Foreign businesses when making their first hire in Indonesia, will often ask us about the local Income Tax Regulations. In essence Indonesia operates a Progressive Tax System – the more someone earns the higher the income tax rate that applies.
Who Needs to Pay Income Tax in Indonesia?
Anyone that falls into one of the following 3 categories is considered a tax resident and subject to Indonesian income tax:
- if the individual lives in Indonesia;
- or is in Indonesia for more than 183 days within a 12-month period;
- or if a person is in Indonesia during a fiscal year and intends to reside in Indonesia.
Personal Income Tax Rates
Nearly all elements of income earned by individuals in Indonesia is subject to income tax.
The following Progressive Tax Rates are charged to taxable annual income:
|Taxable Income (IDR)||Tax Rate||Tax Amount (IDR)|
|Up to IDR 50 million||5 %||IDR 2.5 million|
|Above IDR 50 million and up to IDR 250 million||15 %||IDR 30 million|
|Above IDR 250 million and up to IDR 500 million||25 %||IDR 62.5 million|
|Above IDR 500 million||30 %||30% of the relevant amount|
As of 1st January 2016 a person is not taxed on their first IDR 54,000,000 of income earnt.
Also a husband benefits from an additional IDR 4,500,000 deduction.
And there is a further IDR 4,500,000 deduction per child dependent (up to 3).
Tax Payment Process
Companies withhold income tax from an employees salary / earnings each month and transfer the payment directly to the Indonesian tax department.
Income tax must be remitted by the employer to the government on a monthly basis, by the 10th of the following month. And must be reported to the tax department by the 20th of the following month.
Indonesian tax residents are required to file an annual tax return when their total income exceeds IDR54,000,000 for a single individual / IDR72,000,000 for a married man with three children/dependents (as of 1st January 2016).
The obligation to complete and submit the annual tax return sits with the individual.
The annual tax return should be filed on or before the 31st of March each year, in regards to earnings made the previous financial year.
If there is any tax due to be paid, the payment must be made before the tax return is lodged.
The penalty for late filing of the annual tax return is IDR100,000. Late payment of tax is subject to an administrative penalty of 2 percent per month, calculated from the payment due date.
While you are here, please check out This Article which gives an overview of the THR Religious Holiday Allowance in Indonesia – also called “the 13th Month Bonus”. Similarly, This Article which explains BPJS in Indonesia – mandatory Social Security and Healthcare for employees.
For Businesses that are looking to Hire Executive Talent in Indonesia please submit your Enquiry Here. Or you can reach us through our Contact Details Here. A Consultant will respond within a few hours.