Withholding tax in Indonesia

There are different types of taxes applicable on various types of income in Indonesia. This articles briefly discusses the withholding taxes in Indonesia.

Indonesian income tax is collected mainly through a system of withholding taxes. Where a particular item of income is subject to withholding tax, the payer is generally held responsible for withholding or collection of the tax. These withholding taxes are commonly referred to using the relevant article of the Income Tax (Pajak Penghasilan/PPh) Law, as follows:

Article 21 Income Tax (PPh 21)

Employers are required to withhold PPh 21 from the salaries payable to their employees and pay the tax to the State Treasury on their behalf. The same withholding tax is applicable to other payments to non-employee individuals (e.g., fees payable to individual consultants or service providers) (contact us for the relevant tax rates). Resident individual taxpayers without an NPWP are subject to a surcharge of 20% in addition to the standard withholding tax.

Article 22 IncomeTax (PPh 22)

Some of the transactions that are subject to PPh 22 are as follows:

  1. Import of customer goods
  2. Purchase of good by the Government
  3. Purchase of goods by State owned enterprises
  4. Purchase of oil fuel
  5. Purchase of paper product
  6. Purchase of steel products
  7. The purchase of automotive products
  8. Purchase of pharmaceutical products

The above list is NOT COMPLETE. Contact us for more details about PPh 22 tax and relevant tax rates in Indonesia.

Article 4 (2) – Final income tax (PPh Final)

Resident companies, PEs, representatives of foreign companies, organizations and appointed individuals are required to withhold final tax from the gross payments being made to resident taxpayers and PEs. Contact us more details about Final Income Tax (PPh Final) and relevant tax rates.

Article 23 Income Tax (PPh 23)

Certain types of income paid or payable to resident taxpayers are subject to PPh 23 at a rate of either 15% or 2% of the gross amounts:

A) PPh 23 is due at a rate of 15% of the gross amounts on the following:

  1. Dividends (but see pages 12-13 concerning profit distributions);
  2. Interest, including premiums, discounts and loan guarantee fees;
  3. Royalties;
  4. Prizes and awards.

B) PPh 23 is due at a rate of 2% of the gross amounts on the fees for the following:

  1. Rentals of assets other than land and buildings;
  2. Compensation with respect to technical services, management services, consultation services and other services, except those have been withheld of Income Tax as referred to Article 21.

Article 26 Income Tax (PPh 26)

Resident taxpayers, organisations and representatives of foreign companies are required to withhold tax at a rate of 20% from the following payments to non-residents:

A) On gross amounts:

  1. Dividends
  2. Interest, including premiums, discounts and guarantee fees
  3. Royalties, rents and payments for the use of assets
  4. Fees for services, work, and activities
  5. Prizes and awards
  6. Pensions and any other periodic payments
  7. Swap premiums and other hedging transactions;
  8. Gains from debt write-offs
  9. After-tax profits of a branch or PE

B) On Estimated Net Income (ENI), being a specified percentage of the gross amount of certain types of payments. Contact us for more details.

Where the recipient is resident in a country which has a tax treaty with Indonesia, the withholding tax rates may be reduced or exempted. Contact us to find out which countries have signed the Double Taxation Agreements (Tax Treaties) with Indonesia.

How MAM Corporate Solutions can help?

At MAM Corporate Solutions, we will review your business activities and our experts will advise you on the tax planning to ensure that your tax liability is minimum in addition to full compliance with Local Indonesian Tax Regulations. We will take care of your all tax matters from calculation of tax planning to tax calculation and filing.

Contact MAM Corporate Solutions

If you need help with personal or corporate tax computation and filing, Contact us here or provide below as much detail about your inquiry as possible to receive the most relevant response.

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    Chief Operating Officer, New Santara Global