Id Tax Indonesian Tax Guide 2019 2020 en

Indonesia Tax Guide
2019-2020
Deloitte Touche Solutions
This publication is prepared based on the prevailing laws, regulations
and publications available as at 15 July 2019. These materials and
the information contained herein are provided by Deloitte Touche
Solutions and are intended to provide general information on a
particular subject or subjects and are not an exhaustive treatment of
such subject(s).
This publication contains general information only, and none of

Deloitte Touche Tohmatsu Limited, its member firms, or their related
entities (collectively the “Deloitte Network”) is, by means of this
publication, rendering professional advice or services. Before making
any decision or taking any action that may affect your finances or
your business, you should consult a qualified professional adviser.
No entity in the Deloitte Network shall be responsible for any loss
whatsoever sustained by any person who relies on this publication.
2
Contents
About Deloitte 4
General Indonesian Tax Provisions 7
Corporate Income Tax 14
Individual Income Tax 29
Withholding Tax and Final Tax 33
Value Added Tax 45
Transfer Pricing 55
Summary of Double Tax Avoidance Agreements 68

(Tax Treaties)
Automatic Exchange of Information (AEOI) 78
List of Abbreviations 81
Contacts 82
Indonesian Tax Guide 2019-2020 3

About Deloitte
Deloitte is a leading global provider of audit and assurance,

consulting, financial advisory, risk advisory, tax & legal and related
services. Our global network of member firms and related entities
in more than 150 countries and territories (collectively, the
“Deloitte organisation”) serves four out of five Fortune Global 500®
companies. Deloitte’s approximately 312,000 people are committed
to making an impact that matters.
Deloitte Asia Pacific Limited is a company limited by guarantee and a

member firm of DTTL. Members of Deloitte Asia Pacific Limited and
their related entities, each of which are separate and independent
legal entities, provide services from more than 100 cities across the
region, including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh
City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka,
Shanghai, Singapore, Sydney, Taipei, Tokyo and Yangon.
Deloitte Southeast Asia Ltd comprises Deloitte practices operating in

Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar,
Philippines, Singapore, Thailand and Vietnam. It was established to
deliver measurable value to the particular demands of increasingly
intra-regional and fast growing companies and enterprises.
Comprising over 380 partners and 10,000 professionals in 25 office
locations, the subsidiaries and affiliates of Deloitte Southeast Asia Ltd
combine their technical expertise and deep industry knowledge to
deliver consistent high quality services to companies in the region.
4
About Deloitte Indonesia
In Indonesia, Deloitte is represented by the following:
• Imelda & Rekan (IR), Registered Public Accountants
• Deloitte Touche Solutions (DTS), Tax Services
• PT Deloitte Konsultan Indonesia (DKI), Financial Advisory and Risk
Advisory Services
• KJPP Lauw & Rekan, Valuation Advisory
• Hermawan Juniarto & Partners, Lawyers
• PT Deloitte Consulting, part of the world’s largest management
consulting business
Deloitte Indonesia has over 1,600 Partners and Staff located in

Jakarta and Surabaya, serving companies listed on the Indonesia
Stock Exchange as well as multinational and large national
enterprises, public institutions, and fast growing companies.
Our Tax and Legal Service

Virtually all business decisions today have tax and legal implications
and the rules are in constant flux. Increasingly, companies face
a daunting task in managing their tax and legal requirements
efficiently. Thus, practical and well-crafted tax and legal solutions are
now a critical part of an effective business strategy.
Deloitte offers clients a broad range of fully integrated tax and

legal services. Our approach combines insight and innovation from
multiple disciplines with business and industry knowledge to help
companies excel globally.
In Indonesia, tax services are provided by Deloitte Touche Solutions,

while legal services are provided by Hermawan Juniarto & Partners.
Our professionals guide clients through the tax and legal maze by
applying their specialist skills in the following areas:
• Business Tax Services
• Mergers and Acquisitions
• Transfer Pricing
• Global Employer Services
• Business Process Solutions
• Indirect Tax
• Global Trade Advisory
• Legal Services

We also serve a wide range of industries and group services,
including:
• Consumer Products (CP)
• Energy, Resources and Industrials (ER&I)
• Financial Services (FS)
• Government and Public Services (GPS)
• Life Sciences and Health Care (LSHC)
• Technology, Media and Telecommunications (TMT)
• Japanese Services Group (JSG)
• Korean Services Group (KSG)
• Chinese Service Group (CSG)
• State-owned Enterprises (SOE)
• Deloitte Private (DP)
• Dispute
6
General Indonesian
Tax Provisions
Law Number 6 of 1983 regarding General Procedures and Provisions for

Taxation as most recently amended by Law Number 16 of 2009.
Residency
Taxation in Indonesia is determined on the basis of residency.
Residency tests are applied as follows:
• Individual resident taxpayers are individuals who:
-- are domiciled in Indonesia; or
-- stay in Indonesia for more than 183 days in any 12-month
period; or
-- are present in Indonesia during a tax year and intending to
reside in Indonesia.
• Residency of a corporation is based on place of incorporation or
domicile or effective place of management.
Basics of the Tax System

• Tax returns are filed by taxpayers based on a self-assessment
system.
• Members of a group of companies are taxed individually, as there
are no group relief provisions available.
• The statute of limitations for the Indonesian Tax Authority (“ITA”) to
issue a tax assessment is 5 (five) years, except for criminal acts, for
which it is 10 years.
• Indonesia imposes a range of taxes on individuals and corporate
taxpayers. These are summarized below:
a. Income Tax, which includes:
-- Corporate Income Tax (“CIT”);
-- Individual Income Tax;
-- Withholding Tax on employees’ remuneration;
-- Withholding Tax on various payments to third parties.
b. Value Added Tax (VAT) and Luxury Goods Sales Tax (LGST),
subject to certain criteria.
c. Regional taxes, subject to certain criteria.

Income Recognition
• Indonesian tax residents are taxed on their worldwide income
(foreign tax credits are available on foreign income of residents
under certain criteria).
• Non-residents are taxed on income derived from an Indonesian
source, subject to any relief available under applicable tax treaties.
Compliance Reporting
In general, tax returns (monthly and annual) are required to be
submitted to the ITA in the form of electronic document through
e-filling.
Compliance Timetable
Type of Tax Monthly Monthly Annual Filing
Payment Filing Deadline1
Deadline Deadline
CIT 15th of the 20th of the End of the 4th
following following month after
month month the tax year
ends2
Individual 15th of the 20th of the End of the 3rd
Income Tax following following month after
month month the tax year
ends2
Employee 10th of the 20th of the N/A
Withholding following following
Tax month month
Other 10th of the 20th of the N/A
Withholding following following
Taxes month month
VAT & LGST Before the VAT End of the N/A
return filing following
deadline3 month
Notes:
1. Any underpayment of tax must be settled before submission of the annual
tax return.
2. Taxpayers can extend the period of submission of the annual income tax
return for 2 (two) months at the maximum by submitting notification to the
ITA.
8
3. E
xcept for self-assessed VAT on utilization of intangible taxable goods and/or
taxable services from offshore and VAT collected by VAT Collector other than
State Treasurer, which is due by the 15th of the following month.
Administration, Books and Records

• Generally, books and records, including those on computers,
should be maintained in Rupiah and in the Indonesian language,
and kept for 10 years in Indonesia.
• Foreign investment (PMA) companies, permanent establishments
(“PE”), certain entities with foreign affiliations or taxpayers that
prepare their financial statements in US Dollar as the functional
currency in accordance with the Indonesian financial accounting
standards may maintain English language and US Dollar
bookkeeping, subject to approval from the Minister of Finance
(“MoF”), while for contractors of oil and gas production sharing
contracts and companies operating under Mining Contracts of
Work, only a notification is required.
• Changing of bookkeeping method or period is possible, subject to
approval from the ITA.
• For tax purposes, there is no statutory requirement for an audit
of a taxpayer’s accounts by a public accountant. However, if
taxpayers do have audited accounts, the ITA requires them to be
submitted upon annual tax filing.
Tax Audit
• The ITA may conduct a tax audit within the period before the
statutory limitation has ended.
• Where a return is lodged showing a tax refund request, this will
automatically trigger a tax audit.
• The taxpayer is required to submit all data/documents within 1
(one) month from the request date. Data/documents that were not
provided will not be considered in the tax objection process.
• If there is still a dispute over the legal basis of any adjustment,
before the completion of a tax audit, the taxpayer may request
a review by the Quality Assurance Team from the Regional ITA.
Certain deadline and formalities need to be fulfilled.
• The ITA will issue a tax assessment as a result of the tax audit,
which can be a nil, underpayment, or overpayment (refund) tax
assessment.
• In case of tax audit due to tax refund request, if the ITA does
not issue the tax assessment within 12 months since the refund
request was filed, the tax refund request will be assumed to be
granted.

Tax Disputes – Objection process
• A taxpayer may file a tax objection with the Directorate General
of Taxation (“DGT”) against any tax assessment within 3 (three)
months from the date the ITA sends the tax assessment letter to
the taxpayer.
• A taxpayer that is going to file a tax objection with the DGT over an
assessment letter must pay at least the amount of tax payable that
has been agreed by the taxpayer in the closing conference during
the tax audit, before submitting the objection letter.
• If the objection is rejected or approved in part by the DGT, the
taxpayer will be subject to an administrative sanction in the form
of a penalty amounting to 50% of the tax assessment unpaid at the
time the objection was submitted, unless the taxpayer files for a
tax appeal.
• The DGT should make its decision on the objection within 12
months after receiving the objection. If the DGT fails to issue
a decision within this period, the taxpayer’s objection will be
assumed to be accepted and granted.
Tax Disputes – Appeal process

• A taxpayer may appeal to the Tax Court against the DGT’s decision
on the taxpayer’s objection within 3 (three) months from the date
of receiving the DGT decision.
• The taxpayer is required by the Tax Court Law to pay at least 50%
of the tax payable before lodging the appeal letter.
• The Tax Court will conduct hearings on the appeal and has to
conclude within 12 months of the appeal being lodged. In certain
special cases, this deadline may be extended up to 3 (three)
months. However, there is no consequence if the deadline has
elapsed.
• If the appeal is rejected or approved in part by the Tax Court,
the taxpayer must pay the unpaid tax in the tax assessment plus
a 100% penalty of the tax assessment unpaid at the time the
objection was submitted.
Tax Disputes - Request for Judicial Review by the Supreme Court

• Either the taxpayer or the DGT may further challenge the Tax
Court’s decision on an appeal by filing a request for judicial review
to the Supreme Court.
• Such request for judicial review can only be proposed for specific
circumstances. Depending on the type of circumstances, the
request should be filed no later than 3 (three) months after:
a. the time the condition is identified (e.g., in the event a Tax
10
Court decision that was based on perjury or deceit
by the opponent and this is only known after the verdict or
based on false evidence) or significant new written evidence is
found (based on which, had it been known earlier during the
trial, the tax court verdict could have been different); or
b. the time the tax court verdict is delivered, for other reasons
(e.g., where the verdict was clearly issued not in accordance
with the prevailing laws and regulations, or where the court
verdict does not correspond to the matter being claimed or if
part of a claim has not been decided without any consideration
of the reasons).
• Filing a request for review does not postpone the execution of the
Tax Court decision, including interest compensation due to the
taxpayer.
• The Supreme Court should investigate the case and present
its decision within 6 (six) months of the filing of the request for
review. However, there is no consequence if the deadline has
elapsed.
Tax Penalties and Sanctions

Circumstances Penalties and Surcharges
Late reporting Rp 500,000 for monthly VAT return;

Rp 100,000 for other monthly tax
return; Rp 100,000 for annual
individual tax return;
Rp 1,000,000 for annual corporate tax
return
Late payments in 2% per month
general
Tax underpayment 2% per month for a maximum of 24
resulting from issuance months or 50% or 100% surcharge of
of tax assessments the tax underpayment, depending on
the case
Voluntary amendments 2% per month or 50% or 150%
of returns surcharge of the tax underpayment,
depending on the case

Circumstances Penalties and Surcharges
Issuing incomplete VAT 2% of the taxable base

invoice, or not issuing
or late in issuing VAT
invoice, or reporting
VAT invoice not in
accordance with the
period of issuance of
VAT invoice
Criminal Sanctions
Circumstances Fines and Imprisonment
Fails to submit a tax return through 1 to 2 times the tax

negligence; or submits an incorrect underpaid or imprisonment
or incomplete tax return or attaches from 3 (three) months to 1
incorrect information. (one) year.
Deliberately does not register for 2 to 4 times the

Tax ID Number (“NPWP”) or as tax underpaid and
taxable entrepreneur; improper use imprisonment from 6 (six)
of NPWP or taxable entrepreneur months to 6 (six)years. The
number; does not file a tax return; sentence will be doubled if
submits an incorrect or incomplete commits another criminal
tax return; refuses a tax audit; does act in the taxation field
not maintain bookkeeping; does not before a period of 1 (one)
keep books, records or documents year has passed, i.e., since
supporting bookkeeping in the first sentenced period
Indonesia; shows false or falsified has been served.
bookkeeping/records; does not
remit taxes withheld or collected.
Misuses or uses without right the 2 to 4 times the tax refund

NPWP or taxable entrepreneur requested/ compensated/
number, or submits an incorrect credited and imprisonment
or incomplete tax return and/ from 6 (six) months to 2
or information for restitution or (two) years.
compensating or crediting tax.
12
Circumstances Fines and Imprisonment
Intentionally issues and/or uses tax 2 to 6 times the tax amount

documents which are not based on and imprisonment from 2
the actual transaction; issues tax (two) years to 6 (six) years.
invoice but is not yet confirmed as
taxable entrepreneur.
Notes:
1. More severe penalties, surcharges, and imprisonment are imposed for
improper bookkeeping, fraud, and embezzlement.
2. Criminal sanction can only be imposed by a decision issued by a civil court.

