Personal income tax rates and taxation of foreigners | Indonesian Tax Guide 2025 (17)
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2025-02-07 09:20:06
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This issue's introduction
Taxes for foreign nationals
Chapter II Individual Income Tax
Tax Rate
(2) Income from production, business and occupation, subject to a withholding tax of 20%;
(3) Investment income;
① Dividends, subject to a final withholding tax of 20% of the total amount;
② Interest, subject to a final withholding tax of 20% of the total amount; from August 2, 2021, bond interest will be subject to a final withholding tax of 10%.
③ Royalties, subject to a final withholding tax of 20% of the total amount.
(4) Capital gains;
Capital gains obtained by non-resident taxpayers from the sale of shares in Indonesian non-listed companies are subject to a final withholding tax of 20%, and the taxable income is 25% of the sales revenue, so the effective tax rate is 5%. No withholding tax is levied on non-listed shares with a value of no more than 10 million rupiah in a single transaction.
The 5% tax rate also applies to "deemed gains" from the disposal of shares in a conduit foreign company that is established or resident in a foreign country and holds shares in an Indonesian non-listed company. The sale of shares listed on a stock exchange is subject to a final tax of 0.1% of the total transaction price.
(5) Other income, rent and remuneration are subject to a final withholding tax of 20% of the total amount;
Article 26 of the Income Tax Law provides that gains from the sale of property by non-resident individuals are taxed at a rate of 20%. However, most of Indonesia's tax treaties (arrangements), with a few important exceptions, transfer the taxation right of such transactions to the other contracting party, in which case no tax is levied in Indonesia.
Sales of large decorative items, jewelry, antiques, paintings and vehicles with a value of more than 10 million rupiah are subject to a final withholding tax of 5%.
(6) If Indonesia has a tax treaty (arrangement) with the country where the non-resident individual is located, the non-resident individual may enjoy personal income tax relief under the tax treaty (arrangement).
Taxation of foreign nationals
Pursuant to the Ministry of Finance Regulation No. 139 of 2010 (139/PMK.03/2010) dated August 11, 2010, the Tax Office may reclassify certain foreign employees’ income earned in Indonesia on or after August 11, 2010.
According to the regulation, if a foreign employee is transferred from a related foreign company to a local company and receives income from a local employer, and the local employer reallocates part or all of the wages paid to the foreign employee to the foreign company under other names (such as management fees, technical service fees or other service fees), the Tax Office may recognize this part of the offshore payment as the foreign employee’s employment income in Indonesia.
Of this type of income, the maximum amount of wages that the foreign employee is deemed to have received from the related foreign company shall not exceed the amount paid by the Indonesian employer to the foreign company.
If a foreign employee is determined to be a domestic taxpayer due to his/her Indonesian resident status, he/she may only pay income tax on his/her income from Indonesia (including overseas payments), but he/she must meet certain conditions, such as meeting relevant professional skills requirements. This provision only applies to the first four tax years after obtaining Indonesian resident status. If the foreign income obtained by the foreign employee enjoys the benefits of the tax treaty (arrangement) between Indonesia and the country of origin of the income, the exemption clause of taxation from the geographical source can no longer be applied.
(1) Inbound foreign nationals
Inbound foreign nationals are generally subject to other personal tax policies, but if the actual salary amount obtained by the foreign employee is not supported by formal documents, the tax bureau may adjust the salary amount obtained by the foreign employee from the company in accordance with regulations in the following situations:
① There are signs that the taxpayer's accounts are incorrect and the tax payable cannot be calculated;
② There is evidence that the salary paid to the foreign employee has not been fully recorded;
③ During the audit, insufficient data was found to determine the salary of the foreign employee.
In the Guidelines for Salary Standards for Foreign Employees issued by the General Taxation Department Decree No. 173 of May 22, 2002 (KEP-173/PJ./2002), the salary standards vary according to the following categories:
A. The nationality of the foreign employee;
B. The type or nature of the industry or occupation involved;
C. The position or job of the foreign employee.
The standard amount does not apply to foreign employees employed by oil and gas drilling companies, who are taxed on the basis of deemed taxable income. The salaries of foreign employees employed by oil and gas companies under production sharing contracts are also subject to the corporate income tax exemption.
Staff of diplomatic, consular and other representatives of foreign countries, and service personnel residing with them, are exempt from tax if they meet the following conditions:
A. Are not Indonesian citizens;
B. Do not engage in professional work or run a business in Indonesia;
C. The country of the representative receiving the service also provides the same exemption for staff of diplomatic, consular and other representatives of Indonesia assigned to that country, and service personnel residing with them.
(2) Departing foreigners
Foreigners who are resident taxpayers in Indonesia must go to the tax bureau to cancel their tax number when they permanently leave Indonesia, and must pay for their global income from the beginning of the year to the date of departure
For tax payment in Indonesia, the tax bureau will conduct a tax audit before issuing a tax payment certificate to ensure that there is no unpaid tax.
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