Indonesia continues to be a huge attraction for entrepreneurs, business owners, and international companies due to its wealth of resources and its burgeoning population.
Unicorn businesses are starting to become more prominent and many tout Indonesia as the future powerhouse of Southeast Asia. Many will agree, now is the perfect time to set up a business in this promising climate.
One issue many new businesses face is understanding their tax obligations due to the unfamiliarity of Indonesian regulations, paired with varying prices and service levels from Indonesian agencies.
In this article, Amanda Stevanny (AS) of LetsMoveIndonesia answers your most common questions about tax liabilities for new businesses in Indonesia.
What is the first thing that must be done to carry out tax obligations in Indonesia?
AS: The first thing individuals or businesses must do is obtain an NPWP (Tax identity number). The NPWP essentially provides the capacity to report tax to the Indonesian government. Obtaining a Tax ID is mandatory for all businesses, as well as Individuals (both foreign and local) who earn any form of income in the country. For foreigners to obtain an individual tax identity number, they must also have a KITAS.
Additional documents required to start tax reporting include tax relief certificate (SKT) which you should obtain when setting up your business. Furthermore, if your business has a gross revenue of Rp4.8 billion you will also need to obtain an (SPPKP) VAT Registration Number.
Once your business has all of the above, you may start tax reporting.
Should my company be VAT registered?
AS: If your business has a gross revenue of more than Rp4.8 billion, you must become VAT registered – this is done by obtaining PKP certification (Certification of Taxable Enterprise).
VAT is generally charged at 10 percent in Indonesia and you must report transactions monthly.
For tax reporting, when is this done and how frequently?
AS: Tax reporting needs to be reported both monthly, as well as annually under the following guidelines:
Monthly: WHT art 21/26, WHT art 23/26, WHT art 4(2), WHT art 15, and VAT
Yearly: Corporate Income Tax Return (CITR) and Individual WHT art 21/26
CITR: Should be filed by the latest 30th April the following year
Individual WHT art 21/26: Should be filed by the latest 31st March the following year
How much does tax should I pay?
AS: Each WHT has a different tariff of Tax.
VAT: 10 percent from tax (imposition) base
WHT art 23 for services: 2 percent from tax (imposition) base (if you have NPWP), or 4 percent from tax (imposition) base (if you don’t have NPWP)
WHT art 4(2) for rental building: 10 percent from tax (imposition) base
WHT art 21 for employee/taxpayer that received an income, the progressive tariff are:
- Five percent for yearly income tax up to Rp50 million
- 15 percent for yearly income tax in between Rp50 million–250 million
- 25 percent for yearly income tax in between Rp250 million–500 million
- 30 percent for yearly income tax more than Rp500 million
Please note tax tariffs are the same throughout Indonesia.
If you employ workers, what should you do?
AS: You are obliged to calculate the tax, deduct their salary (or maybe your company will bear the tax), pay the tax, and file the report of WHT 21/26.
What is withholding tax and who pays it?
A withholding tax, or a retention tax, is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient.
How does the reporting process work?
AS: From 1 July 2016, tax reporting is done via an online system rather than manually. To do so, you will need an EFIN number (Electronic Filing Identification Number). The EFIN is issued by the Directorate General of Taxes, and in order to obtain it, the individual taxpayer or agency can submit directly to the relevant tax office by preparing legality documents and also the EFIN registration submission form. Once registered, all reporting is encrypted to ensure confidentially is guaranteed.
If you do not adhere to the rules, what are the potential consequences?
AS: If you do not file your taxes accordingly, you will be charged an interest penalty for late payment and an administrative penalty for late report filing.
How much does tax reporting cost?
AS: Outsourcing your tax reporting to a reliable agency is recommended and generally more cost-effective than employing a full-time consultant. Fees between agencies vary; many will have a standard rate, but the fee will rise depending on the number of transactions, whilst others will vary their fee based on the size of the transactions. At LetsMoveIndonesia we are proud to be the first agency in Jakarta to advertise our prices for all services, so you can clearly see the costings. Our monthly reporting starts at only Rp2.5 million.
What are the benefits of using LetsMoveIndonesia to prepare my taxes?
AS: Our tax team has decades of experience in reporting taxes and we value promoting reliable and ethical services in everything we do. As described by previous news articles from Expat magazines, LetsMoveIndonesia is often referred to as Jakarta’s Most Trusted agency, due to our ethical practices and reliability of service. Since its inception in 2016, we have quickly become the trendsetters in Immigration, Company Establishment, Tax and Accountancy and Real Estate Services.
If I have more questions or need assistance, how can I contact you?
If you have a question or would like to know more, then feel free to contact me for a free consultation: E: [email protected] T: 021 300 297 27 or come and visit me in our office in Bellagio Mall Mega Kuningan – the only walk in agency in Jakarta.