Corporate Income Tax
Law Number 7 of 1983 regarding Income Tax as most recently amended

by Law Number 36 of 2008.
Tax Rates
The curent applicable standard CIT rate is 25%. Resident corporate
taxpayers with gross revenue up to Rp 50 billion receive a 50%
reduction in the corporate tax rate imposed on the taxable income
for gross revenue up to Rp 4.8 billion.
Taxpayers who fulfil certain criteria with gross revenue not exceeding
Rp 4.8 billion in one tax year are subject to final income tax of 0.5%
of the gross revenues. These taxpayers may opt to be subject to the
standard Income Tax rate by submitting a notification to the ITA.
The standard CIT rate also applies to income received or earned by

a non-resident through a PE in Indonesia. A PE will also be subject
to 20% branch profits tax, which is applied to the PE’s net profit
after tax. If a PE receives or earns income that is subject to final
income tax, the tax base of the branch profits tax shall be the taxable
income (after fiscal adjustments) less the amount of final income tax.
This branch profit tax rate of 20% may be reduced pursuant to the
applicable tax treaty.
An exemption from branch profits tax applies if all the net profit after
tax of a PE is reinvested in Indonesia in the form of:
1. Capital contribution in a newly established company domiciled in
Indonesia as a founder or a member of the founders;
2. Capital contribution in an existing company established and
domiciled in Indonesia;
3. Fixed assets to be used by the PE to do business or conduct
activities of the PE in Indonesia; or
4. Investment in intangible goods to be used by the PE to do business
or conduct activities of the PE in Indonesia.
14
Final Income Tax
Certain incomes are subject to a fixed percentage of gross income
(final tax - see page 41-44).
Corporate Tax Incentives

A public company which has a minimum of 40% of its total paid- up
shares traded on an Indonesian stock exchange and complies with
the associated requirements can obtain a 5% reduction from the
applicable standard CIT rate.
Tax Objects
Tax Objects are broadly defined as income, that is, any increase in
economic capability received or accrued by a Taxpayer from within or
outside Indonesia, which can be used for consumption or to increase
the wealth of a taxpayer, in whatever name or form.
Calculation of Income – Deductible Expenses

All legitimate business expenses directly or indirectly related to
earning, collecting, or maintaining income are deductible from the
assessable income to calculate the taxable income. These expenses
include but are not limited to:
• Expenses that are directly or indirectly related to business activity
such as:
a. Material expense;
b. Salary / wages expense;
c. Interest, rental and royalty;
d. Travelling expense;
e. Insurance premium;
• Depreciation and amortisation expense;
• Promotion and selling expenses, provided that a nominative list
in a required format is available and the expenses constitute the
cumulative amount of the following costs:
a. Costs of advertising in electronic media, print media, and/or
other media;
b. Costs of product exhibition;
c. Costs of introducing new products;
d. Costs of sponsorship associated with product promotion;
• Losses from the sale or transfer of assets that are owned and used
in a company or that are owned to obtain collect and maintain
income;
• Write-off of uncollectible receivables for certain transactions with
non-related party, provided that the following conditions are met:
a. The write-off must have already been booked as expense in the

commercial income statement of the creditor;
b. The taxpayer must submit a list of uncollectible receivables to
the ITA; and
c. The collection case has been brought to the District Court or the
government; or there is a written agreement on nullification of
accounts receivables / debt release and discharge between the
creditor and debtor concerned; or it has been announced in
general or special publications; or the debtor acknowledges that
its debts have been nullified for a certain amount;
• Donations and expenses for handling national disasters, research
and development, educational facilities, sports development, and
construction of social infrastructure, as long as the fund/donations
are made directly through the relevant authorized institution and
the following requirements are met:
a. The previous year’s CIT return of the taxpayer that claims such
donation expense must be in a fiscal profit position;
b. The donation is supported with sufficient supporting
documentation;
c. The institution that receives the donation must be registered as
a taxpayer, except for those that are exempted by law, and not
a related party of the donor;
d. The total donations or expenses for one fiscal year should not
exceed 5% of the previous year’s fiscal profit.
There are also certain requirements that must be fulfilled in terms of

type or form of donation and how to value the donation that is not
made in the form of cash.
• Compulsory Tithe (“zakat”) or religious contribution, provided that
valid supporting evidence is available and certain requirements
are met;
• Non-creditable input VAT that has been paid and incurred from a
transaction that is related to the activity of generating, collecting,
and maintaining income. If the input VAT relates to an asset that
has useful life of more than 1 (one) year, it must be capitalized and
expensed through amortization or depreciation.
Calculation of Income – Non-Deductible Expenses

There are a number of non-deductible expenses. These non-
deductible expenses are specified in the law or in associated
regulations and pronouncements. Major categories of non-deductible
expenses include:
• Benefits-in-kind provided by an employer to employees (however,
this is also subject to certain exceptions, e.g., certain benefits-
16
in-kind due to requirements from authority in-charge of labour
matters, meals and uniforms provided to all employees are
deductible, as well as benefits provided in certain qualifying
remote areas);
• 50% of depreciation, operating and maintenance costs for cars and
mobile telephones provided to employees;
• Distribution of profits in the form of dividend;
• Gifts and donations, except those that are required by religion
(zakat, etc.) and donations for handling national disasters, research
and development performed in Indonesia, social infrastructure
development, educational facilities, and sports development;
• The creation of general provisions/reserves, except for doubtful
debts provisions for banks, credit providers, financial lease
companies, financing companies, factoring companies, Savings
and Loan Cooperatives, PT Permodalan Nasional Madani (PNM),
and insurance companies (except life insurance reserves related to
unit link, which are accumulated in accordance with income that is
subject to final tax and/or not subject to tax, which shall be treated
as non-deductible expenses), including provisions for social
assistance formed by a Social Security Administration Agency,
provisions for underwriting of the Deposit Insurance Corporation,
provisions for the reclamation costs of mining companies,
provisions for reforestation costs for forestry companies, and
provisions for closing and maintenance costs of waste disposal
facilities of waste processing companies;
• Income tax;
• Tax penalties;
• Expenses relating to income which is taxed through a final-rate
withholding tax system, income that is subject to tax based on the
Net Income Calculation Norm (deemed profit margin), and income
which is otherwise exempt from tax (non-tax object);
• Salaries received by partners in a partnership or members of a
firm where their participation is not divided into shares; and
• In respect of interest deductibility, the acceptable Debt-to-Equity
Ratio (“DER”) is 4:1, except for certain capital intensive industries.
Gains from foreign exchange are taxable and losses incurred from
foreign exchange can be treated as deductible expense, except for
those arising from transactions that are subject to final tax or are
non-tax objects.

DER
The amount of deductible borrowing costs arising from debt is
limited to a maximum DER of 4:1 (except for certain capital intensive
sectors). As such, if a taxpayer’s DER exceeds the prescribed 4:1
threshold, the excess borrowing costs are non-deductible for
income tax calculation. It is important to note that the rule applies
to domestic and foreign debts from both related and non-related
parties. Definitions of debt and equity as well as the components of
borrowing costs for this purpose are further governed under MoF
regulation and regulation of ITA. Furthermore, for taxpayers that
have zero or deficit in equity balance, the entire borrowing costs are
not deductible.
Besides complying with the prescribed DER, taxpayers are also

required to submit a report on DER calculation and a summary
of overseas debt (if applicable) using the prescribed form as
attachments to the annual CIT Return.
Depreciation/Amortization
Either straight-line or declining balance method of depreciation
is allowable, except for buildings, for which only the straight-line
method is permitted. The chosen depreciation method must be
applied consistently. When adopting a declining balance method, the
remaining book value at the end of the useful life of an asset must be
depreciated in full.
Depreciation commences either in the month the expenditure occurs

or in the month construction/installation of an asset is completed.
With the approval of the ITA, however, depreciation may commence
in the year the asset is first used or when production starts or when
business income is first earned.
18
The useful life and tariffs of depreciation of tangible assets are
governed as follows:
Tariff of Depreciation
Group of Straight Double
Useful Life
Tangible Assets Line Declining
Method Method
1. Non-Buildings
Group 1 4 (four) Years 25% 50%
Group 2 8 (eight) Years 12.5% 25%
Group 3 16 Years 6.25% 12.5%
Group 4 20 Years 5% 10%
2. Buildings
Permanent 20 Years 5% N/A
Non-Permanent 10 Years 10% N/A
MoF determines the asset categories subsumed into the groups of

non-building tangible assets. Intangible assets (including goodwill)
are amortized on the same basis as the non-buildings groups in the
table above.
Loss Carried Forward

Losses are available to be carried forward for a maximum of 5 (five)
years. Carry back of losses is not allowed.
Non-Taxable Income
Applicable to corporate and individual taxpayers, the law specifies a
number of categories of income that are exempted from tax. These
are:
• Aid, donations, zakat, religious donations or gifts received,
provided there is no business, work, or ownership relationship
between the parties concerned;
• Inheritances;
• Dividends received by a resident company from another resident
company, provided that the dividends are paid out from retained
earnings and the recipient owns 25% or more of the investee
company;

• Payments by an insurance company to an individual in connection
with health, accident, life, or education insurance;
• Assets, including cash, received by an entity in exchange for shares
or capital contribution;
• Profits distributed to a venture-capital company by a small or
medium-size enterprise (annual turnover less than Rp 50 billion)
engaging in certain businesses in Indonesia; and
• The share of profit received by a member of a limited partnership
without share capital, partnership, association, or firm, including
the participation unit holders of collective investment agreements.
Sale of Land and/or Building

A final tax at 2.5% is generally imposed on taxpayers, while transfer
of basic houses (rumah sederhana) and basic apartments (rumah
susun sederhana) by a taxpayer whose main business is in transfer
of land and buildings is subject to 1% final tax. Transfer duty of 5% is
payable by the purchaser. A 0% rate is also applicable on transfer of
land and building to the Government for the public interest.
Exemptions are granted for certain types of transfer of land and

buildings, including grant, inheritance, merger with book value
approved by the Ministry of Finance, non-tax subject transferring
land and building, and sale of land with value less than Rp 60 million
by an individual taxpayer whose annual income does not exceed the
non-taxable income threshold.
Income from Derivative Transactions

Income from derivative transactions in stock exchange and future
market is subject to normal CIT. In this case, the gain on such
transactions shall be recognized as taxable income that is subject to
the standard CIT rate.
Tax Allowance Facility

Companies investing in certain business sectors and/or in certain
less developed regions having high priority on a national scale can be
granted tax allowance facility in the form of:
a. Additional net income reduction, up to a maximum of 30% of the
amount of investment in tangible fixed assets (including land),
which shall be charged at 5% per annum over 6 (six) years;
b. Accelerated depreciation and amortization;
c. The period of loss carry forward being extended up to ten years
(certain additional years can be given if the taxpayer meets the
requirements) and;
20
d. Withholding tax on dividend distributed to foreign shareholder at
10%, unless the relevant tax treaty stipulates a lower rate.
In order to apply for the tax allowance facility, certain detailed
requirements must be met. Qualitative criteria, such as high
investment value or export-oriented, high labour absorption, and
high local content, must also be met.
The industry sectors that are eligible for the income tax allowance
facility are listed in the relevant MoF regulation and these are
updated periodically to accommodate the needs to entice
investments in certain types of business and selected regions.
Tax Holiday Facility

Taxpayers making a new investment in a pioneer industry may obtain
exemption or reduction of income tax. The said pioneer industries
are defined as industries possessing broad linkages, giving added
value and high externality, introducing new technology, as well as
possessing strategic value for the national economy.

The tax exemption or reduction facility (tax holiday) applies to the
following 18 certain industries:
Integrated upstream Semi-conductor or other Ship main components

metals industry main computer components manufacturing industry
manufacturing industry integrated integrated with shipping
with computer manufacturing manufacturing industry
industry
Integrated crude oil Communication equipment main Aircraft main components

refinery industry components manufacturing industry manufacturing industry
integrated with smartphone integrated with aircraft
manufacturing industry manufacturing industry
Integrated crude oil/ Main healthcare equipment Railway main components

natural gas/coal-based components manufacturing manufacturing industry
petrochemicals industry industry integrated with irradiation, integrated with railway
electromedical or electrotherapy manufacturing industry
equipment manufacturing industry
Integrated basic Industrial machinery main Electricity generator machinery

inorganic chemicals components manufacturing industry including garbage-
industry industry integrated with machinery based electricity generator
manufacturing industry machinery industry
Integrated basic organic Machinery main components Economic infrastructure

chemicals sourced from manufacturing industry integrated
agriculture/plantation/ with four-wheels or more automotive
forestry industry manufacturing industry
Pharmaceutical raw Robotic components manufacturing

materials industry industry integrated with
manufacturing machinery
manufacturing industry
Digital economy covering

data processing, hosting,
and related activities
22
The tax facilities provided are:
a. a five-year 50% reduction in CIT liability for investment of Rp 100
billion to below Rp 500 billion;
b. a five to twenty-year 100% reduction in CIT liability for minimum
investment of Rp 500 billion;
c. during the next 2 (two) years subsequent to the end of the CIT
reduction periods above, the taxpayers are eligible for half of the
CIT reduction percentages as stipulated above; and
d. the tax holiday period commences from the year of commercial
operation.
The prerequisites to apply for the tax holiday facility are as follows:
a. a new investment;
b. holds principal license or business license which falls under
Pioneer Industry;
c. invests at least Rp 100 billion in a qualified Pioneer Industry;
d. satisfies DER as prescribed by the Ministry of Finance;
e. has not been issued a decision on granting or rejection notification
of CIT reduction by the Ministry of Finance; and
f. must have legal status as an Indonesian legal entity.
Upon approval, the tax holiday facility is only applicable to the

income which is generated from business eligible for the facility.
Other income (such as capital gain, interest, dividend, royalty, rental,
debt waiver, revaluation, etc.) remains subject to tax in accordance
with the prevailing tax regulations. Taxpayers that have both types
of income stream are required to maintain separate bookkeeping for
each income stream.
Corporate Tax for Certain Industries / Taxpayers

The tax provisions for minerals and coal mining, upstream oil
and gas, geothermal, and sharia-based industries are stipulated
separately through government regulations and Ministry of Finance
regulations
(to date, the regulation for geothermal and coal mining sectors have
not been issued yet).
Taxation of general mining and coal mining under the framework

of Contracts of Work is stipulated in the relevant Contract of Work.
Certain taxpayers in certain industries are subject to final income tax
based on gross income (see page 41-44).

