A Brief Look At The Different Tax Categories in Indonesia’s Taxation System
Indonesia has several taxes that you need to comply with. This guide is an overview of Indonesia taxation system for individuals, investors and companies.
The Types of Taxes
Indonesia’s taxation system is comprised of several categories:
- Individual Income Tax – Applicable for tax residents in the country. If you are a non-resident, you will be subject to 20% withholding tax on your locally-sourced income. If you earn up to IDR 50 million, your tax rate is 5%. If you earn between IDR 50 million to IDR 250 million, your tax rate is 15%. Those earning between IDR 250 million and IDR 500 million are taxed 25%. Anyone earning more than IDR 500 million is taxed 30%.
- Corporate Income Tax – Companies in Indonesia will need to fulfil this tax obligation. Foreign companies that have no permanent establishment in the country but still generates an income through business must still fulfil its tax liabilities. This can be done through the withholding tax system. The tax rate is 25% for this category. If you have a gross turnover of less than IDR 4.8 billion, your tax rate is 1%. If you have a gross turnover of less than IDR 50 billion, your tax rate is 12.5%. If you are a public company but less than 40% of your shares are traded on the Indonesian stock exchange, your tax rate is 20%.
- Value-Added Tax (VAT) – The normal tax rate for this category is 10%. The rate may sometimes be increased to 15%. This could depend on the regulations. This tax is applicable to imported goods that are taxable, the export of tangible and intangible goods or services, and the consumption or use of intangible goods or services from abroad that are deemed taxable.
- Luxury-Goods Tax – Indonesia’s taxation system also involves the sales tax for luxury goods. The luxury-sales goods tax is better known as LGST. Imports of certain luxury goods and items like cars, houses, and apartments will be subjected to LGST. The current LGST rates are between 10% to 125%. The maximum allowed by law is 200%.
- Customs and Excise Tax – The law in Indonesia does permit import duties to be between 0 and 150%. Based on the customs value of the goods imported into the country, currently, the highest tax rate is 40%. Thanks to the several free-trade agreements signed and a more globalised economy, import duty rates have lowered significantly. Certain goods from specific countries are subject to an anti-dumping import duty rate.