also provided for.
In addition to VAT, certain goods (e.g. cars and luxury residences) when imported or supplied by a manufacturer to another party are subject to additional tax at rates that currently range from 10% to 95%.
Employers' insurance contributions are calculated as a percentage of normal salary ranging from 0,24% to 4%. This applies to all employees, including expatriates who have worked in Indonesia for more than 6 months.
A corporate taxpayer may be required to pay certain regional taxes and levies. The rates of such taxes and levies range from 0,2% to 75%.
The following are examples of regional taxes that may apply:
A controlled foreign company (CFC) is a foreign entity that is at least 50% owned by an Indonesian taxpayer or Indonesian taxpayers.
In Indonesia, certain income of a CFC is subject to the deemed dividend rules. This income includes dividends, interest, rents, royalties, and (subject to certain limitations) gains from the sale or transfer of assets.
Transactions between related parties must comply with the arm's length principle: this principle involves recalculating the value of contracts for transactions between related parties to market values for tax purposes. This means that if the market price level is not met, the Indonesian tax authority is authorised to recalculate the taxable income or deductible expenses arising from such transactions using the arm's length principle.
Most capital gains are subject to the standard rates of income tax (if we are individuals) and corporate income tax (if we are legal entities). Capital gains from shares listed on the Indonesian Stock Exchange are taxed at a rate of 0,1% of the transaction value. Gains derived from the disposal of land and/or buildings by companies are taxed at a rate of 2,5% of the sale proceeds (for individuals, the rate of this tax is 5%).
A basic withholding tax rate of 20% applies to dividends, interest and royalties paid to a tax non-resident of Indonesia. The rate may be reduced under a double tax treaty.
Indonesia has concluded 71 Double Tax Treaties (Double Tax Treaty / DTC) as well as 6 Tax Information Exchange Agreements (Tax Information Exchange Agreement / TIEA) with the following jurisdictions:
71 DTCs: Algeria, Armenia, Australia, Austria, Bangladesh, Belarus, Belgium, Brunei, Bulgaria, Cambodia, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hong Kong, Hungary, India, Iran, Italy, Japan, Jordan, Korea (North), Korea (South), Kuwait, Laos, Luxembourg. Malaysia, Mexico, Mongolia, Morocco, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russia, Serbia, Seychelles, Singapore, Slovakia, South Africa, Spain, Sri Lanka, Sudan, Suriname, Sweden, Switzerland, Syria, Taiwan, Tajikistan, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uzbekistan, Venezuela, Vietnam, Zimbabwe.
6 TIEAs: Bahamas, Bermuda, Guernsey, Isle of Man, Jersey, San Marino.
In addition, Indonesia has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting / MLI. The Multilateral Convention entered into force for Indonesia on 1 August 2020.
Individuals entering or leaving Indonesia with cash and/or other forms of payment of at least IDR 100 000 000 (or equivalent) must notify the Indonesian General Directorate of Customs and Excise.
Indonesia does not prohibit the transfer of funds to or from foreign countries. However, for transfers from Indonesia of USD 100 000 or more (or equivalent), the person carrying out the transaction must provide appropriate documentation, which will be submitted to the Central Bank of Indonesia (Bank Indonesia) by the relevant bank.
All cash or non-cash transactions conducted in Indonesia by residents or non-residents must be conducted using IDR.