Small-scale entrepreneurs, both individual and corporate, are subject
to 0.5% tax on gross revenue (see page 43).
Taxpayers operating in specific areas, such as Special Economic Zone/

Kawasan Ekonomi Khusus (KEK) will be eligible for certain CIT, VAT, and
import facilities.
Super Deduction Facility

The Government introduces income tax facility for labor-intensive
industries and certain types of expenditure incurred by Indonesian
taxpayers, which will be soon regulated under MoF regulation. There
are 3 (three) business activities eligible for this new income tax
facility:
1. New capital investment or business expansion in labor-intensive
industry (eligible for 60% tax allowance);
2. Apprenticeship, internship, and/or learning program in human
resources development (eligible for a maximum 200% deduction
of total expenditures); and
3. Research and development related activities (eligible for a
maximum 300% deduction of total expenditures).
Corporate Tax for Sharia Business

The treatments on income and expenses as specified in the Income
Tax Law also apply to sharia-based business activities in the same
manner as in conventional banking/financial services (mutatis
mutandis). The income tax treatment of sharia banking and sharia
financial services can be summarized as follows:
1. Sharia Banking
Income Recipient Type of Income Tax Treatment
Bank Bonus, profit Treated as interest
sharing, and margin
from transactions of
facilitated customer
Income other than Treated in
those mentioned accordance with the
above normal income tax
regulation for the
relevant transaction
24
Income Recipient Type of Income Tax Treatment
Investor/ Depositor Bonus, profit Treated as interest
Customer sharing, and any
other income from
funds entrusted
and placed
offshore through
an Indonesian
sharia bank or an
Indonesian branch
of an offshore
sharia bank
Income other than Treated in
those mentioned accordance with the
above normal income tax
regulation for the
2. Sharia Financial Services

Type of Income Tax Treatment
Leasing (Ijarah) Normal operating lease, and the
leased asset is non-depreciable
Financial Lease (Ijarah Similar to financial lease with
Muntahiyah Bittamlik/IMB) option, and the leased asset is
non-depreciable
Factoring (Wakalah bil Ujrah) Gain or profit is treated as interest
Consumer Financing Gain or profit margin is treated as
(Murabahah, Salam, Istishna) interest
Other Sharia Financing Fee or other income is treated
in accordance with the normal
income tax regulation for the
Corporate Financing from Gain or profit sharing is treated as
investor (Mudharabah, interest
Mudharabah Musytarakah,
Musyarakah)

Type of Income Tax Treatment
Delivery of Assets Treated in accordance with the
(deemed to be delivered normal income tax regulation for
directly from supplier to end the relevant transaction
user)
Deemed Profit Margins

The following types of income derived from certain businesses have a
deemed profit margin.
Type of Income On Gross Effective Income Tax
Revenue Rate *)
Foreign oil and 15% 3.75%
gas drilling service
operations
Foreign shipping and 6% 2.64%
airline operations
Domestic shipping 4% 1.20%
operations
Domestic airline 6% 1.80%
operations
Trade representative 1% of export 0.44%
offices value
*) The effective income tax rate may deviate, as it may be subject to tax treaty or
any changes of rate in the income tax law and/or regulations.
Controlled Foreign Company (“CFC”) Rules

Indonesia has adopted CFC rules that determines the time of receipt
of dividend by a resident taxpayer from capital participation in a non-
listed foreign company, which:
a. is owned by an Indonesia taxpayer, or together with other
Indonesian taxpayer(s), with direct ownership of at least 50% of
the total paid-up share capital; or
b. is jointly owned with other resident taxpayer(s) with direct or
indirect ownership of at least 50% of the total paid-up share capital
at each shareholding level.
26
The amount of the capital participation is the percentage of
ownership measured at the end of the fiscal year of the Indonesian
taxpayer, either:
a. total paid-up capital issued by the non-listed company; or
b. total paid-up capital with voting rights issued by the non-listed
foreign company, which is applicable to multiple layers of
subsidiaries, with a 50% threshold criterion applied at each level.
The time of receipt of dividend by a resident taxpayer with the above
conditions is as follows:
a. in the 4th month after the deadline for the submission of the
Annual CIT Return of the foreign company for the fiscal year
concerned; or
b. in the 7th month after the end of a fiscal year if such foreign
company does not have an obligation to submit an Annual CIT
Return or if there is no deadline for the submission of the Annual
CIT Return.
The amount of deemed dividend shall be the total amount of
dividend that the Indonesian taxpayer is entitled to in proportion to
its capital participation in the foreign company from the net passive
income of the foreign company, which covers:
a. Dividend;
b. Interest, except interest earned by a foreign company with banking
licence;
c. Rent of land and/ or buildings;
d. Rent of other assets to related parties;
e. Royalty; and
f. Gain on sale or transfer of assets.
The deemed dividend can be offset against the actual dividend

received from the direct CFC within the past 5 (five) consecutive
years. In the case that the actual dividend received is greater than the
deemed dividend, the discrepancy is subject to income tax and shall
be declared in the annual income tax return for the fiscal year when
the actual dividend is received. Further, the Indonesian taxpayer may
credit the income tax paid or withheld for dividends received from
a direct CFC in the fiscal year when the tax is paid or withheld, with
certain limitations and documentation requirements.

Indirect Purchase of Indonesian Shares or Assets Involving
Special Purpose Company (“SPC”)
The indirect purchase of shares or assets by an Indonesian taxpayer
through an SPC can be stipulated as the purchase of shares or assets
by the Indonesian taxpayer if the SPC has a special relationship with
the Indonesian taxpayer and where there is unreasonable pricing.
Indirect Sale of Indonesian Shares Involving SPC

Sales of shares of a SPC established or domiciled in a tax haven
country having special relation (related party) with Indonesian
company or PE by a non-Indonesian tax resident can be deemed
as a sale of shares in the Indonesian company or PE by the non-
Indonesian tax resident.
Tax haven country is defined as a country that has a corporate tax

rate 50% lower than that of Indonesia or a country that does not
have a provision for exchange of information with Indonesia.
Tax-Neutral Mergers
Generally, transfers of assets in business mergers, consolidations, or
business spin-offs are conducted at market value, which may result
in taxable gain. The assets can be transferred at book value for a
tax-neutral merger, consolidation, expansion, or business acquisition
upon approval from the ITA, provided that business purpose tests
are fulfilled.
Cross-border merger and consolidation at book value is also allowed,

provided that business purpose tests are fulfilled and a resident
taxpayer is the surviving entity.
This facility is also available for business spin-offs as part of an Initial

Public Offering (“IPO”) plan, spin-offs of a sharia business unit, spin-
off of a corporate taxpayer where the new entity receives additional
capital injection from foreign investor with minimum value of Rp 500
billion, and spin-off of a state-owner enterprise that receives capital
injection from the Government of Indonesia for the purpose of
establishing a state-owned holding company.
28
Individual Income Tax
Law Number 7 of 1983 regarding Income Tax as most recently amended

by Law Number 36 of 2008.
Tax Rates
The applicable tax rates are as follows:
Taxable Income Rate
Up to Rp 50,000,000 5%
Over 50,000,000 but not exceeding Rp 250,000,000 15%
Over Rp 250,000,000 but not exceeding Rp 500,000,000 25%
Over Rp 500,000,000 30%
The applicable tax rates on severance payment are as follows:

Taxable Income Rate*)
Up to Rp 50,000,000 0%
Over Rp 500,000,000 25%
The applicable tax rates on payment of pension fund or old age

saving funds are as follows:
Taxable Income Rate*)
Up to Rp 50,000,000 0%
Over Rp 50,000,000 5%
*) These tax rates are final and only applicable on lump sum payment or
payment made within a two-year period. Payment made in the third year and
thereafter would be subject to normal tax rates and can be claimed as tax
credit.

Non-resident individuals are generally subject to a 20% withholding
tax on income received from Indonesia (Article 26 withholding tax).
However, this rate may vary depending on the circumstances and the
applicable tax treaty provisions. Specific rates apply for income that is
subject to final tax.
Tax Registration and Tax Filing

• All individual tax residents (including expatriates) are obliged to
register with the ITA and obtain a Tax ID number. An exemption
from registration is available for those earning below the non-
taxable income threshold, those who do not qualify as individual
tax residents, and married women who will fulfill their individual
tax obligation jointly with their husband.
• Tax residents are taxed on their worldwide income, regardless of
the source, and they are also required to declare their worldwide
assets and liabilities.
• Individual taxpayers are required to file annual individual income
tax returns (Form SPT 1770 or 1770 S or 1770 SS). In certain cases,
monthly instalment tax payments are also required.
• Individual taxpayers are encouraged to file their individual tax
returns electronically through the e-Filing system. They need to
separately obtain an e-Filing Number (e-FIN) from the ITA in order
to access the system.
Tax Payments
For processing tax payment, a billing code must first be generated.
The specific billing code is valid for 30 days and will need to be given
to the bank so that the bank can process the tax payment.
Personal Deductions
The following personal deductions are available for resident
individual taxpayers in calculating their taxable income, depending
on the taxpayer’s personal circumstances.
Basis of Deduction Deductible Amount (per year)
Taxpayer Rp 54,000,000
Spouse Rp 4,500,000
(additional Rp 54,000,000 for a wife
whose income is combined with her
husband’s)
30
Basis of Deduction Deductible Amount (per year)
Dependents Rp 4,500,000 each (up to a maximum of

3 (three) individuals related by blood or
marriage)
Occupational Support 5% of gross income up to a maximum of
Rp 6,000,000
Pension Cost 5% of gross income up to a maximum of
(available to Rp 2,400,000
pensioners)
Contribution to Amount of self-contribution
approved pension
fund, e.g. BPJS
Ketenagakerjaan
Compulsory tithe Actual amount, provided that valid
(zakat) or religious supporting evidence is available and all
contributions requirements are met.
MoF is authorized to re-determine the amounts of the above

personal deductions. The above personal deductions were
introduced in June 2016 and apply retrospectively from January 2016.

Social Security
The national social security schemes are the Manpower scheme (BPJS
Ketenagakerjaan) and Healthcare scheme (BPJS Kesehatan), which
are mandatory for Indonesian nationals as well as foreigners who
work in Indonesia for at least 6 (six) months. Expatriates need to be
able to prove their participation in the social security schemes when
renewing their work permits.
The premium contributions for each scheme are as follows:
As a percentage of
regular salaries/wages
Social Security
Areas covered
Scheme Borne by Borne by
employers employees
BPJS Working 0.24 - 1.74% -

Ketenagakerjaan accident
(Manpower protection
Scheme)
Death insurance 0.3% -
Old age saving 3.7% 2%
Pension plan(1),(2) 2% 1%
BPJS Kesehatan 4% 1%
(Healthcare Scheme)(3)
1% for (4)
additional
family
member
Notes:
1. From March 2019, the regular salary/wages cap for calculating the pension
insurance contribution is increased from Rp 8,094,000 to Rp 8,512,400 per
month. The amount may be updated from time to time.
2. Contribution to the pension plan is not mandatory for expatriates.
3. The regular salary/wages cap for calculating the healthcare contributions is
Rp 8,000,000 per month. The amount may change in the future.
4. The mandatory premium covers husband, wife, and three dependents.
Additional family members can be covered with additional premium.
32
Withholding Tax and
Final Tax
System
• To facilitate ITA’s tax collection, taxpayers are subject to a number
of obligations to withhold taxes on various payments to residents
and non-residents.
• The tax withheld from payments made to residents may represent
either a final income tax on the income for the recipient, or
(advance) prepaid tax which is either creditable by the recipients
against their final tax liability or refundable.
• Withholding tax on payments made to non-residents is a final tax.
Withholding Tax under Article 21

• Employers are required to withhold tax from remuneration and
severance payment paid to employees (the progressive tax rates
are as described in the individual income tax section).
• Pension funds approved by MoF and the State Workers Social
Security Company (BPJS) are required to withhold tax from pension
and old age saving fund payments, respectively.
• Rates are 20% higher for individuals who do not have Tax ID
Numbers.
• According to MoF regulation, the ITA can re-determine the amount
of income received by an individual taxpayer from an employer
which has a special relationship with an offshore company.
Withholding Tax under Article 22

• A creditable withholding tax of 2.5% (or up to 10% if the importer
does not hold an import license) applies upon importation of
certain goods;
• A creditable withholding tax of 1.5% is collected by State
Treasurers and State-Owned enterprises on the purchase of
goods;
• Article 22 tax is also due on the local purchase of certain
commodities and sale of vehicles made by Sole Agents (Agen

Tunggal Pemegang Merek or “ATPM”), Agents (Agent Pemegang Merek
or “APM”), and general importers for vehicle sales in Indonesia;
• Rates are 100% higher for taxpayers that do not have Tax ID
numbers.
The major types of payment made to Indonesian tax residents and

their applicable rates are:
WHT Rate (1) (2)

Type of Payment
(on gross amounts)
7.5% or 10% of import value Import of certain consumer
goods with Importer Identification
Number (Angka Pengenal
Importir/“API”)
0.5% of import value Import of soybeans, wheat, and
wheat flour with API
2.5% of import value Other than the above goods with
API
7.5% of import value Import of goods without API
7.5% of auctioned price Auctioned imported goods
1.5% of the sales value Sale of goods to the Government

that involves payment from the
State Treasury and certain State-
Owned Enterprises
1.5% of the export value Export of coal commodity, metallic
mineral and non-metallic mineral3
0.3% of the sales value Purchase of steel products by
distributor
0.45% of the sales value Purchase of automotive products
by distributor
0.1% of the sales value Purchase of paper products by
distributor
0.25% of the sales value Purchase of cement by distributor
0.3% of the sales value Purchase of medicine products by

distributor
34
WHT Rate (1) (2)
Type of Payment
(on gross amounts)
5% of the sales value Purchase of highly luxurious goods4
0.45% of the sales value Of vehicle sold by a sole agent

