Scope and rate of corporate income tax丨Indonesia Tax Guide 2025 (2)
Indonesia
tax guide
Tax Guide
Tax guide
Corporate income tax
corporate income tax
Corporate Income Tax
2025-01-10 09:40:09
Page view：25
This issue's introduction
Tax scope
Tax rate
Chapter 1 Corporate Income Tax
2. Scope of collection
Generally speaking, business income refers to the income generated by the business activities of an entity or private enterprise. Capital gains are considered ordinary income and are subject to corporate income tax, including all gains from the sale or transfer of property, and gains obtained by companies or other organizations in liquidation distribution. Resident companies and permanent establishments should pay corporate income tax on income from within and outside Indonesia.
In addition, the scope of taxation of permanent establishments includes:
1) income from business activities and income from property owned or controlled by them;
2) income from the head office engaged in business activities similar to the business of the permanent establishment in Indonesia, sales of goods or provision of services;
3) the related income mentioned above, as well as income from property transfers or business activities that are actually related to the permanent establishment.
3. Tax rate
The applicable tax rate for resident enterprises and permanent establishments is 22%.
Small and micro enterprises that meet the following conditions shall be subject to a fixed tax rate of 0.5% of their total income in the first three fiscal years of operation:
① This policy applies to corporate taxpayers, excluding:
A. Permanent establishments;
B. Companies that have not yet started business operations;
C. Companies with income exceeding IDR 4.8 billion in the fiscal year after starting business operations.
② Income must come from business activities.
After the above-mentioned small and micro enterprises have been in operation for three fiscal years, they shall be subject to the regular income tax system and may enjoy other corporate income tax benefits as stipulated.
(2) Classified income
① Real estate
From September 7, 2016, income from the transfer or disposal of land and buildings shall be subject to corporate income tax at 2.5% of the sales price (previously 5%). Corporate taxpayers whose main business is the transfer of ordinary houses or ordinary apartments shall be subject to corporate income tax at a reduced rate of 1% of the sales price.
② Indonesian company shares
Disposal of shares listed on the stock exchange is subject to a final tax of 0.1% of the total transaction value.
③ Dividends
Dividends between resident companies are tax-free; non-resident companies without a permanent establishment in Indonesia are subject to a final withholding tax of 20% of their total income, but can enjoy tax treaty relief.
④ Interest
Generally, resident companies pay a deductible withholding tax of 15% of the total interest. Indonesian bank certificate discounts are subject to a final withholding tax of 20% of the total amount.
From December 28, 2015, time deposits, savings or Indonesian bank certificate discounts deposited in Indonesian banks (including Indonesian branches of overseas banks) can enjoy lower interest and lower final withholding taxes:
For eligible US dollar deposits, the withholding tax rate ranges from 10% (deposits of 1 month) to 0% (deposits of more than 6 months);
For eligible rupiah deposits, the withholding tax rate ranges from 7.5% (deposits of 1 month) to 0% (deposits of more than 6 months).
Resident companies and permanent establishments are subject to final withholding tax on bond interest as follows:
A. 15% of the gross interest on interest-bearing bonds;
B. 15% of the difference between the selling price/face value and the purchase price of interest-bearing and zero-coupon bonds.
Final withholding tax on bond interest does not apply if the recipient of the interest is a registered pension fund or a bank established or operated through an Indonesian branch. Mutual Funds are exempt from final withholding tax on bond interest received before 2010, and are subject to a final tax of 5% from 2011 to 2020, and a final withholding tax of 10% from 2021.
Effective January 1, 2009, interest and other payments on loans and other forms of financing (including Shariah-based financing) provided to certain resident entities are exempt from the 15% deductible withholding tax, which generally applies to payments to resident companies and permanent establishments. Business entities eligible for exemption are:
A. Financing companies consisting of non-banking business entities and non-banking financial institutions specially established by the Ministry of Finance and authorized to provide financing services;
B. State-owned entities or local government-owned entities that provide financing facilities specifically for micro, small and medium-sized enterprises and cooperatives.
If the taxpayer does not have a tax number, the withholding tax on interest is increased by 100%.
⑤ Royalties
Resident enterprises are required to pay a deductible withholding tax of 15% of the total amount of royalties. If the taxpayer does not have a tax number, the withholding tax on royalties is increased by 100%.
⑥ Services
All types of services, including property leasing (except land and buildings), technical, management, construction, consulting and other services, are subject to a 2% withholding tax. If the taxpayer does not have a tax number, its withholding tax is increased by 100%.
According to Government Regulation No. 9 of 2022 (GR-9/2022), construction service agreements signed on or after February 21, 2022 are subject to final withholding tax on gross revenue at the following rates:
A. Construction services provided by companies with small company qualifications and individuals with proof of work ability are subject to 1.75%;
B. Construction services provided by companies or individuals without proof are subject to 4%;
C. Construction services provided by other types of companies or individuals (companies with medium-sized company qualifications, large company qualifications or experts) are subject to 2.65%;
D. Construction consulting services provided by companies or individuals with proof are subject to 3.5%;
E. Construction consulting services provided by companies or individuals without proof are subject to 6%;
F. Comprehensive construction services provided by companies without proof are subject to 4%;
G. Comprehensive construction services provided by companies with proof are subject to 2.65%.
The final tax rate for construction service agreements signed before February 21, 2022 shall be implemented in accordance with the provisions of Government Regulation No. 51 of 2008 (GR-51/2008).
⑦ Rental income
Resident enterprises are subject to a final withholding tax of 10% of the total rental income from land and buildings.
Rental income other than land and buildings is subject to a 2% deductible withholding tax. If the taxpayer does not have a tax number, the withholding tax is increased by 100%.
⑧ Luxury goods sales
A. Corporate taxpayers that sell certain luxury goods must withhold taxes from the sales price of the corresponding items at the following rates:
a. Private aircraft, including private helicopters, are subject to a 5% tax rate;
b. Cruise ships, yachts, etc., are subject to a 5% tax rate;
c. Houses (including land) with a sales or transfer price exceeding IDR 30 billion and an area exceeding 400 square meters are subject to a 1% tax rate;
d. Apartments, including condominiums, with a sales or transfer price exceeding IDR 30 billion or an area exceeding 150 square meters are subject to a 1% tax rate;
e. Four-wheeled vehicles such as sedans, jeeps, off-road vehicles, multi-purpose vehicles, minibuses, etc. that carry less than 10 passengers and have a sales price exceeding IDR 2 billion or a cylinder capacity exceeding 3,000cc are subject to a 5% tax rate;
f. Two-wheeled or three-wheeled motor vehicles with a sales price exceeding IDR 300 million or a cylinder capacity exceeding 250cc are subject to a 5% tax rate.
B. When resident and non-resident enterprises sell the following assets (valued at more than 10 million rupiah), they should comply with the provisions of the relevant tax treaties (arrangements) and withhold effective final tax at 5% of the sales price:
a. Large decorative items;
b. Jewelry including gold, watches and gemstones such as diamonds;
c. Antique goods;
d. Paintings;
e. Cars, motorcycles, cruise ships, light aircraft, etc.
The excitement continues in the next issue...