Indonesia individual Income Tax
Individual income tax (Pajak penghasilan) rates in Indonesia are progressive up to30%, as follows:
Taxable income (Rp) Tax Rate 0 – 50,000,000 0 + 5% on excess 50,000,001 – 250,000,000 2,500,000 + 15% on excess 250,000,001 – 500,000,000 32,500,000 + 25% on excess Above 500,000,000 95,000,000 + 30% on excess
An additional 20% tax is imposed on the individuals, other than non-tax residents, who do not posses tax identification number (NPWP).
ALLOWABLE TAX DEDUCTIONS
In determining the annual taxable income of an individual, the following may be deducted from gross income:
- Occupational support: 5% of gross income, up to maximum of 6,000,000 - Pension: 5% of gross income, up to maximum of 2,400,000
- Non-taxable income:
. For the taxpayer 15,840,000
. Additional for a married taxpayer 1,320,000
. Additional for each lineal family member related by blood marriage who is a full dependent up to a maximum of three 1,320,000 each
A married female employee is only allowed non-taxable income for herself unless she has a certificate from the local authorities stating that her husband does not work.
Non-resident individuals are subject to a final tax of 20% where the payments represent compensation for work performed in Indonesian regardless of where paid.
Lump sump pension payments and severance pay on individual residents are subject to final tax on the gross amount at the following rates:
Taxable income Tax Rate 0 – 25,000,000 exempt/non taxable income 25,000,001 – 50,000,000 5% on excess 50,000,001 – 100,000,000 1,250,000 + 10% on excess 100,000,001 – 200,000,000 6,250,000 + 15% on excess 200,000,000 and above 21,250,000 + 25% on excess
However, pension payments made to non-resident individuals are taxed under Article 26 of Income Tax Law at a rate of 20% on the gross amount.
Where home leave or education costs are reimbursed, the amount of the reimbursement is taxable in full on the employee.
Note that food and drink provided at the working area by the employer to the employees are not subject to tax but deductible for the employer.
Indonesians are taxed on their worldwide income. Non-residents are only taxed on income derived from Indonesia. An individual will be a resident of Indonesia if they are present in Indonesia for more than 183 days or reside in Indonesia during a fiscal year and intend to stay in Indonesia. Certain tax treaties modify the above rules.
Filing status – The family is considered a single economic unit; hence, joint filing is required. Separate filing is allowed only if there is a pre-nuptial agreement between the husband and wife.
Taxable income – Taxable income of individuals includes profits from a business, employment income and capital gains.
Capital gains – Capital gains derived by an individual are taxed as income at the normal rates; gains on shares listed in Indonesia are taxed at 0.1% (final tax) of the transaction value. (An additional tax of 0.5% applies to the share value of founder shares at the time of an initial public offering.) Gains on the disposal of land and/or buildings are taxed at 5% (final tax) of the transaction value.
Corporate Income Tax Rate in Indonesia
Indonesia company tax rate is 25%.
A company will be considered taxable in Indonesia if it has a presence and conducts business in that country. Resolution of this question depends on whether the entity has a 'permanent establishment' in Indonesia. This term is widely defined to include a place of management, branch, representative office, office building, agent, factory or workshop, construction or mining site. Where such a presence exists, the permanent establishment is taxable on its worldwide income. Where similar...
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