(ATPM), agent (APM), or general
importer in Indonesia
0.25% of the purchase value Purchase of material by
manufacturers or exporters in
forestry, plantation, agriculture,
farm, fishery from wholesale
0.3% of the sales value Sales of gas fuel
0.25% of the sales value Sales of kerosene made to
Pertamina fuel stations
0.3% of the sales value Sales of kerosene made to non-
Pertamina fuel stations
0.3% of the sales value Sales of lubricants
1.5% of the sales value Purchase of coal, metallic mineral
and non-metallic mineral from
companies or individual holding
a mining license (Izin Usaha
Pertambangan)
0.45% of the sales value Sales of gold bar from
manufacturers (except sales made
to Bank Indonesia)
Notes:
1. Rates are 100% higher for taxpayers that do not have tax ID.
2. MoF has added the following entities as Article 22 income tax collectors:
Authorized Budget User (Kuasa Pengguna Anggaran/”KPA”), KPA or government
officials authorized by KPA to issue Payment Order Instruction, and Treasurer
that makes payments using the reserve money (Uang Persediaan/”UP”)
method.
3. Applicable for tax exporters, except those engaging in business activities
under Mining Coorperation Agreement or Contract of Work.
4. “Highly Luxurious Goods” refers to private airplane, yacht, luxurious building
complex such as house, apartment, condominium, townhouse and the like
with selling price at Rp 30,000,000,000 or more, four-wheeled vehicle (with
selling price of more than Rp 2,000,000,000 or cylinder capacity of more than
3,000 cc), and two and three-wheeled vehicle (with selling price of more than
Rp 300,000,000 or cylinder capacity of more than 250cc) – subject to certain
selling prices as stipulated through MoF regulation.
The following are exempted from Article 22 income tax:
• Import of goods related to donations for disaster relief;
• Import of goods for nature conservation;
• Import of goods used in upstream oil and natural gas activities by
certain Production Sharing Contractors; and
• Payments for purchase of goods using School Operational
Assistance (Bantuan Operasional Sekolah/BOS) funds; and
• Payment by a State-Owned Enterprise for a maximum of
Rp 100,000,000 and not being a separate payment.
• Import of science and technology books and other scientific books;
• Certain payments made by a government body acting as WHT
collector.
36
Withholding Tax under Articles 23/26
The other major categories of withholding are referred to as Article
23 or Article 26 Income Tax. The relevant types of payment and their
generally applicable rates are as follows:
Article 23 WHT on Payment to Indonesia Tax Resident

WHT Rate (1) (2)
Type of Payment
(on gross amounts)
15% Dividends (3), interest (4), swap premiums,
loan guarantee fees, royalites, price, award
and bonus
2% Rental and other income for use of

property, except rental of land and/ or
buildings (5)
2% Remuneration for technical, management,
construction, consultant services and
certain other services, viz.:
• Appraisal services
• Actuarial services
• Accounting/audit/attest services
• Legal services
• Architecture services
• Urban planning and landscape
architecture services
• Design services
• Drilling services in the oil/gas industry,
except those provided by a PE
• Auxiliary services in the geothermal and
oil/ gas Mining industry
• Mining and support services in the
Geothermal and General mining sectors
• Airline & airport support services
• Forest tree felling services
• Waste management services
• Manpower supply services
• Broker/agency services

WHT Rate (1) (2)
Type of Payment
(on gross amounts)
2% • Services in securities trading, except for
trading performed by the Indonesian
Stock Exchange, KSEI (Indonesian
Central Securities Depository), and KPEI
(Indonesian Clearing and Guarantee
Corporation)
• Custodian services, except for services
provided by KSEI
• Dubbing services
• Film mixing services
• Promotion services including film
promotion, advertisement poster,
photo, slide, banner, pamphlet, billboard
and folder
• Service in relation to computer software
and hardware, including repairs and
maintenance
• Website creation and/or management
services
• Internet services and its connection
• Storage, processing and/or distribution
of data, information and/or program
• Installation services, except for
installation services performed by a
construction company
• Repair and maintenance services, except
for building repair and maintenance
services performed by a construction
company
• Maintenance services for vehicle and/or
land, marine, and air transportation
• Toll-manufacturing (maklon) service
• Investigation and security services
• Event organizer services
• Packaging services
38
WHT Rate (1) (2)
Type of Payment
(on gross amounts)
2% • S ervice in providing space and/or time
in mass media, outdoor media or other
media for delivering information
• Pest eradication services
• Cleaning services
• Vacuum septic tank services
• Pool maintenance services
• Catering services
• Freight forwarding services
• Logistics services
• Document handling services
• Loading and unloading services
• Laboratory services and/or laboratory
test services except if conducted by an
educational institution for academic
research
• Parking management services
• Soil testing services
• Soil preparation and management
services
• Seeding and planting services
• Maintenance of trees and plants
• Harvesting services
• Processing service for agricultural,
plantation, fishery, livestock, and/or
forestry products
• Decoration services
• Printing/ publishing services
• Translator services
• Transportation/ expedition services
except for service regulated under
Article 15
• Port services

WHT Rate (1) (2)
Type of Payment
(on gross amounts)
2% • ransportation services through pipeline
T
• Child care services
• Training and/or course services
• ATM cash delivery and loading services
• Certification services
• Survey services
• Tester services
• Services other than above for which the
payment is charged to State Budget and/
or Local Government Budget
Article 26 WHT on Payment to Non-Indonesian Tax Resident

WHT Rate (1) (2)
Type of Payment
(on gross amounts)
20% Any payment (other than for purchases
of goods) to a non-resident recipient is
subject to withholding tax of 20%. (7) (8)
5% Sale or transfer of assets in Indonesia
in the form of luxury jewellery, polished
diamonds, gold, diamonds, luxury watches,
antiques, paintings, cars, motorcycles,
yachts, and/or light aircraft, other than
those subject to article 4 (2) withholding
tax, that is received by a Non-Indonesian
Tax Resident other than a PE is subject to
final tax on the transaction value. (6) (7)
5% Sale of non-listed company shares by Non-
Indonesian Tax Residents are subject to a
final tax on transaction value. (7)
40
Notes:
1. The withholding tax does not apply to payments to banks operating in
Indonesia.
2. Rates are 100% higher for taxpayers that do not have tax ID.
3. Dividends paid to Indonesian limited liability companies holding at least 25%
of shares could be exempt from tax under certain conditions. Dividends paid
to individuals are subject to final tax (see below).
4. Certain interest income is subject to final tax (see below).
5. The withholding tax does not apply to payments made in relation to financial
leases.
6. Exemptions apply for sale or transfer of assets at Rp 10 million or less per
transaction.
7. Subject to reduced rate or exemption based on applicable Tax Treaty
(including deemed interest from a shareholders loan that does not meet
certain requirements).
8. Purchase of imported film that meets certain conditions is not subject to
Article 26 withholding tax.
Final Tax collected through withholding and self-assessment

The following transactions are subject to final tax, either by way of
withholding or through self-assessment:
Effective Withholding Tax Rates

Type of Income Resident Recipient Non-Resident
& PE Recipient (1)
Dividends paid to 10% 20%
Individuals
Lottery prizes 25% 20%
Interest or discount on 15%(2) 20%
bonds, including zero
coupon bonds
Interest or discount on
bonds, received by a
registered mutual fund:
For year 2014 to 2020 5% N/A
For year 2021 onwards 10% N/A
Interest on deposit paid 10% 20%
by a cooperative to its
members
> Rp 240,000

& PE Recipient (1)
Airline/Shipping Services:
• international airline & - 2.64%(3)
shipping operations
• domestic airline 1.8%(3) -
operations (charter
only) 1.2% (3)
-
• domestic shipping
operations
Insurance premium paid N/A 1%, 2% or
to offshore companies 10%(4)
Construction Planning & 4% / 6%(5) 20%
Supervisory Services
Construction Contracting 2% / 3% / 4%(6) 20%
Services
Sale of listed shares (of the 0.1% 0.1%
gross proceeds) (7)
Additional tax on sale of 0.5% 0.5%
Founder shares’ at IPO
price
Sale of land and/or 2.5% / 1% / 0.5% / N/A (8)
buildings 0% (8)
Rental of land and/or 10% (13)(14) 20%
buildings
Interest or discount 20% (10) 20%
on Bank Indonesia
Certificates (SBI), savings &
fixed deposits (9)
Gain on approved asset 10% or 15%(11) N/A
revaluation
Sharia business income 20%(12) 20%(12)
42
& PE Recipient (1)
All income earned or 0.5%(15) -
received by individual or
corporate tax payers doing
business (other than PE)
that does not exceed
Rp 4.8 billion within a fiscal
year (subject to certain
conditions)
Notes:
1. Subject to reduced rate or exemption based on applicable Tax Treaty.
2. On the gross amount of interest, or on excess of nominal value over the
acquisition value.
3. Effective tax rate after applying a deemed profit margin. For international
airline & shipping operations, the withholding is done through the PE.
4. If the payer is an Indonesian insurance company, 10%.
5. Effective tax rates:
• 4% for certified contractors
• 6% for non-certified contractors
The rate does not include the branch profit tax for PE service providers.
6. Effective tax rates:
• 2% for small-scale certified contractors
• 3% for medium and large certified contractors
• 4% for non-certified contractors
The rate does not include the branch profit tax for PE service providers.
7. Applies to non-residents, unless the seller is resident in a country that has a
tax treaty with Indonesia, in which case an exemption may apply.
8. Tax rate:
• 1% for sale of simple houses and basic apartments by taxpayer whose
main business is to engage in transfer of land and/or buildings; 2.5% for
sale of land and/or buildings other than above; 0% for sale of land and/or
building to government, state-owned enterprise with special assignment
from government and regional-owned enterprise with special assignment
from the head of district.
• Exemptions are granted for transfer of land and/or buildings in the cases
of grant, inheritance, and sale of land with value < Rp 60 million by an
individual taxpayer whose annual income does not exceed the non-taxable
income threshold.
• 0.5% for the transfer of real estate to an SPC or Dana Investasi Real Estate
(DIRE or Real Estate Investment Trust or REIT).
9. For amounts above Rp 7.5 million (the total of time deposits, saving accounts,
and Bank Indonesia Certificates); exceptions apply for banks and certain
approved pension and mutual funds for certain periods. Gift from depositing

money in a bank for certain amount and period is considered as interest on
savings.
10. Different rates apply on interest received from time deposits sourced from
export proceeds (devisa hasil ekspor)
Interest from deposits in US dollar currency:
• 10% for deposit with tenor of 1 (one) month
• 7.5% for deposit with tenor of 3 (three) months
• 2.5% for deposit with tenor of 6 (six) months; and
• 0% for deposit with tenor more than 6 (six) months.
Interest from deposits in Rupiah currency:
• 7.5% for deposit with tenor of 1 (one) month
• 5% for deposit with tenor of 3 (three) months; and
• 0% for deposit with tenor more than 6 (six) months
11. Additional final income tax of 15% is imposed if the revalued assets are:
• Sold or
• Transferred prior to expiration of the new useful life of the revalued assets
or
• Transferred prior to 10 years for land and/building and fixed assets with
tax useful life of more than 8 (eight) years (does not apply to certain
situations such as assets transferred in the course of a tax-free business
merger, combination or expansion, etc.).
12. Income in the form of bonus, profit sharing, and any other income from
funds entrusted; and placed offshore through an Indonesian sharia bank
or an Indonesian branch of an offshore sharia bank; and/or gain or profit
derived from Sharia Financial Service such as Factoring (Wakalah bil Ujrah),
Corporate Financing from investor (Mudharabah, Mudharabah Musytarakah,
Musyarakah), Consumer Financing (Murabahah, Salam, Istishna) – are treated
as interest, that is, taxed in the same manner as interest in conventional
banking/financial services.
13. The object includes income received by landlords from investors related to
the Build Operator Transfer (BOT) agreements, BTS rental and tank rental.
14. The tax base also covers all service charges related to land and/or building
rental (i.e. cost of maintenance and upkeep, security fees, service fees and
other facility cost), regardless whether the agreements are made separately
or not.
15. Additional conditions that must be met in applying 0.5% final income tax and
limitation of periods to the type of taxpayer:
a. seven (7) years for individual taxpayer;
b. four (4) years for corporate taxpayer in the form of cooperation, CV, or
firm;
c. three (3) years for limited liability taxpayer.
Taxpayer who receives income under this category has the option to choose:
1. applying final income tax treatment, or
2. applying the tax treatment under Article 31E of Income Tax Law Number
7 of 1983 as most recently amended by Law Number 36 of 2008, i.e. 50%
reduction of normal corporate tax rate subject to the maintaining of
proper bookkeeping.
44
Value Added Tax
Law Number 8 of 1983 as most recently amended by Law Number 42 of

2009.
Threshold for Value Added Tax (“VAT”) Registration

An Entrepreneur that delivers taxable goods and/ or services
exceeding a certain amount in one fiscal year is required to register
as a VAT-able Entrepreneur. Currently, the threshold is Rp 4.8 billion
per annum. However, entrepreneurs domiciled in a Free Trade Zone
are not required to register.
Taxable Events
VAT is an indirect tax imposed on taxable goods and/ or services and
due on the following taxable events, among others:
• Local delivery of taxable goods and/or services;
• Import and export of taxable goods;
• Consumption of services and/or intangible goods from offshore
within the Indonesian customs territory;
• Export of intangible taxable goods and taxable services.
Local delivery of taxable goods includes the following:

• Transfer of title to Taxable Goods because of an agreement;
• Supply of goods through a finance lease arrangement;
• Supply of goods through a third party or a Government auctioneer;
• Self-use of taxable goods or Taxable goods given away at no
charge;
• Remaining assets/inventories in the course of a company’s
dissolution;
• Movement of taxable goods between the head office and a branch
and between branches of the same legal entity;
• Movement of goods on consignment;
• Delivery of taxable goods in the context of a Sharia financing
arrangement, which delivery is considered to be directly from the
VAT-able entrepreneur to the party that needs the taxable goods.

