Blog Details

Indonesia tax authority (hereinafter shall be referred to as “Dirjen Pajak”) requires each of the different forms of business entity possessing Tax Identification Number (hereinafter shall be referred to as “NPWP”) to pay corporate taxes. The mandatory corporate taxes fall into two categories, namely Income Tax (hereinafter shall be referred to as “PPh”) and Value Added Tax or VAT (hereinafter shall be referred to as “PPN”).

1. Income tax for corporate taxpayers is classified into eight (8) types as follows:
   • Income Tax Article 15 (PPh 15): This income tax is imposed on any income received or obtained by certain groups of corporate taxpayers in sectors such as shipping and aviation, foreign insurance firms, drilling, oil and gas as well as geothermal, foreign trading companies, investment companies in the form of building-use-handover.
   • Income Tax Article 21 (PPh 21): Any income of corporate taxpayers derived from occupation, services, and business activities of all forms is subject to PPh 21.
   • Income Tax Article 22 (PPh 22): Income tax article 22 whose rates vary depending on the taxable objects, are subjected to both state-owned and private corporations involve in trading activities such as export-import.
   • Income Tax Article 23 (PPh 23): PPh 23 is subjected to parties involve in income-generating transaction activities such as interest, awards, gift, dividends, royalty, rent and other-related assets excluding land or transfer of building or services.
   • Income Tax Article 25 (PPh 25): PPh 25 is a tax installment derived from the amount of income tax payable according to annual income tax return, deducted by PPh withheld or collected as well as PPh paid or payable overseas that can be credited.
   • Income Tax Article 26 (PPh 26): Corporate taxpayers involve in transaction activities including dividends, royalty, salary and the likes to foreign taxpayers, are subject to PPh 26. According to Indonesia’s tax regulation, the general rate of PPh 26 is 20% but the rates may change depending on the tax treaty.   
   • Income Tax Article 29 (PPh 29): Income tax which must be paid prior to reporting annual corporate tax return on April 30, and occur when the amount of tax payable within a year is greater than the amount of tax credit that has been deducted and paid.
   • Income Tax Article 4 Clause 2 (PPh 4(2)): PPh 4(2), which commonly called the Final Income Tax, is subjected to taxpayers for different types of income. The rates are vary depending on a particular income which include, among others, deposits and other savings, bonds and government securities, lottery prizes, shares and other securities-related transaction, as well as businesses with turnover of less than IDR 4.8 billion a year.


2. Value Added Tax, is subjected to transactions on taxable goods and services in Indonesia. The rate of VAT set by the government is 10% and typically added to the initial price of goods and services sold. Corporate taxpayers are also a subject to Sales Tax on Luxury Goods (hereinafter shall be referred to “PPNbM”). PPNbM is levied on purchased goods and services under categories such as not staple and typically consumed by high-income taxpayers, status-related, and potentially damaging the health and morals of Indonesian people.

The taxation system in Indonesia adheres to a self-assessment system allowing authority to companies and public to fill in their own tax return, from calculation process to reporting until finally paying the tax. Administrative sanctions with varying amount of fines will be imposed to taxpayers violating the given time period or extension period of submission on annual tax return report.