Income Tax Rate for Expatriate/Foreigner in Indonesia

Income Tax Rate for Expatriate/Foreigner in Indonesia

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Before answering questions below, make sure you have already done with these questions first to see whether you are subject to this kind of tax or not.

Does your country have tax treaty with Indonesian government?

If Yes, check tax treaty between Indonesian government and your government because tax rate under tax treaty usually below normal rate.

If No, see below

Do you earn income from this source?

  1. Dividend
  2. Interest, including premium, discount, and compensation  from loan repayment;
  3. Royalty, rent, and other income from property;
  4. Income/compensation from services rendered, jobs, and other events
  5. Prizes and awards
  6. Pension and other regular income.
  7. Premium on swap and other hedging income
  8. Gain from debt write off

If Yes, you are subject to 20% tax (final) from gross income.

Do you earn income from this source?

  1. Sale of asset in Indonesia;
  2. Insurance premium, reinsurance premium directly paid or via brokerage for foreign insurance company outside Indonesia
  3. Stock selling/transfer between conduit company or a special purpose company incorporated or domiciled in a country that provides taxes protection that have related-party interconnection with a company or permanent establishment in Indonesia

If Yes, you are subject to 20% tax (final) from net income

While net income is equal to 25% from sale of asset or stock

or 5 – 50% from insurance premium

Is your company a permanent establishment (or Bentuk Usaha Tetap/BUT in Bahasa Indonesia)?

If Yes, your permanent establishment is subject to 20% tax (final) from Taxable Income After Tax unless that taxable income after tax is reinvested in Indonesia.

It means, along with regular income tax (25% from taxable income), your permanent establishment also pays 20% additional tax unless it is reinvested again in Indonesia.

When will this kind of tax due? Should you pay this tax yourself?

This kind of tax is due and payable no later that the 10th day of the following month after income accrued/paid. Individual income tax will likely using withholding tax system, it means that it is your employer responsibility to cut tax from your income and pays it to government. Make sure you receive tax proof of payment from your employer.

Reference:

Article 26 of Income Tax Law in Indonesia (or Pasal 26 Undang-undang Pajak Penghasilan/UU PPh in Bahasa Indonesia)

Current Income Tax Law in Indonesia = Law No 36 year 2008

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