VAT Invoice
A VAT invoice is an instrument to levy VAT (for the seller) and to claim
VAT credit (for the buyer).
The format and contents of a VAT invoice must follow guidelines set
by the ITA. Failure to meet the guidelines will cause the VAT invoice
to be considered as an Incomplete VAT Invoice and thus subject to
penalties for the seller and disallowed as credit for the buyer.
A VAT Invoice must be issued at one of the following events:

• Upon the delivery of taxable goods and/or services; or
• When payment is received, if the payment occurs before the
delivery of taxable goods and/or services; or
• When a progress payment is received, if the work is delivered on a
phase basis; or
• Upon other defined events as determined by MoF.
VAT Invoice is required to be produced through an electronic system

(e-VAT Invoices) designated by ITA, including generating replacement
or cancellation of VAT invoices.
VAT invoices must bear Rupiah currency, electronic signature,

and a VAT serial numbers. VAT-able entrepreneur must file
application to the ITA to request for this predetermined range of
VAT serial numbers. Prior to submitting such request, the VAT-able
entrepreneur must first request for Activation Code and Password
from the ITA, as these will be required when filing a request for VAT
invoice serial numbers.
Retail entrepreneurs and entrepreneurs that issue documents

treated as VAT invoices are exempted from the obligation to issue
e-VAT invoices.
Certain documents are treated as VAT invoices. These include:

• Export Declaration on taxable goods, taxable services and
intangible goods (with accompanying invoice);
• Import Declaration (with accompanying payment slips);
• Goods Delivery Order (SPPB) from BULOG/DOLOG for wheat
delivery;
• Delivery Note (PNBP) issued by Pertamina;
• Invoice issued by a Telecommunication Company;
• Ticket, airway bill or delivery bill issued for domestic air transport
services;
46
• Service Delivery Note issued for port service;
• Invoice issued by an Electricity Company;
• Tax payment slip (SSP) for payment of self-assessed VAT on the
use of offshore intangible goods and/or services;
• Invoice issued by a Drinking Water Company for delivery of taxable
goods or services;
• Trading confirmation from stock brokerage company;
• Invoice issued by a Bank for delivery of VATable services;
• Tax payment slip (SSP) for the payment of VAT on delivery of
taxable goods through auctioneer accompanied with the Minutes
of the Auction;
• Document used for ordering tobacco products excise tape (CK-1
Document).
VAT Rates
The general VAT rate is 10%. However, a VAT rate of 0% is applied to
the following taxable events:
a. Export of taxable goods;
b. Export of intangible taxable goods; and
c. Export of certain taxable services (refer below).
The rates are applied on a VAT base equivalent to the sale price/
service fee or import/export value.
Export Services
Definition of export of services shall be taxable services furnished/
rendered within Indonesian customs territory for the benefit of
recipient located outside Indonesian customs territory. Certain types
of taxable services considered as export that could enjoy a zero-rated
VAT are as follows:
a. Services in connection with movable goods exported for use
outside Indonesian customs territory, covering:
• Toll manufacturing services (“maklon”), for which further
criteria are provided under a MoF regulation;
• Repair and maintenance services;
• Freight forwarding services for goods to be exported.
b. Services in connection with immovable goods located outside
Indonesian customs territory, i.e., construction consultation
services, which cover assessment, planning, and design of
construction related to building or plan for building outside
Indonesian customs territory.
c. Services utilized outside Indonesian customs territory, covering:

• Technology and information services;
• Research and development services;
• Charter of airplane and/or sea vessel, for international flight
or shipping activities;
• Business and management consulting, legal consulting,
architectural and interior design activity, human resources
consultating, engineering, marketing, accounting or
bookkeeping, financial statements audit, and taxation;
• Intermediary services, i.e., services to search for a seller of
goods for export in Indonesian customs territory; and
• Interconnection, satellite, and/or data communication/
connectivity services provider.
To apply 0% VAT on such export services, the following cumulative

conditions must be satisfied:
a. The services must be based on written agreement or contract
between the Indonesian service provider and the services
recipient, and it must contain:
• Category of services;
• Details of activity furnished/rendered within Indonesian
customs territory for the use/benefit outside Indonesian
customs territory by the recipient; and
• Value of the delivery.
b. There is payment from the recipient received by the Indonesian
service provider, proven by valid evidence.
c. The service recipient has no PE in Indonesia.
If the above conditions are not met, the delivery of Export Services
will be deemed by the ITA as delivery of taxable services within
Indonesia customs territory subject to 10% VAT.
VAT-able entrepreneur who delivers export services must issue

Services Export Notification (“Pemberitahuan Ekspor Jasa Kena Pajak”
or “PEJ”) using a prescribed form that can be treated as VAT Invoice,
attached together with the commercial invoice upon delivery of
export services.
Special VAT Base

VAT is calculated by applying the VAT rate to a relevant tax base. In
most cases, the tax base is the transaction value agreed between
the parties concerned. For certain events or situations, other criteria
must be used as the tax base, including:
48
a. for own use of Taxable Goods and/or Taxable Services, it shall be
the Selling Price or Compensation after deduction of gross profit;
b. for free-of-charge granting of Taxable Goods and/or Taxable
Services, it shall be the Selling Price or Compensation after
deduction of gross profit;
c. for delivery of motion picture, it shall be the estimated average
proceeds per film title;
d. for delivery of tobacco products, it shall be the retail selling price at
the effective VAT rate of 9.1%;
e. for Taxable Goods in the form of supplies and/or assets that
according to their initial purpose are not for sale, which are still
remaining at the time of dissolution of a company, it shall be the
fair market price;
f. for delivery of Taxable Goods from the head office to a branch or
vice versa and/or delivery of Taxable Goods between branches, it
shall be the basic selling price or acquisition price;
g. for delivery of Taxable Goods through a broker, it shall be the price
agreed upon by the broker and the purchaser;
h. for delivery of Taxable Goods through an auctioneer, it shall be the
auction price;
i. for delivery of package delivery service, it shall be 10% of the
amount invoiced or the amount that should be invoiced;
j. for delivery of travel bureau service or tourism bureau service
such as travel agents’ travel packages, booking transportation,
accommodation and booking facilities whose delivery is not based
on the provision of the commission/ brokerage fee, it shall be 10%
of the amount invoiced or the amount that should be invoiced;
k. for delivery of gold jewellery, including delivery of services of repair
or modification of gold jewellery and other services associated
with gold jewellery, which are performed by a gold jewellery
manufacturer or trader, it shall be 20% of the selling price of the
gold jewellery or the value of compensation, while for delivery of
gold jewellery by a gold jewellery entrepreneur which is performed
by replacing or exchanging gold jewellery with gold bullion of 24
carats as replacement of all raw materials of production of Gold
Jewellery, it shall be 20% of the difference between the selling
price of the gold jewellery less the price of the 24 carat gold bullion
which is contained in the gold jewellery;
l. for delivery of freight forwarding services which contain freight
charges in the invoice for the freight forwarding services, it shall
be 10% of the amount invoiced or the amount that should be
invoiced;

m. for delivery of goods by a small-scale entrepreneur, it shall be 30%
of the amount of business turnover;
n. for delivery of services by a small-scale entrepreneur, it shall be
40% of the amount of business turnover;
o. for private construction carried out not in respect of a job or
occupation by an individual or an organization, the result of which
will be self-used or used by another party, it shall be 20% of the
cost incurred or paid.
Self-Assessed VAT
Resident taxpayers receiving and utilizing taxable services and/or
taxable intangible goods from offshore or from a Free Trade Zone
are obliged to self-assess, report and pay 10% VAT calculated from
the gross amount paid or payable. The self-assessed VAT is due when
the goods or services are:
a. actually used or utilized by the user;
b. declared as payable by the user;
c. invoiced by the service provider/seller; or
d. fully or partly paid by the user.
VAT Collectors
To safeguard VAT revenues, the Government Treasurer, the State
Cash and Treasury Office, Contractors of oil and gas production
sharing contracts with the Indonesian Government, Geothermal
Energy Contractors or License Holders (including head office,
branches or units), State-Owned Enterprises and certain entities as
defined by MoF regulation, are assigned to act as VAT withholding
agents (VAT collectors).
Goods and Services Not Subject to VAT

Certain goods and services are not subject to VAT. These include:
Non-Taxable Goods
• Goods produced from mining or from drilling that are extracted
directly from the source such as:
a. crude oil;
b. natural gas, excluding natural gas such as LPG that is ready to
be consumed directly by the public;
c. geothermal energy;
d. asbestos, slate, semiprecious stone, limestone, pumice,
gemstone, bentonite, dolomite, feldspar, halite, graphite,
granite/andesite, gypsum, calcite, kaolin, leucite, magnesite,
mica, marble, nitrate, obsidian, ochre, sand and gravel, quartz
50
sand, perlite, phosphate, talc, fuller’s earth, diatomaceous earth,
clay, alum, trass, jarosite, zeolite, basalt, and trachyte;
e. coal not yet processed into coal briquettes; and
f. iron ores, tin ores, gold ores, copper ores, nickel ores, silver
ores, and bauxite ores.
• Basic commodities vital to the general public such as:
a. rice and unhusked rice-grains;
b. corn;
c. sago;
d. soybeans;
e. salt for consumption;
f. meat, namely uncooked fresh meat, packaged or not packaged,
but having gone through processes of slaughtering, skinning,
cutting, cooling, freezing, salting, liming, pickling, preservation
by other methods, and/or boiling;
g. eggs, namely unprocessed eggs, including cleaned, salted, or
packaged eggs;
h. milk, namely animal’s milk that has gone through a cooling
or heating process, containing no additional sugar or other
ingredients, and/or packaged or unpackaged;
i. fruit, namely picked fresh fruit, including that which has gone
through washing, sorting, peeling, cutting, slicing, grading, and/
or packing or non-packing processes;
j. vegetables, namely fresh vegetables that are picked, washed,
drained, and/or stored at low temperature, including chopped
fresh vegetables;
k. tubers;
l. ingredients; and
m. sugar for consumption.
• Food and beverages served in restaurants, including food and
beverages delivered by catering businesses; and
• Money, gold bars, and commercial paper.
Non-Taxable Services
• Medical/health services;
• Social services;
• Mail delivery service using stamps;
• Financial services1);
• Insurance services;
• Religious services;
• Educational services2);
• Arts and entertainment services;
• Non-commercial broadcast services;

• P
ublic transport services on land and on water and air transport
services within the country which are an inseparable part of air
transport services to abroad;
• Labour services;
• Hotel services3);
• Services provided by the government in respect of carrying out
general governmental administration;
• Parking provision services;
• Public telephone services using coins;
• Money transfer services using postal money orders; and
• Catering services.
Notes:
1. The ITA has defined the characteristics of services provided by banks which
are not subject to VAT as outlined below:
• Financial services in the form of financing services that receive
compensation in the form of interest, or
• Financial services provided by a bank directly to its customers that are not
financing services.
Other banking services that are not subject to VAT include:

• Factoring activity;
• Credit card business;
• Provision of financing and/or other activity based on sharia principles in
accordance with Bank Indonesia (Indonesian Central Bank) regulation.
2. The following services are not qualified as non-taxable education services:

• Education services other than the following:
-- Formal Education (early age education, elementary education,
secondary education, higher education);
-- Non-Formal Education (life skill education services, early age education,
youth education, women’s empowerment education, literacy education,
work training and proficiency education, equality education)
-- Informal Education (independent learning activity done by families and
communities)
• Formal or non-formal education services delivered by an educational
institution which does not have an education license issued by the relevant
central/ local government authority; or
• Education service which is an integral, inseparable part of the delivery of
other goods and/or services.
3. The following services are not qualified as non-taxable hotel services:

• Room rental services other than for meetings or other events, such as
space rental for automated teller machines (ATMs), offices, banking,
restaurants, places of entertainment, karaoke, pharmacies, retail stores,
and clinics;
• Rental services for units and/or space, including enhancements, in
apartments, condominiums, and the like, as well as other related support
52
facilities based on its business license;
• Tour and travel services organized by hotel service management.
Available VAT Incentives

Certain imports and purchases are exempted from VAT or VAT is not
collected, through incentives provided by the government. These
include:
• Strategic goods, such as machinery, factory equipment, etc.;
• Raw materials for processing by companies inside a Bonded Zone;
• Imports and delivery of services, equipment, and other supplies
required to perform a project financed by foreign aid;
• Imports and purchases made by companies in certain industries
such as national shipping or airline companies, etc.;
• Import of certain goods on which the duty is exempted;
• Delivery and/or import of taxable goods into a Free Trade Zone.
VAT Refund
• Excess of input VAT over output VAT can be requested for refund
or carried forward without limitation.
• Claims for VAT refund can only be made at the end of a tax year,
except for certain VATable entrepreneurs that are eligible to claim
tax refund at each monthly period.
• A refund request usually results in a tax audit, and such reviews
are very strict on the quality of documentation. It is important
for taxpayers to reconcile their corporate tax returns and books
for the year-end VAT Return. E-VAT invoice is not required to be
attached in the VAT Return in the event of the VAT Refund request.
• The time frame to obtain a refund decision varies, depending on
the category of business applying for the refund. In general, it
takes 12 months from the submission of the VAT refund request
for the tax auditor to issue the decision letter.
• Failure of production: For those VATable entrepreneurs that are
in the pre-production stage, if they fail to commence production
within 3 (three) years from when the input VAT is credited, the VAT
that has been refunded must be repaid. If no refund has been
made, the VAT can still be credited and claimed for refund after
the initial three-year period. The extension is provided for up to 2
(two) years after the initial three-year period has elapsed.
• VAT refund for foreigners: VAT paid by foreign individuals on
purchases in designated retail stores can be claimed for refund by
the foreigners upon leaving Indonesia. The minimum amount for a
claim is Rp 500,000.

