Scope of personal income tax - other income and capital gains and taxable foreign income | Indonesian Tax Guide 2025 (12)
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Indonesia investment
Personal Income Tax
Personal income tax
2025-01-22 09:10:34
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This issue's introduction
Tax scope - other income
Tax scope - capital gains
Tax scope - taxable foreign income
Chapter II Individual Income Tax
Scope of taxation - other income
① Technical support and service fees
A. Provide technical support for one-off projects;
B. Technical assistance for the production of goods or services, including guidance and training;
C. Provide management assistance, including research or investigation of a scientific or technical nature, or any consulting or supervisory services.
"Management services" means services that directly participate in management and charge management fees.
The Tax Bureau has determined that all of the above payments are subject to withholding tax, except for payments between the head office and a permanent establishment. Expenses incurred to earn, recover or secure service income are allowed to be deducted.
② Forward foreign exchange sales premium
Forward foreign exchange sales transactions refer to agreements between buyers and sellers to purchase or sell foreign exchange, agreeing to exchange principal of equal value but different currencies (such as rupiah and US dollars), but delivery is not calculated until the agreed date at the exchange rate at the time of the initial transaction.
The forward foreign exchange sales premium offsets the difference between the exchange rate on the initial transaction date and the exchange rate on the maturity date, and is paid to the seller on the maturity date.
③ Income from swap and forward contracts
Article 26 of the Income Tax Law has expanded the definition of "interest" to include payments under swap contracts, and such interest is subject to a 20% withholding tax.
Notice No. SE-03/PJ.43/1998 of the General Department of Taxation issued on February 9, 1998 aims to clarify the income tax treatment of interest income from swap contracts and forward contracts. The notice stipulates:
A. The premium obtained from swap and forward contracts based on Indonesian currency deposits with banks is generally classified as interest income, and a final withholding tax of 20% is withheld by the bank;
B. The premium obtained from swap contracts based on foreign exchange loans with non-bank institutions that are not reported to the Indonesian central bank is regarded as interest income and is subject to a non-final withholding tax of 15%.
The notice also points out that the following are not included in the definition of "interest":
A. The premium obtained from swap contracts based on foreign exchange loans that have been reported to the Indonesian central bank;
B. Certain swap contract premiums related to export business.
The circular also states that the premium payable on swap contracts related to foreign exchange loans reported to Bank Indonesia must be recognized as available for funding and such premium is deductible when calculating income tax.
④ Income from futures contracts
Withholding tax does not apply to gains from futures contracts traded on the Indonesian Stock Exchange, and gains from such contracts are subject to income tax.
⑤ Miscellaneous income
Refundable membership deposits received by golf clubs are not taxable.
Scope of taxation - capital gains
Taxable transactions include the sale or transfer of property and the disposal of shares.
Scope of collection - taxable foreign income
① Employment income
Income from employment abroad is subject to tax in Indonesia.
② Business and professional income
Business and professional income obtained by residents abroad is subject to tax in Indonesia.
③ Investment income
Investment income such as dividends, interest and royalties received by residents abroad is subject to tax in Indonesia. Income from real estate located abroad (such as rent) is also subject to tax in Indonesia.
④ Capital gains
Foreign capital gains are regarded as general income and are subject to income tax.
⑤ Other foreign income
Any foreign income obtained by resident individuals is subject to tax in Indonesia.
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