Personal Income Tax
In Indonesia, there is a broad range of taxes that businesses, investors, and all other taxpayers and taxpaying entities must pay. These include corporate tax, Personal income tax, withholding tax, tax treaties, value-added tax (VAT), luxury goods sales tax, customs, and excise tax, and property and construction tax.
Personal income tax in Indonesia is a tax collected from individuals and imposed on various sources of income such as salaries, pensions, interest, and dividends. Personal income tax revenues are a significant source of income for the Indonesian government. Every taxpayer’s employer is responsible for calculating any taxes that must be withheld from salaries, paying these taxes to tax authorities on a monthly basis, and providing the employee with annual tax figures.
Income Tax Law (PPh 21)
Definition of Income Tax (PPh) is a tax on salary, wages, honorarium, payment and payment by name and relation with job or position, and activities undertaken by individual domestic tax subjects.
Calculation of income tax article 21 or Pph21 for foreign nationals (foreigners) working in Indonesia is a tax subject governed by the regulation of the director-general of tax (DJP) Number Per-43 / PJ / 2011, which contains the Determination Domestic Tax Subjects or SPD and also Foreign Tax Subjects or SPLN. In the regulation of the director-general of taxes the following categories or criteria for SPDN are written:
- An individual who has lived in Indonesia, or has been in Indonesia for more than 183 (one hundred eighty-three) days within a period of 12 (twelve) months, or in a Tax Year resides in Indonesia and has the intention to reside in Indonesia,
- Agency established or domiciled in Indonesia, and
- An undivided inheritance as a whole replaces the entitled.
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Then what about the Pph21 payment criteria for employees who are foreigners? Basically a foreign national is also an SPDN if it meets the first criteria above, when it meets the first criteria, foreigners who work in Indonesia will be subject to Pph21 no longer Pph26. The criteria for details on the first point in the SPDN criteria for foreigners are as follows:
- Residing in Indonesia: having a permanent place of residence to live an ordinary course of life.
- Intend to reside in Indonesia, indicated by documents in the form of a work visa or a Limited Stay Permit Card (KITAS), then rent a place to live in Indonesia, and even move family members to Indonesia.
- Approve, or extend the contract/agreement, for more than 183 days (one hundred eighty-three) days.
Value Added Tax (VAT)
The VAT is a tax that is imposed on domestic consumption by individual, corporate and government taxpayers. In its application, the Agency or individual who pays this tax is not required to deposit directly into the state treasury, but rather through a party that deducts VAT.
Value Added Tax is objective, not cumulative, and is an indirect tax. The tax subjects consist of Taxable Entrepreneurs (PKP) and non-PKP, it must be understood that this tax subject is different from the Taxpayer. Tax subjects do not yet have the obligation to pay taxes while the taxpayer already has the obligation to pay taxes.
Goods or Services Subject to Value Added Tax (VAT)
- Delivery of Taxable Goods (BPK) and Taxable Services (JKP) within the Customs area is carried out by employers.
- Import Taxable Goods.
- Utilization of intangible taxable goods from outside the customs area inside the customs area.
- Utilization of taxable services from outside the customs area within the customs area.
- Exports of tangible or intangible Taxable Goods and exports of Taxable Services by Taxable Entrepreneurs (PKP).
- Building Activities Alone with a building area of more than 200m2 that is carried out outside the company environment and/or work by an Individual or Agency whose results are used alone or by other parties.
- The transfer of assets according to the original purpose is not for sale, as long as the input tax paid at the time the acquisition of the asset may be credited.
Goods or Services Not Subject to Value Added Tax (VAT)
- Mining or drilling products (crude oil, asbestos, coal, natural gas, etc.).
- Staple goods (rice, corn, milk, meat, soybeans, vegetables, etc.).
- Food and drinks are served in restaurants or restaurants.
- Money and gold bars.
- Medical services, social services, financial services, insurance, education and so on.
Land Tax and Building Tax (PBB)
Land Tax and Building Tax (PBB) is a tax that is borne by an individual or entity that benefits and/or a better socioeconomic position because of his land and building rights.
Then who is obliged to pay the Land Tax and Building Tax (PBB)? Of course, those who are obliged to pay taxes are individuals or entities that benefit from their land and building rights. Persons or entities including taxpayers must pay tax payments no later than 6 months from the date of receipt of SPPT.
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What is SPPT? SPPT is a tax return that contains a notification of the amount of tax payable that must be paid in one year for the person or entity included in the taxpayer.
After that, we also need to know the basis for the imposition of the Land and Building Tax (PBB) that must be paid. Do not let us get SPPT, but do not know where the nominal amount of the Land and Building Tax (PBB) must be paid. The basis for the imposition of PBB is NJOP or Selling Value of Tax Objects.
NJOP is the average price or market price on a sale and purchase transaction, in this case, the tax object is land and buildings. NJOP is usually determined annually by the Minister of Finance (Minister of Finance). Each NJOP region is different.
Several Factors that Determine the Basis of Earth NJOP Determination:
- The location
- Environmental conditions
Several Factors that Determine the Basis of Building NJOP Determination:
- Materials used in buildings
- The location
- Environmental conditions
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The government requires each company to report tax in Indonesia. Indo-Ned Consultancy has helped many of our clients who do business in Indonesia and set up the company in Indonesia on making a periodical tax report. We always follow every update of regulations from the Government in Indonesia, because we work with all relevant departments such as the Dirjen Pajak (Directorate General of Taxation). Our experience in helping our clients makes us work faster and precisely in meeting the needs of our clients for tax tariff and tax rule in Indonesia.
The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.