Input VAT Not Allowed for Credit
Certain transactions may generate VAT that will not be available for
credit. These situations include:
• VAT incurred prior to a business being registered for VAT;
• VAT incurred before the entrepreneur starts production and
makes taxable delivery, except from the acquisition of capital
goods;
• VAT on purchases with no direct connection to the conduct of the
company’s business;
• VAT imposed by way of tax assessments;
• Incomplete VAT invoice;
• Purchase & maintenance of sedan and station wagon type of
vehicles, unless they are inventory for sale/rental;
• Overlooked input VAT not yet credited and only discovered after a
tax audit has commenced;
• Purchases made by those exempted from charging output VAT.
Luxury Goods Sales Tax

In addition to the general VAT rate of 10%, certain goods considered
as “luxury” items are subject to a surcharge of 10% to 200%. Luxury
goods are those that fulfil certain criteria, i.e.:
• Does not constitute a basic staple;
• Consumed by certain group;
• Consumed by an exclusive group of (upper income) consumers;
• Goods consumed for status rather than for their utility.
Free Trade Zone

Batam Island, Bintan Island and Karimun Island have been
designated as Free Trade Zones (Free Trade and Free Port Zones).
This provides certain facilities, such as:
• A company domiciled in a Free Trade Zone is not required to
register as a VAT-able entity;
• The delivery of taxable goods in a Free Trade Zone is exempted
from the imposition of VAT and/or LGST;
• The importation of goods into a Free Trade Zone is exempted from
the imposition of import VAT and/or LGST;
• The delivery of intangible taxable goods or taxable services in a
Free Trade Zone is exempted from VAT;
• The delivery of taxable services from other places within the
customs area into the free trade zone is subject to VAT, except for
certain delivery of services pursuant to MoF regulation.
54
Transfer Pricing
Overview
Since 2010, the ITA has issued a spate of guidelines and regulations
to provide greater certainty to businesses subject to transfer pricing
rules. The updates and revisions to transfer pricing guidelines issued
from time to time indicate ITA’s increased attention to transfer pricing
issues as well as the evolving nature of the rules in Indonesia. This
section discusses taxpayers’ transfer pricing obligations in Indonesia
and how the requirements have evolved.
General
• Article 18 of the Income Tax Law authorizes the ITA to adjust
taxpayers’ income or costs, where transactions with related
parties (“special relationship”) are not in accordance with “fair and
common business practices”.
• A special relationship is deemed to exist in the following
circumstances:
a. where a taxpayer directly or indirectly holds 25% or more of the
capital of another taxpayer, or where a company holds 25% or
more of the capital of two taxpayers, in which case the latter
two taxpayers are also considered to be related parties; or
b. where there is a control through management or the use of
technology, even though ownership relations are not present;
or
c. where there is a family relationship, biological or by marriage, in
vertical and/or horizontal lineage of the first degree.
• Corporate taxpayers are required to disclose their related party
transactions in a separate attachment1 to the corporate tax return.
The disclosure includes information such as type of transactions,
nature of relationship, questionnaire on documentation prepared
to support the arm’s length principle, transactions with parties
from tax haven countries, etc. Attachment 3A/3A-1/3A-2 would be
applicable for taxpayers that maintain their books of accounts in
Indonesian Rupiah, while attachment 3B/3B- 1/3B-2 is applicable
1
Attachments 3A/3B, 3A-1/3B-1, 3A-2/3B-2).

for taxpayers that maintain books of accounts in United States
Dollar currency.
• MoF issued Regulation Number 213/PMK.03/2016 (“PMK-213”)
dated and effective 30 December 2016, implementing the three-
tiered documentation requirement i.e., Master File, Local File
and Country-by-Country Report (“CbCR”) as recommended by
the Organization for Economic Co-operation and Development
(“OECD”) in Action 13 (Transfer Pricing Documentation) of Base
Erosion and Profit Shifting (“BEPS”) project. Under the new
regulation, taxpayers are required to file a summary of the Master
File and Local File as an attachment to the corporate tax return in
the format prescribed. The summary requires taxpayers to declare
that the Master File and Local File contain the bare minimum
content as per the requirement and to provide the date on which
the Master File and Local File became available. This summary is
in addition to the Special Attachment Forms (Forms 3A/3A-1 and
Forms 3B/3B-1) mentioned above.
• Filing an incorrect or incomplete tax return may result in penalty.
Application of Arm’s Length Principle

• The Income Tax Law introduces methods for determining arm’s
length transactions, e.g. comparable uncontrolled price method,
resale price method, cost plus method and other methods (i.e.,
profit split method and transactional net margin method). These
methods are broadly in line with the OECD guidelines.
• In order to provide detailed guidelines on transfer pricing
matters, the ITA promulgated separate regulations2 regarding the
application of arm’s length principle in related party transactions.
In these regulations, the ITA provided guidance on several matters
including selection of transfer pricing method, cost contribution
arrangement, trade and marketing intangibles, and corresponding
adjustment amongst others.
• The aforesaid regulations outline the following:
a. Lays the onus on taxpayers to undertake a transfer pricing
analysis with regard to their transactions with related parties
to ensure that the transactions conform to the arm’s length
principle. This involves, inter alia, conducting a comparability
analysis and determining the comparable transactions;
identifying the most appropriate transfer pricing method; and
applying the arm’s length principle based on the results of the
comparability analysis and based on the most appropriate
transfer pricing method.
2
Regulation No. PER-43/PJ/2010 (“PER-43”) and PER-32/PJ/2011.
56
b. Taxpayers must document the steps taken in determining the
above in accordance with the provisions of the prevailing tax
regulations.
c. Provides an overview of the authority of ITA and the taxpayers’
rights.
d. Outlines specific requirements for intra-group services and
intangibles transactions.
• There is no statutory deadline for submission of the transfer
pricing documentation, but the documentation must be provided
when requested by the ITA. Generally, the ITA provides a one-
month deadline to provide the documentation in the tax audit.
Failure to furnish documentation within the stipulated time may
prompt the ITA to disregard any documentation afterward and
determine tax liability based on the data available to the ITA.
• Updated transfer pricing documentation requirement effective
from 30 December 2016 (provided below)
Transfer Pricing Documentation requirement

As part of the BEPS Action 13, the OECD as has recommended a
three-tiered approach to documentation, which includes: a) Local
File b) Master File and c) CbCR to provide transparency for tax
administration as well as to provide governments with needed
information on the global allocation of the income, economic activity
and taxes paid among countries according to a common template
(Action 13 on the BEPS initiative).
To this end, Action 13 suggests that this three-tiered approach to

transfer pricing documentation be adopted and incorporated into the
domestic legislation of the participating countries. This, in fact, is one
of the minimum standards agreed by the participating countries.

The salient features of PMK-213 are:
1. Master File and Local File

Taxpayers having related party transactions and meeting any one
of the following thresholds / conditions are required to prepare
the Master File and Local File:
Item Threshold
Gross Revenue in the preceding

3
Exceeding Rp 50,000,000,000
tax year (fifty billion Rupiah)
Tangible goods transactions in the Exceeding Rp 20,000,000,000

preceding tax year (twenty billion Rupiah)
OR
Services, Royalties, Interest or other Exceeding Rp 5,000,000,000
transactions in the preceding tax year (five billion Rupiah)
Related party transactions with Any value

affiliated party located in a
jurisdiction with tax rate lower than
Indonesia (i.e. currently at 25%)
In addition, a taxpayer that qualifies as a Parent Entity4 of

a Business Group having consolidated gross revenue of Rp
11,000,000,000,000 (eleven trillion Rupiah) is also required to
maintain Master File and Local File.
In the event that the preceding tax year covers a period less
than 12 months, the gross revenue and/or the related party
transactions are required to be annualized.
For bookkeeping in currency other than Rupiah, the monetary

value of the threshold is to be calculated using the exchange rate
set by MoF for tax calculation at the end of the tax year.
The regulation clearly specifies that even if the taxpayers do not
meet the above threshold to maintain Master File and Local File,
they are still required to adhere to the arm’s length principle for
the related party transactions.
3
Gross Revenue is defined as the gross amount of revenue received or accrued in connection with the
Taxpayer’s work, business or main activities before deduction of discount, rebates, and other deductions.
4
Parent entity is defined as the Entity directly or indirectly controlling the Business Group and
is required to prepare consolidated financial statements under Indonesian Financial Accounting Standards.
58
The regulation also mandates the following:
a. Master File and Local File is to be prepared based on the
data and information available at the time the related party
transactions are conducted.
b. If the above is not satisfied, the taxpayer shall be deemed not to
apply the arm’s length principle.
c. Master File and Local File must be available within 4 (four)
months after the end of the tax year and must be accompanied
by a statement letter concerning the time of the availability of
such documents. Such statement letter needs to be signed by
the party providing the Transfer Pricing Document.
d. Master File and Local File are required to be submitted in the
local language, i.e. Bahasa Indonesia.
e. Master File and Local File are required to be submitted to the
ITA upon request within the time specified under the provisions
of tax laws and regulations.
f. In the case of delayed submission, Master File and Local File
reports shall not be considered. Further penal implications as
regulated in the prevailing tax laws may apply in case of non-
compliance.
g. The Master File and Local File are broadly aligned with the
BEPS Action 13 recommendations, with certain additional
requirements.
2. CbCR
a. CbCR is required to be prepared and submitted by a taxpayer
that qualifies as the Parent Entity of a Business Group having
consolidated gross revenue of Rp 11,000,000,000,000 (eleven
trillion Rupiah).
b. Where the Parent Entity is located in a foreign jurisdiction, the
resident taxpayer is required to submit the CbCR when the
country of the Parent Entity:
• Does not require submission of CbCR; or
• Does not have an agreement with the Government of
Indonesia on exchange of information; or
• Has an agreement but the CbCR cannot be obtained by the
Government of Indonesia.
c. The CbCR is to be based on the data and information available
up to the end of the Tax Year.
d. If the above is not satisfied, the taxpayer shall be deemed not to
apply the arm’s length principle.
e. The CbCR must be submitted within 12 months after the end of
the tax year. The first year of coverage was financial year 2016.

f. The CbCR is required to be prepared in the form / format
prescribed as an attachment to PMK-213. The format is broadly
aligned with the CbCR template prescribed in BEPS Action 13
with certain additional requirements. An exemption is provided
to a local Taxpayer with an overseas Parent Entity, if the Parent
Entity assigns a Surrogate Parent Entity5 and fulfils the following
conditions:
i. The local Taxpayer submits a notification on the Surrogate
Parent Entity to the ITA; and
ii. The country/ jurisdiction in which the Surrogate Parent Entity
is domiciled:
• Requires the filing of CbCR; and
• Has an agreement with the Government of Indonesia on
exchange of information.
g. Indonesia also requires taxpayers to file a Notification
electronically through an online platform provided by the ITA.
The form generally requires the local Taxpayers to provide
the information necessary to ascertain whether they have the
obligation to submit a CbCR.
h. Upon the filing of Notification and/or CbCR, the Taxpayer shall
receive a receipt. This receipt has to be attached to the Annual
CIT Return.
Audits of taxpayers with special relationships

Emphasizing the heightened focus on transfer pricing, the ITA issued
a separate regulation6 and technical guidelines7 providing guidelines
for audits of taxpayers with special relationships. The guidance is
provided on the following, among other matters:
The aforementioned regulation was further supplemented by the

release of SE-50, which provided technical guidelines to tax auditors
for audits of taxpayers with special relationships. SE-50 contains
guidance on the following, among other matters:
• Stages involved in a transfer pricing audit (viz., preparation stage,
implementation stage and reporting stage) and information to be
reviewed in each stage.
• Scrutiny of taxpayers’ counterparties – Specific attention to be
given for transactions with counterparties in tax havens or low-tax
jurisdictions.
5
Where a Parent Entity that is a foreign tax subject has appointed a foreign Constituent Entity as a
substitute of the Parent Entity.
6
Regulation No. PER-22/PJ/2013 (“PER-22”).
7
Circular Letter No. SE-50/PJ/2013 (“SE-50”), which officially revoked SE-04/PJ.7/1993.
60
• Taxpayers’ preliminary examination using industry (comparables)
average financial ratios: a) Gross margin b) Gross mark-up c)
Operating margin d) Mark-up on total costs e) Return on assets f)
Return on capital employed g) Berry ratio h) DER i) Ratio of R&D
expense to sales and j) Ratio of marketing expense to sales.
• Taxpayer’s information to be collated in the specified forms and
format (discussed below).
• Applicability of transfer pricing methods by using detailed
illustrations – including guidance on tested parties, authorized
databases, multiple-year analysis.
• Transfer of intangibles – In addition to the 5 (five) prescribed
transfer pricing methods, to test the arm’s length nature, this
regulation also introduced other methods such as a) cost-based
method, b) income- based method and c) market-based method.
• Intra-group services – Guidance on the transfer pricing methods
which would be applicable and the review of service provider’s
cost base: a) comparable uncontrolled price method; b) Cost Plus
method; and c) Transactional Profit Method.
• Intra-group financing transactions – Guidance on the transfer
pricing methods that would be most suited in undertaking an
analysis of an intra-group financing arrangement. Additional
requirements posed by this regulation include a) performing
analysis on the need for the debt, b) ensuring that the loan from
related party actually occurred, c) testing the fairness of DER, and
d) testing the arm’s length nature of the interest expense.
• Introduced the concept of secondary adjustments in addition to
the primary and corresponding adjustments.
The ITA has also provided forms/formats that will be used in the
event of a tax audit. Seven of the prescribed 10 forms will have to be
completed by the taxpayer at the time of audit and submitted within
7 (seven) days from the request. The purposes of these forms are as
follows:
Form Description
A Letter of request for information/evidence – This form
provides a format of the letter that will be issued by
the tax auditor to request information/ evidence. The
format mentions a 7 (seven) working day time limit to be
provided to taxpayer to respond to the request

