Certification criteria for resident enterprises and withholding agents for corporate income tax

Certification criteria for resident enterprises and withholding agents for corporate income tax | Indonesian Tax Guide 2025 (1)

Indonesia tax guide Tax Guide Tax guide Corporate income tax corporate income tax Corporate Income Tax 2025-01-10 09:37:47 Page view：33

This issue's introduction

Corporate income tax

Resident enterprises

Judgment criteria and withholding agents

Chapter 1 Corporate Income Tax

1. Resident Enterprises

Indonesia's "Income Tax Law" stipulates that corporate income tax taxpayers include all legal entities established in Indonesia, with actual management institutions in Indonesia, and with permanent establishments in Indonesia.

Legal entities include limited liability companies, partnerships, foundations, offices, pension funds, and cooperatives.

Any organization established in Indonesia or with actual management institutions in Indonesia, except for certain government agencies that meet specific criteria, is considered a tax resident for tax purposes. If the residence cannot be determined, the tax bureau has the right to make a determination.

Enterprises established in Indonesia or with actual management institutions in Indonesia become resident corporate taxpayers after obtaining income from Indonesia or overseas.

1.1 Judgment criteria and withholding agents

(1) Resident Enterprises

“Resident Enterprises” refers to entities established or registered in Indonesia, except for government agencies that meet the following criteria:

① Established in accordance with the law;

② Funded by the national or local government budget, and its income is included in the national budget or local government budget;

③ Its accounting books are audited by government auditors;

④ The beneficiaries’ legacy should be considered as an indivisible property as a whole.

A company will be deemed to be registered in Indonesia if:

① The company’s articles of association stipulate that its place of registration is in Indonesia;

② The headquarters, administrative center or financial center office is in Indonesia;

③ A control office is set up in Indonesia to be responsible for management activities;

④ The board of directors’ meetings for strategic decisions are held in Indonesia;

⑤ The management members reside or settle in Indonesia.

(2) Withholding tax system

Article 23 of the Income Tax Law stipulates that government agencies, resident tax entities, event organizers, permanent establishments or representative offices of non-resident enterprises shall pay withholding tax when paying the following income to resident taxpayers or permanent establishments:

① Dividends, interest, royalties;

② Prizes, bonuses and other similar remuneration (except for those withheld in accordance with Article 21 of the Income Tax Law);

③ Rent and other income related to the use of property (except for those withheld in accordance with Article 4 of the Income Tax Law);

④ Compensation related to technical, management, construction, consulting and other services (except for those withheld in accordance with Article 21 of the Income Tax Law), "other services shall be further stipulated by the regulations of the Minister of Finance.

The Director of the State Administration of Taxation may designate a resident individual as the withholding tax payer for the above-mentioned services. Withholding obligations.

In addition, according to Article 22 of the Income Tax Law and its interpretation, the Minister of Finance may designate withholding agents in the following circumstances:

① The government financial director withholds relevant taxes when paying for the supply of goods. The person designated as the withholding agent shall be the financial director of the central or local government, government agency or other statutory agency responsible for paying for the supply of goods, including cash holders and financial directors who perform the same functions;

② Specific entities withhold taxes from taxpayers engaged in import business or other business activities. Such entities can be government or private entities, such as manufacturers of specific goods, including cars, cement, etc.;

③ Specific entities withhold taxes from taxpayers who purchase high-end luxury goods. Such withholding taxes apply to the purchase of goods that are very luxurious in both goods and prices, such as cruise ships, luxury homes, and high-end luxury cars.

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