Corporate Tax Obligations and Compliance in Indonesia 2022/23

By Terje. H. Nilsen, Seven Stones Indonesia

Indonesia has several types of tax obligations if you’re a tax resident; both corporate and personal. But compliance can be somewhat overwhelming at times, so using outsourced expertise might be a better option. 

One of the most important things in doing business in Indonesia is to stay in full compliance, regardless of where your company is established. The Indonesian tax authority is highly advanced and skilled to detect any kind of non-compliance for whatever reason. The various tax obligations include proper registration, reporting, which is mandatory and of course payments of relevant taxes. All of which are necessary to prevent any issues and keep your business running. 

As an expat and foreign investor there are many types of tax obligations to follow and it may be challenging to understand them one by one. It’s also worth remembering that tax regulations are often prone to changes so seeking advice and support from a qualified tax consultant is recommended regardless of the size of your business. It is often also cheaper to use an outsourced tax consultant rather than to hire a team in-house.  

With this article we will highlight a few of the most important tax obligations in Indonesia that every business owner must be aware of, along with possible penalties and sanctions for non-compliance of taxes. 

Compliance And Tax Obligations In Indonesia

Corporate Income Tax, referred to as CIT and Value Added Tax, referred to as VAT are the two most important tax obligations to be in compliance with for any business owner. Note that a director of a company is personally responsible and liable for any activity of a company set up under Indonesian law. 

Tax obligations and requirements may differ depending on your business classification (KBLI), location and general activities. If you want to find out more about this please contact one of our tax consultants and experts. 

Corporate Income Tax (CIT) 

Generally speaking, a flat rate of 20-percent CIT applies. There are however, several exceptions. 

Smaller companies with an annual turnover revenue of IDR 4.8-billion or less pay a final corporate tax of 0.5-percent from turnover. 

Companies with revenues between IDR 4.8 billion and up to IDR 50 billion are taxed 11-percent from profits. 

Companies with revenues of more than IDR 50-billion are taxed 22-percent from profits. 

For public companies complying with the minimum requirement of having 40-percent of their shares on the Indonesian Stock Exchange (IDX) along with a few other conditions, may enjoy a 5-percent tax cut off the standard rate. 

For some businesses such as oil and gas, geothermal, mining and construction special tax rates may also apply. 

Payment of corporate taxes are done monthly before the 15th of the following month. 

Annual filing should be done no later than April the following year. 

Value Added Tax (VAT) 

In general, a float rate of 11-percent applies, but there are several exceptions. 

For the export of tangible and non-tangible goods a 0-percent VAT applies. 

For the export of services, a 0-percent VAT applies. 

Tax exemptions from VAT include F&B services in restaurants and hotels, medical and health care services, human resource services, as well as drilling and mining from direct extract sources. 

Reporting and Payment 

Payment before the VAT return deadline. 

Reporting at the end of the following month. 

Note that if you are considered a company with compulsory tax (PKP) with revenue beyond IDR 4.8-billion, the company must report VAT on related business activities. For a company having more than one location or multiple branches it is compulsory to register each branch with the local tax office at each location. 

Penalties And Sanctions For Tax Obligations In Indonesia 

The non-compliance of tax obligations anywhere in Indonesia may be classified as non-severe or severe, with possible penalties and sanctions incurred accordingly. 

As an example, if a company for whatever reason, is late with its tax payments it will be subject to a 2-percent monthly surcharge of the total tax bill and a company that fails to report may get fined up to IDR 1,000,000. 

For VAT, the late or incomplete issuance of the VAT factor is subject to a 1-percent surcharge. 

More serious infringements of taxes in Indonesia include not providing tax returns or even the wrong information of tax returns, which may result in a 200-percent penalty/ fine or even between 3 to 12-months in jail. 

Finally, tax fraud, or embezzlement and improper bookkeeping may result in up to 6-years in jail or a surcharge as high as 600-percent. 

At Seven Stones Indonesia, we believe that compliance is better than defiance. That’s why we have a team of tax and accounting professionals who are here to help you with your taxes, so if you need a consultation or just want to clarify your position and tax obligations, make sure to reach out today at hello@sevenstonesindonesia.com  

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Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.