Form Description
B Statement letter – This forms the cover letter to provide
information requested by the tax auditor in Forms C to H
C Related-party transactions – Requires the taxpayer to
provide the details of the related-party transactions, such
as type of transaction, transaction counterpart, value,
nature of relationship, transfer pricing method, etc.
D Segmented Financial Statements – Provides a format
for the taxpayer to present the segmented financial
statements between related parties and third parties
E Supply Chain Management Analysis – Requires
the taxpayer to provide details (including financial
information) of parties which undertake functions in the
overall supply chain
F Function, Asset and Risk Analysis – Requires the taxpayer
to provide the functions, assets and risks of the taxpayer
and the related party
G Characterization form – Requires the taxpayer to tick the
characterizations relevant to the taxpayer
H Comparability Analysis – Requires the taxpayer to provide
information on the 5 (five) comparability factors between
transactions with third parties and with related parties
I Summons to provide information on affiliated
transactions – Form requesting taxpayer to be present
on a specified date, time and location in order to provide
information/ explanation/ presentation to the tax audit
team
J Minutes of Taxpayer’s provision of information regarding
affiliated transactions – Format to present the minutes of
the tax audit proceedings
8
MoF Regulation No. 49/PMK.03/2019 concerning “The Implementation Guidelines of Mutual Agreement
Procedure” (“PMK-49”). Effective from 26 April 2019, PMK-49 replaces the previous MAP regulation, i.e.
MoF Regulation No. 240/PMK.03/2014 (“PMK-240”), which was issued before the final BEPS reports were
delivered in 2015.
62
Mutual Agreement Procedure (“MAP”)
Indonesia is a member of G20 countries and as such, committed to
implement the minimum standards under the BEPS project including
amongst others, Action 14 on dispute resolution mechanism.
Indonesia has a well-defined MAP framework8 issued with a view

to meet the minimum standards set out in BEPS Action 14. The
regulation specifies that any request for MAP should be filed within
the timeline specified in the Double Tax Avoidance Agreement (“DTA”)
from the first notification of the action resulting in taxation not in
accordance with the provisions of this agreement. A deadline of 3
(three) years is introduced for submitting the MAP application in
Indonesia if the prevailing DTA does not specify the deadline. The
timelines refer to the date of the tax assessment letter or the date
of the payment receipt, withholding income tax slip or from the
occurrence of the tax treatment inconsistent with the DTA.
The regulation reinforces what had been stipulated in PMK-240: the

flexibility for taxpayers to apply for an MAP and to pursue domestic
resolution process at the same time. This includes applying for a
tax objection, appealing to the Tax Court, and requesting reduction
or cancellation of an incorrect tax assessment. However, in such
cases, the regulation stipulates that the matter of which the MAP
application is lodged should be included in the matter of dispute for
which the domestic dispute resolution is filed. It further reiterates
that, in a case where the tax court issues an appeal decision before
the MAP negotiations are concluded, the MAP process will be
deemed to result in a disagreement and the process will accordingly
be terminated. However, in case the MAP is concluded before the
tax court issues an appeal decision, the Taxpayer has to withdraw
the appeal and upon receiving the Tax Court’s written approval on
the withdrawal of appeal, the ITA would issue the revised Objection
Decision.
The regulation stipulates the following:

1. The request for an MAP can be filed by:
• An Indonesian resident taxpayer
• Indonesian citizens through the ITA;
• The ITA itself; or
• The tax authority of a treaty partner country.

2. Clear timelines for the follow-up actions to be taken by the ITA
and the taxpayer in relation to the MAP application. As one of the
key points, the regulation provides a time limit of 24 months for
the Authorized Officials to conclude the negotiations (against 3
(three) years under PMK-240) from the receipt/submission of the
written MAP request from the Authorized Official of treaty partner
country. Unlike the previous MAP regulation, the new regulation
does not provide for any extension to this timeline and is explicit in
saying that the MAP will result in “disagreement” if an agreement is
not reached within the 24 months period.
3. The regulation includes certain provisions and prescribed process

for revocation of the MAP application. However, the notable
difference in this regulation vis-à-vis the erstwhile regulation is the
provision which states that revocation of the MAP application by
the Indonesian Applicant could only be done within the time limit
of first 6 (six) months.
Advance Pricing Agreement (“APA”)

Indonesia has a well-defined APA framework9 the salient features of
which are discussed in the table below:
Topic Details
Who can apply • An Indonesian resident taxpayer or an
Indonesian PE of a foreign taxpayer is
eligible to apply for an APA as long as its
operations or business activities have
been carried on for at least 3 (three)
years
• An APA may also be initiated by a foreign
resident Taxpayer that is a transaction
counterparty of an Indonesian resident
taxpayer
Validity period • Unilateral – 3 (three) tax years
• Bilateral – 4 (four) tax years
9
MoF Regulation Number 07/ PMK.03/2015 (“PMK-7”).
64
Topic Details
Rollback period • Regulation is silent. With respect to
bilateral APAs, the APA shall be effective
in accordance with the terms of the
mutual agreement.
Deadlines • Deadline for filing request for pre-filing
– 6 (six) months before the start of the
tax year that is to be covered in the APA.
This also applies to cases which are
initiated by foreign resident taxpayers.
The ITA may also inter alia make site
visits during the pre-filing phase.
• Deadline for filing formal request for APA
– The invitation letter must be provided
by the ITA to the taxpayer no later than
1 (one) month before the start of the
tax year that is to be covered in the
APA. The taxpayer has to file the formal
application in the Indonesian language to
Director of Tax Regulations II along with
the supporting documents no later than
the end of the tax year which precedes
the tax year covered in the APA. If this
deadline is exceeded (by not more than
one year), the period covered in the APA
will be reduced by one year. The formal
request for APA cannot proceed if the
delay in submitting the request and
supporting documents exceeds one year.
• Deadline for APA discussions – Unilateral
APAs have a time limit of one year from
the date of filing the formal request. An
additional extension of one year can be
made by the ITA if the circumstance so
warrants. In bilateral APA cases, the time
limit is as specified in the provisions of
the MAP.
Effectivity of an APA • A unilateral APA is effective from the tax
year in which the draft APA is agreed on.
• A bilateral APA is effective in accordance
with the mutual agreement.
Topic Details
Compliance • During the covered period, an Annual
requirements Compliance Report shall be submitted no
later than 4 (four) months after the end
of the tax year.
• Failure to submit the same will result in
review or cancellation of the APA.
Confidentiality of • T
he information submitted by the
information taxpayer during the APA is treated as
confidential and is prohibited from being
disclosed to another party. If the APA
request does not result in an agreement
between the ITA and the taxpayer, the
documents which were submitted by the
taxpayer will be returned to the taxpayer.
Furthermore, the documents which are
submitted by the taxpayer cannot be
used by the ITA for conducting an audit,
preliminary investigation, or investigation
of tax crime.
Audits for covered • Having an APA or filing an application
transactions in the for APA does not prevent the ITA from
covered period conducting an audit.
• In bilateral APAs, the ITA shall correct
any tax assessment notice(s) or objection
decision letter(s) based on the prevailing
tax regulations for the covered period.
Renewal of APA • Renewal of an APA can be applied for in
the last tax year of the covered period.
The request for renewal will be treated
as if it is a fresh application.
66
Topic Details
Miscellaneous • P MK 7 has made the APA a procedurally
robust process – formation of APA
discussion team, review of the APA
discussion team’s recommendations with
the quality assurance team.
• The APA discussion team can constitute
both personnel from within the ITA and/
or experts appointed by the ITA.
• No discussion on the filing fees is
provided in these regulations.
• No discussion has been provided
on customs and transfer pricing
convergence.
DER
Effective from fiscal year 2016, part of the borrowing cost arising
from debt is non-tax deductible if DER exceeds 4:1. MoF regulation10
provides detailed guidance on the scope of related parties, definition
of debts and equity, prescribed threshold for DER, and other
compliance requirements. Please also refer to the discussion in the
earlier section under CIT (page 18).
10
MoF Regulation No. 169/PMK.010/2015.

Summary of Double Tax
Avoidance Agreements
(Tax Treaties)
Indonesia has signed DTA with many countries all around the world.
The summary of the various reduced tax rates and PE time tests
under the DTAs is provided in the table provided below.
In order to claim the relief under the DTA, a foreign taxpayer has
to complete and submit a specific document issued by the ITA, i.e.
Form DGT. This form contains certain declarations to be made by
the foreign income recipient related to its substance and beneficial
ownership of income, as well as a Certificate of Domicile (CoD) which
must be endorsed by the ITA of the DTA partner country.
In the case that the foreign taxpayer is unable to obtain the

endorsement, the foreign taxpayer can use any form of Certificate
of Residence (CoR) commonly verified or issued by the DTA partner’s
ITA. This document must meet the following requirements:
• presented in English;
• contains at least the name of the foreign taxpayer, the issuance
date and the applicable tax year of the CoR;
• the original or copy document must be legalized by the ITA where
the withholding tax agent is registered;
• the document is signed by the relevant competent ITA.
This form will serve as an attachment to the completed form. The

relief under the DTA provisions will be denied by the ITA if the foreign
taxpayer fails to fulfil the requirement.
68
No. Country Dividends Interest Royalties PE Tax PE
(1) (3) (4) (5) Time Test
For Investor Other (6)
Companies
(2) % % % %
%
1 Algeria 15 15 15 15 10 3 months
6 months
2 Armenia 10 15 10 10 10
or 120 days
3 Australia 15 15 10 10 or 15 (10) 15 (8) 120 days
4 Austria 10 15 10 10 12 (8)
6 or 3
months
5 Bangladesh 10 15 10 10 10 (19)
183 or 91
days
6 Belarus29 10 10 10 10 10 6 months
or 120 days
7 Belgium 10 15 10 10 10 6 or 3
months
8 Brunei 15 15 15 15 10 3 months
Darussalam or 183 days
9 Bulgaria 15 15 10 10 15(8) 6 months or

120 days
10 Canada 10 15 10 10 15 120 days
11 China 10 10 10 10 10 6 months
12 Croatia 10 10 10 10 10(8) 6 or 3
months
13 Czech 10 15 12.5 12.5 12.5 6 or 3

Republic months
14 Denmark 10 20 10 15 15(8) 6 or 3
months
15 Egypt 15 15 15 15 15 (8)
6 or 3 or 4
months
16 Finland 10 15 10 10 or 15 (11) 15 (8) 6 or 3

months
17 France 10 15 10 or 10 10 6 months or
15 (16) 183 days
18 Germany 10 15 10 15,10, 10 6 months

7.5 (12)
19 Hungary 15 15 15 15 20 (19) 3 or 4
months
20 Hong Kong 5 10 10 5 5 (8) 183 days

(1) (3) (4) (5) Time Test
Companies
(2) % % % %
%
21 India 10 10 10 10(27) 15 (8) 183 or 91

days
22 Iran 7 7 10 12 7 6 months or
183 days
23 Italy 10 15 10 10 or 12 (8) 6 or 3
15 (7) months
24 Japan 10 15 10 10 10 (8) 6 months
25 Jordan 10 10 10 10 20 (19) 6 or 1
month(s)
26 Korea (North) 10 10 10 10 10 12 or 6
months
27 Korea (South) 10 15 10 15 10 (8) 6 or 3

months
28 Kuwait 10 10 5 20 10 (20) 3 months
29 Laos 10 15 10 10 10 6 months
30 Luxembourg 10 15 10 10 or 10 (8) 5 months

12.5 (13)
31 Malaysia (24) 10 10 10 10 12.5 (8) 6 or 3

months
32 Mexico 10 10 10 10 10 (8) 6 months or

91 days
33 Mongolia 10 10 10 10 10 (8) 6 or 3
months
34 Morocco 10 10 10 10 10 (8) 6 months or

60 days
35 Netherlands 5 10(28) 5 (9) 10 10 6 or 3

or 15 or 10 months
36 New Zealand 15 15 10 15 20 (19) 6 or 3

months
37 Norway 15 15 10 10 or 15 (8) 6 or 3
15 (14) months
38 Pakistan 10 15 15 15 (15) 10 3 months
39 Papua New 15 15 10 10 15 120 days

Guinea
70
(1) (3) (4) (5) Time Test
Companies
(2) % % % %
%
40 Philippines 15 20 10 or 15 20 3 or 6
15 (17) months
or 183 days
41 Poland 10 15 10 15 10 (8) 120

or 183 days
42 Portugal 10 10 10 10 10 6 months
or 183 days
43 Qatar 10 10 10 5 10 6 months
44 Romania 12.5 15 12.5 12.5 or 12.5 6 or 4

15 (21) months
45 Russia 15 15 15 15 12.5 (8) 3 months
46 Seychelles 10 10 10 10 20 6 or 3
months
47 Singapore 10 15 10 15 15 (8) 183 or 90

days
48 Slovakia 10 10 10 10 or 15 (22) 10 (8) 6 months

or 91 days
49 South Africa 10 15 10 10 20 (19) 6 months

or 120 days
50 Spain 10 15 10 10 10 (8) 183 days

or 3 months
51 Sri Lanka 15 15 15 15 20 90 days
52 Sudan 10 10 15 10 10 6 or 3
months
53 Suriname 15 15 15 15 15 (8) 6 months or

91 days
54 Sweden 10 15 10 10 or 15 (12) 15 (8) 6 or 3

months
55 Switzerland 10 15 10 10 (12) 10 (8) 183 days
56 Syria 10 10 10 15 or 20 (14)
10 (8) 6 months or
183 days
57 Taiwan 10 10 10 10 5 (8) 6 months

or 120 days
58 Thailand 15 20 15 15 20 (19) 6 months

or 183 days
59 Tunisia 12 12 12 15 12 (8) 3 months

(1) (3) (4) (5) Time Test
Companies
(2) % % % %
%
60 Turkey 10 15 10 10 10 (8) 6 months
61 UAE 10 10 5 5 5 6 months
62 Ukraine 10 15 10 10 10 (8) 6 or 4
months
63 United 10 15 10 10 or 15 (18) 10 (8) 91 or 183

Kingdom days
64 United States 10 15 10 10 10 (8) 120 days
65 Uzbekistan 10 10 10 10 10 (8) 6 or 3
months
66 Venezuela 10 15 10 10 or 20 (23) 10 (8) 6 months
67 Vietnam 15 15 15 15 (15) 10 6 or 3
months
68 Zimbabwe(25) 10 20 10 15 10 or 5 (26) 6 months

or 183 days
69 Serbia (30) 15 15 10 15 15 (8) 6 months
Notes to summary of DTA Withholding Tax Rate and PE Time Tests:

