A company will be considered taxable in Indonesia if it has a presence
and conducts business in that country. Resolution of this question
depends on whether the entity has a 'permanent establishment' in
Indonesia. This term is widely defined to include a place of
management, branch, representative office, office building, agent,
factory or workshop, construction or mining site. Where such a
presence exists, the permanent establishment is taxable on its
worldwide income. Where similar businesses as that carried on by the
permanent establishment are conducted in Indonesia, care must be taken
to ensure that the 'force of attraction' principle does not result in
that business income being taxed in the permanent establishment.
Company tax is payable by monthly instalments. The collection of tax
from interest, royalties, rentals and dividends, professional service
fees, technical and management service fees, construction service
fees, installation service fees, repair and maintenance service fees
is by way of withholding tax. Where the recipient is a tax resident of
Indonesia, the tax withheld is taken into account in determining the
company's final tax liability (except for tax of interest from bank
and space rentals which are treated as final tax). Where the recipient
is not a resident, the tax withheld represents a final tax.
Under the Income Tax Law No. 36 Year 2008, which took effect from 1
January 2010, corporations are taxed at single rate of 25%.
Corporations with an annual gross income up to Rp 50 billion are
entitled to a tax discount of 50% of the standard rate on taxable
income derived from the portion of gross income up to Rp 4.8 billion.
As for public companies, corporate tax deduction at 5% will be granted
when meeting the following requirements:
1. Minimum listing requirement is 40%
2. The minimum public ownership is 300 individuals where each
individual holds less than five percent of the paid-in shares
3. The above two conditions must be fulfilled at least in six months
(183 days) in a tax year.
Residence – A company is a resident if it is established or domiciled
in Indonesia.
Basis – Resident companies are taxed on worldwide income. Nonresident
companies are taxed only on income sourced in Indonesia, including
income attributable to permanent establishments in the country.
Taxable income – Taxable net income is defined as assessable income
less taxdeductible expenses.
Taxation of dividends – Dividends paid by a domestic corporate
taxpayer to a resident are subject to a 15% withholding tax and the
payment represents an advance payment of tax liability. See also
"Participation exemption".
Capital gains – Capital gains are taxable as ordinary income, and
capital losses are taxdeductible.
Losses – Losses may be carried forward for 5 years following the year
the loss was incurred (this period may be extended to 10 years for
selected industries and for operations in remote areas). Losses cannot
be carried back.
Surtax – No
Alternative minimum tax – No
Foreign tax credit – Resident companies deriving income from foreign
sources are entitled to a unilateral tax credit with respect to
foreign tax paid on the income. The credit is limited to the amount of
Indonesian tax otherwise payable on the relevant foreign income.
Participation exemption – Dividends received or derived by a resident
company from a participation in another Indonesian limited liability
company are exempt from tax if the recipient holds at least 25% of the
shares of the payor and the dividends are from retained earnings.
Holding company regime – No
Tax Incentives – Tax incentives are available to entities with capital
investments in certain approved industry sectors, or those operating
in certain geographic locations. Incentives include a 30% tax
investment allowance (5% per year), accelerated depreciation, the
carryforward of losses up to 10 years and a reduced withholding tax of
10% on dividends paid to nonresidents. An income tax reduction of 5%
may be available to companies listed on the Indonesian stock exchange
if certain conditions are satisfied.
Withholding tax:
Dividends – Dividends paid by a domestic corporate taxpayer to a
nonresident are subject to a 20% withholding tax, which is considered
a final tax. Tax treaties may reduce the rate, but to take advantage
of a reduced rate, the payee must obtain a certificate of tax domicile
from the tax authorities in its country of residence and be the
beneficial owner of the dividends. The withholding tax on dividends
paid to resident individuals is a 10% final tax.
Interest – Interest paid to nonresidents is subject to a 20%
withholding tax, unless the rate is reduced by an applicable tax
treaty. Interest paid by a domestic taxpayer to a resident is subject
to a 15% withholding tax and the payment represents an advance payment
of tax liability.
Royalties – A 20% withholding tax is imposed on royalties remitted
abroad, unless the rate is reduced under an applicable tax treaty and
the recipient submits a tax residence certificate from the tax
authorities of its country of residence. For tax purposes, royalties
refer to any charge for the use of property or know-how in Indonesia.
Royalties paid by a domestic taxpayer to a resident are subject to a
15% withholding tax and the payment represents an advance payment of
tax liability.
The withholding tax on domestic payments for technical, management and
consulting services and rentals (except for land and building rentals)
varies from 1.5% to 4.5%.
Branch profits tax – Permanent establishments are subject to a 20%
branch profits tax on after-tax profits. This rate may be reduced
under a tax treaty.
Other taxes on corporations:
Capital duty – No, but various registration fees apply.
Payroll tax – Employers are required to withhold, remit and report
income tax on employment income of their employees.
Real property tax – Land and building tax is payable annually on land,
buildings and permanent structures. The rate is typically not more
than 0.5% of the value of the property, although higher rates apply to
certain high-value housing and large estates.
Social security – Employers must contribute to Indonesia's social
security system if they employ 10 or more individuals or maintain a
payroll expense of IDR 1 million per month. The employer's
contribution rate for old-age compensation is 3.7%.
Stamp duty – Certain documents are subject to stamp duty at a nominal
amount of IDR 3,000 or IDR 6,000.
Transfer tax – A land and building transfer duty of 5% is payable when
a person or company obtains rights to land or a building with a value
greater than IDR 60 million. Certain exceptions/reductions apply,
including transfers in connection with a merger.
Other – Sales of shares listed on the Indonesian stock exchange are
subject to a final tax of 0.1% of the transaction value; an additional
tax of 0.5% applies to the share value of founder shares at the time
of an initial public offering.
Anti-avoidance rules:
Transfer pricing – Related party transactions or dealings with
affiliated companies (including profit-sharing by multinational
companies) must be carried out in a "commercially justifiable way" and
on an arm's length basis. Documentation is required.
Thin capitalisation – Indonesia does not have specific rules on thin
capitalisation, but the general law authorises the Ministry of Finance
to determine the debt-to-equity ratio of companies for tax calculation
purposes.
Controlled foreign companies – The Ministry of Finance is authorised
to determine when a dividend is deemed to be derived from a foreign
company established in countries where an Indonesian resident taxpayer
holds at least 50% of the paid-up capital of the foreign company or,
together with other resident taxpayers, holds at least 50% of the
paid-up capital. This applies only if the foreign company does not
trade its shares on the stock exchange. If no dividends are declared
or derived from the offshore company, the resident taxpayer must
calculate and report the deemed dividend in its tax return; otherwise,
the Ministry of Finance will do so. The dividend is deemed to be
derived either in the fourth month following the deadline for filing
the tax return in the offshore country or 7 months after the offshore
company's tax year ends if the country does not have a specific tax
filing deadline.
Disclosure requirements – Taxpayers must provide certain information
regarding their transfer pricing transactions with related parties in
an attachment to their annual tax returns. The information will be
maintained by the tax authorities and may be tested by tax auditors in
the course of a tax audit.
Administration and compliance:
Tax year – The tax year is generally the calendar year. A corporate
taxpayer can elect to file a corporate tax return based on the book
year.
Consolidated tax returns – Consolidated returns are not permitted;
each company must file a separate return.
Tax Filing requirements – Tax collection operates under a
self-assessment system, with tax due on the 15th day of the calendar
month following the tax-assessment month. Tax returns (as opposed to
actual tax payment) must be filed by the 20th of the following month.
Annual corporate tax returns must be filed within 4 months of the end
of the book year, and annual employment income tax returns (filed by
the employer) must be filed by 31 March of the following year.
Penalties – Penalties vary depending on the situation, such as late
tax payment, late filing, tax underpayment and voluntary amendment of
returns. The most common penalty is 2% monthly interest on the tax
underpaid.
Rulings – The Minister of Finance and the Director General of Taxation
may issue rulings in certain cases, such as the determination of
debt-to-equity ratios or the tax effects of a proposed transaction.
Source : http://www.taxrates.cc
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