Tax on Personal Income for Foreigners in Indonesia

Every resident taxpayer is obliged to pay their income tax. Resident taxpayers are defined as individuals who:

• Are domiciled in Indonesia; or
• Stay in Indonesia for more than 183 days in any 12-month period, or
• Are present in Indonesia during a tax year and intending to reside in Indonesia

For point number 2, you may be considered resident even though you have spent less than 183 days in the country. This would be the case if you disposed of your home in another country, moved with your family to Indonesia and took up employment and it was clear you intended to stay in the country for a length of time.

A foreigner who qualifies to be a resident taxpayer becomes a tax resident from the date of arrival in Indonesia until the date of final departure from Indonesia.

Individuals exempted from personal individual tax

Certain foreign expatriates, because of their special legal status, are not considered as Indonesian tax residents and are exempted from paying taxes, even if they stay for more than 183 days per year or reside and intend to stay in Indonesia.

These exemptions apply for:

• Foreign diplomatic and consular personnel;
• Military personnel and civilian employees of foreign armed services; and
• Representatives of international organizations specified by the Minister of Finance.

A resident taxpayer should oblige to these rules:

• Must register with the Indonesian Tax Office (Kantor Pelayanan Pajak or KPP) and obtain a tax ID number (NPWP or Nomor Pokok Wajib Pajak). If he/she is leaving Indonesia permanently, the NPWP should be deregistered.
• File individual income tax returns declaring worldwide income and assets and liabilities annually. The forms are called Form 1770 (for resident taxpayers with business income), Form 1770-S (for resident taxpayers who receive income from employers and other income), and Form 1770-SS (for resident taxpayers with annual gross income not exceeding Rp60 millions).
• Annual tax underpayment, if any, must be paid before the tax return is lodged. The annual tax return is for the period from 1 January to 31 December and shall be lodged with the Tax Office no later than 31 March on the following year. The annual tax return can be lodged directly to the Tax Office where the taxpayer is registered, or through Drop Boxes.
• Resident taxpayers may need to pay monthly tax installment or tax prepayment (“Article 25 Income Tax”), the amount of which is to be calculated when the annual income tax due is calculated and to be reported in the annual income tax return.
• Maintain documents to support the income, taxes paid, and assets and liabilities declared in the individual tax return, such as bank statements, foreign tax return, asset ownership certificate, and more. Documents shall be maintained for a minimum period of 10 years.

How to obtain an NPWP

Foreigners have to obtain an NPWP at the nearest tax office of their place of residence so as to be able to determine if they will have to pay income tax and how to proceed. Residents having to apply for an NPWP are the following:

• Any employee whose salary exceeds the maximum non-taxable income
• Any employee who earns extra remuneration, in addition to his main salary
• Any employee or taxpayer who receives income from trade, business, self-entrepreneurship
• Any taxpayer who earns his income from capital
• Any foreigner living in Indonesia for 183 consecutive days over a 12 months period and holding a KITAS, KITAP, a business or social and cultural visits visa.

Those living in Jakarta have to visit the KPP Badora (Kantor Pelanan Pajak Badan dan Orang Asing), which is the tax office for expatriates and foreign agencies. Documents to be produced are the following:

•  A photocopy of Kartu Izin Tinggal Terbatas (KITAS) or Kartu Izin Tinggal Tetap (KITAP).

Otherwise, you can apply for an NPWP online through https://ereg.pajak.go.id.

Taxation on employment income

In Indonesian tax regime, “income” is defined as any increase in economic prosperity received or accrued, originating within or outside Indonesia, used for consumption or to increase the wealth of the taxpayer, in whatever name or form.

Indonesian tax resident companies and permanent establishments are required to withhold income tax (“Article 21 Income Tax”) from the salaries payable to their employees on a monthly basis and pay to the tax to the state treasury on their behalf; and then report to the Tax Office.
The rates applied to taxable income are shown below:

Tax return for the year must be filed by 31 March of the following tax year, and payment of any outstanding tax must have been made before that date. The filing deadline can be extended to 31 May using Form 1770-Y; however you still need to have paid all outstanding before 31 March.