1. This is a general summary of the current treaty provisions. For more
comprehensive information, please refer to the relevant treaty.
2. These rates are applicable only if the shareholders are the beneficial owner
of the dividends. The lower rate applies where the recipient holds 25%
(10% in the case of South Africa, Venezuela and Bangladesh) or more of the
capital of the paying company (voting shares in Japan). For Thailand, 15%
applies to dividends paid to shareholders by companies engaged in industrial
undertakings; 20% in other cases. For the Czech Republic, Poland and Ukraine,
the lower rate applies if the recipient controls 20% or more of the capital
of the paying company. For the UK, the lower rate applies if the recipient
controls 15% or more of the voting power.
3. These rates are applicable only where the recipient is the beneficial owner
of the interest. With the exception of Switzerland, if amounts are paid to the
Government, the Central Bank, or a bank or financial institution specifically
mentioned in the treaty, they will be exempted from interest withholding tax
4. These rates are applicable only where the recipient is the beneficial owner of
the royalties. Royalties paid to the Government of Brunei are exempt.
5. Only on amounts actually remitted for Belgium and the Philippines; levied on
total after-tax profits for all other countries.
6. Where two periods are stated, the longer one usually applies to a building,
construction, or assembly site or installation project or supervisory services
in connection therewith, and the shorter, to consulting and other services.
72
Details of the time test of those activities for each country shall refer to the
table on pages 74 up to 77.
7. The 10% rate applies to royalties for the use of or information regarding
industrial, commercial or scientific equipment or experience; the 15% rate
applies to all other royalties.
8. There is a specific provision regarding the application of branch profit tax
in production-sharing contracts and mining contracts of work (or similar
contracts) in the oil and gas or mining sector concluded by the Government
of Indonesia.
9. According to the new protocol, the withholding tax rate can be reduced to
5%, as long as certain conditions are met, e.g. interest is paid on long-term
borrowings (beyond 2 years).
10. The 10% rate applies to the right to use industrial, commercial and scientific
information. In all other cases the rate is 15%.
11. The 10% rate applies to copyright of literary and artistic works, including
cinematographic films, films, or tapes for television or radio broadcasting. In
all other cases the rate is 15%.
12. The 15% rate applies to copyrights, patents, trademarks, secret formulas,
literary and artistic works, or designs; the 10% rate applies to the use of/right
to use or information regarding industrial, commercial or scientific equipment
or experience; the 7.5% rate applies to technical, managerial or consulting
services (Germany); the 5% rate applies to payment for services (Switzerland).
13. The 10% rate applies to fees for technical services; the 12.5% rate applies to
royalties.
14. The 10% (20% in the case of Syria) rate applies to patents, trademarks, secret
formulas, designs and the use of or right to use industrial, commercial or
scientific equipment or experience; the 15% rate applies to copyrights.
15. The 15% rate applies to royalties in all other cases and for technical services
as well.
16. The 10% rate is applied if the interest is paid by a bank or financial institution,
or by an enterprise the activities of which are mainly carried on in the fields
of agriculture, plantation, forestry, fishery, mining, manufacturing, industries,
transportation, low- cost housing projects, tourism and infrastructure, and
is paid to a bank or to another enterprise; 15% for interest on other types of
debt.
17. 10% for interest on public issues of bonds, debentures and similar
obligations; 5% for interest on other types of debt.
18. The 10% rate applies to royalties for use of or the right to use industrial,
commercial, and scientific equipment; the 15% rate applies to royalties for
copyrights, patents, know-how, designs or models, trademarks, plans, secret
formulas, or processes.
19. The treaty provisions are silent on the rate. The ITA interprets this to mean
that the rate stipulated by Indonesian Tax Law (i.e. 20%) should apply.
20. Tax is only applicable if profits are remitted to head office within 12 months
after the profits accrue.
21. The 12.5% rate applies to patents, trademarks, secret formulas, designs and
the use of or right to use industrial, commercial or scientific equipment or
experience; the 15% rate applies to copyrights. Further, under article 12 of the
Romania-Indonesia DTA, the 10% rate is applied for any payment in relation
to commissions.

22. The 10% rate applies to royalties for the use of or the right to use motion
picture films, films or videos for use in connection with television, or tapes for
use in connection with radio broadcasting; the 15% rate applies in all other
cases.
23. The 10% rate applies to fees for technical services; the 20% rate applies to
royalties in all other cases.
24. The tax treaty with Malaysia does not cover business activity conducted in
Labuan offshore, as defined in the Malaysian Labuan Offshore Business
Activity Act of 1990.
25. The treaty is not yet in force.
26. The 10% rate applies in Indonesia; 5% rate applies in Zimbabwe.
27. The 10% rate applies to royalties and technical services.
28. The 10% rate applies if the beneficial owner is a pension fund.
29. The treaty is in force from 9 May 2018, but the effective date is starting
from 1 January 2019.
30. The treaty is in force from 31 December 2018, but the effective date is starting
from 1 January 2019.
PE Time Test
Certain activities conducted in Indonesia for more than a certain
period may trigger a creation of PE. The following is a summary of the
period specified in the relevant tax treaties:
Other
No. Country Construction Installation Assembling Supervisory
Services
1 Algeria 3 months 3 months 3 months 3 months 3 months
2 Armenia 6 months 6 months 6 months 6 months 120 days
3 Australia 120 days 120 days 120 days 120 days 120 days
4 Austria 6 months 6 months 6 months 6 months 3 months
5 Bangladesh 183 days 183 days 183 days 183 days 91 days
6 Belarus 6 months 6 months 6 months 6 months 120 days
7 Belgium 6 months 6 months 6 months 6 months 3 months
8 Brunei 183 days 3 months 3 months 183 days 3 months

Darussalam
9 Bulgaria 6 months 6 months 6 months 6 months 120 days
10 Canada 120 days 120 days 120 days 120 days 120 days
74
Other
Services
11 China 6 months 6 months 6 months 6 months 6 months
12 Croatia 6 months 6 months 6 months 6 months 3 months
13 Czech 6 months 6 months 6 months 6 months 3 months

Republic
14 Denmark 6 months 3 months 3 months 6 months 3 months
15 Egypt 6 months 4 months 4 months 6 months 3 months
16 Finland 6 months 6 months 6 months 6 months 3 months
17 France 6 months - 6 months 183 days 183 days
18 Germany 6 months 6 months - - -
19 Hungary 3 months 3 months 3 months 3 months 4 months
20 Hong Kong 183 days 183 days 183 days 183 days 183 days
21 India 183 days 183 days 183 days 183 days 91 days
22 Iran 6 months 6 months 6 months 6 months 183 days
23 Italy 6 months 6 months 6 months 6 months 3 months
24 Japan 6 months 6 months - 6 months -
25 Jordan 6 months 6 months 6 months 6 months 1 month
26 Korea 12 months 12 months 12 months 12 months 6 months

(North)
27 Korea 6 months 6 months 6 months 6 months 3 months

(South)
28 Kuwait 3 months 3 months 3 months 3 months 3 months
29 Laos 6 months 6 months 6 months 6 months 6 months
30 Luxembourg 5 months 5 months 5 months 5 months -
31 Malaysia 6 months 6 months 6 months - 3 months
32 Mexico 6 months 6 months 6 months 6 months 91 days
33 Mongolia 6 months 6 months 6 months 6 months 3 months
34 Morocco 6 months - 6 months 6 months 60 days
35 Netherlands 6 months 6 months 6 months 6 months 3 months

Other
Services
36 New Zealand 6 months 6 months 6 months 6 months 3 months
37 Norway 6 months 6 months 6 months 6 months 3 months
38 Pakistan 3 months 3 months 3 months 3 months -
39 Papua New 120 days 120 days 120 days 120 days 120 days
Guinea
40 Philippines 6 months 3 months 3 months 6 months 183 days
41 Poland 183 days 183 day 183 days 183 days 120 days
42 Portugal 6 months 6 months 6 months 6 months 183 days
43 Qatar 6 months 6 months 6 months 6 months 6 months
44 Romania 6 months 6 months 6 months 6 months 4 months
45 Russia 3 months 3 months 3 months 3 months -
46 Seychelles 6 months 6 months 6 months 6 months 3 months
47 Singapore 183 days 183 days 183 days - 90 days
48 Slovakia 6 months 6 months 6 months 6 months 91 days
49 South Africa 6 months 6 months 6 months 6 months 120 days
50 Spain 183 days 183 days 183 days 183 days 3 months
51 Sri Lanka 90 days 90 days 90 days 90 days 90 days
52 Sudan 6 months 6 months 6 months 6 months 3 months
53 Suriname 6 months 6 months 6 months 6 months 91 days
54 Sweden 6 months 6 months 6 months 6 months 3 months
55 Switzerland 183 days 183 days 183 days 183 days -
56 Syria 6 months 6 months 6 months 6 months 183 days
57 Taiwan 6 months 6 months 6 months 6 months 120 days
58 Thailand 6 months 6 months 6 months 6 months 6 months
59 Tunisia 3 months 3 months 3 months 3 months 3 months
60 Turkey 6 months 6 months 6 months 6 months 183 days
76
Other
Services
61 UAE 6 months 6 months 6 months 6 months 6 months
62 Ukraine 6 months 6 months 6 months 6 months 4 months
63 United 183 days 183 days 183 days 183 days 91 days
Kingdom
64 United 120 days 120 days 120 days 120 days 120 days
States
65 Uzbekistan 6 months 6 months 6 months 6 months 3 months
66 Venezuela 6 months 6 months 6 months 6 months -
67 Vietnam 6 months 6 months 6 months 6 months 3 months
68 Zimbabwe 6 months 6 months 6 months 6 months 183 days
In April 2019, the Government issued regulation regarding PE

determination.11 The regulation sets out more detailed criteria for
PE from Indonesia domestic tax law perspective, including the ITA’s
interpretation of certain PE provisions in tax treaty.
11
MoF Regulation Number 35/PMK.03/2019.

Automatic Exchange of
Information (AEOI)
The OECD has developed a Common Reporting Standard (CRS) for
the automatic exchange of tax and financial information on a global
level, whose intention is to reduce the possibility of tax evasion.
It provides for the exchange of non-resident financial account
information with the tax authorities in the account holders’ country
of residence. Participating jurisdictions that implement Automatic
Exchange of Information (“AEOI”) send and receive pre-agreed
information each year, without having to send a specific request.
In preparation for the AEOI, the Government has issued a MoF

regulation.12 This regulation provides instructions to financial
institutions to release certain financial information for tax purposes
to the ITA. Moreover, the regulations also introduce sanctions for
non-compliant financial institutions. Under this regulation, financial
accounts that are considered as assets in the form of undistributed
inheritance also part of the information that will be automatically
exchanged accordingly.
Indonesia, as one of the participants of the AEOI agreement, has

conducted the first information exchange per September 2018.
Currently, the ITA has started to receive financial information from
certain foreign countries; in the future, this information will be
utilized for monitoring the tax compliance of taxpayers.
12
Mof Regulation Number 70/PMK.03/2017, as amended by Mof Regulation Number 19/PMK.03/2018.
78
80
List of Abbreviations
AEOI : Automatic Exchange of Information
ATPM : Sole Agents (Agen Tunggal Pemegang Merek)
APA : Advance Pricing Agreement
API : Importer Identification Number (Angka Pengenal
Importir)
APM : Agents (Agen Pemegang Merek)
BEPS : Base Erosion and Profit Shifting
CbCR : Country-by-Country Report
CFC : Controlled Foreign Company
CIT : Corporate Income Tax
DER : Debt-to-Equity Ratio
DGT : Directorate General of Taxation
DTA : Double Tax Avoidance Agreement
IPO : Initial Public Offering
ITA : Indonesian Tax Authority
KPA : Authorised Budget (Kuasa Pengguna Anggaran)
MAP : Mutual Agreement Procedure
MoF : Minister of Finance
OECD : The Organization for Economic Co-operation and
Development
PE : Permanent Establishment
SPC : Special Purpose Company
UP : Reserve Money (Uang Persediaan)
VAT : Value Added Tax

Contacts
If you have any queries, please correspond with your usual contact
within Deloitte Touche Solutions or with any one of the following Tax
Partners:
Melisa Himawan
Business Tax and Corporate mehimawan@deloitte.
(Tax Managing
License com
Partner)
Ali Mardi Djohardi Business Tax alimardi@deloitte.com
Balim Transfer Pricing bbalim@deloitte.com
Cindy Sukiman Business Tax csukiman@deloitte.com
ddamijanto@deloitte.
Dionisius Damijanto Business Tax
com
hsupriyanto@deloitte.
Heru Supriyanto Business Tax
com
Global Employer Services

iatmawijaya@deloitte.
Irene Atmawijaya and Business Process
com
Solutions
Business Tax and Merger &

John Lauwrenz jlauwrenz@deloitte.com
Acquisition
Roy David Kiantiong Transfer Pricing rkiantiong@deloitte.com
Business Tax, Indirect

Roy Sidharta Tedja Tax and Business Process roytedja@deloitte.com
Solutions
Shivaji Das Transfer Pricing shivdas@deloitte.com
Business Tax and Global

Turmanto tturmanto@deloitte.com
Trade Advisory (Customs)
Yan Hardyana Business Tax yhardyana@deloitte.com
82
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of
member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of
its member firms and their affiliated entities are legally separate and independent entities. DTTL
does not provide services to clients. Please see www.deloitte.com/about to learn more.
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk
advisory, tax & legal and related services. Our global network of member firms and related
entities in more than 150 countries and territories (collectively, the “Deloitte organisation”) serves
four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000
people make an impact that matters at www.deloitte.com.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL.
Members of Deloitte Asia Pacific Limited and their related entities, each of which are separate
and independent legal entities, provide services from more than 100 cities across the region,
including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur,
Manila, Melbourne, