There is a wide variety of taxes in Indonesia that companies, investors, and individuals need to comply with. This includes corporate income tax, personal income tax, withholding taxes, international tax agreements, value-added tax (VAT), and many more. These tax regulations, especially calculating employees’ income tax, should be considered before investing in Indonesia.
Almost all income earned by individual taxpayers in Indonesia is subject to income tax. In fact, if an individual fulfills any of the following conditions, then he/she is regarded as a tax resident in Indonesia :
- The individual lives in Indonesia;
- The individual is in Indonesia for more than 183 days within a 12-month period;
- The individual is in Indonesia during a fiscal year and intends to reside in Indonesia.
For non-resident individuals, they are subject to a 20 percent withholding tax on Indonesia-sourced income.
The Indonesian tax office (Direktorat Jenderal Pajak) requires all resident individuals in Indonesia to have their own personal tax numbers, Nomor Pendaftaran Wajib Pajak or NPWP. This regulation also applies to expatriates.
According to the latest government law, the rate of the tax that an individual need to pay is based on this table :
|Personal Income Tax Rate|
Rp. 1-50 Million
|Rp. 50-250 Million||
|Rp. 250-500 Million||
|Over 500 Million||
You might be wondering, if your company pays for house rental, car, etc. would it be considered your income, or not. Well, It depends on how the company will treat the expense. It may go to your income tax report as an income, or may go to the company income tax report as an expense. However, an extra 20% is levied on people who do not have a tax number (NPWP) on top of progressive income tax rates mentioned above. Deductions for an individual are Rp 2,880,000, wife 2,880,000 and up to three children Rp 1,440,000. Position Expense (Biaya Jabatan) is a deduction with a maximum 5% from gross income or a maximum of Rp 1,296,000.
Dealing with Income tax in Indonesia is quite troublesome especially if your company has a lot of employee. Afraid not, Gadjian provides a system for Indonesian payroll & taxation. Using payroll software provided by Gadjian, this taxation could be done in a matter of second. Our payroll software will automatically calculate the income tax for each of the employee according to Indonesian labor law. In addition, it also calculates salary, social security, and overtime. It will be so much faster and easier, guarantee to be accurate and satisfying results for the hiring companies.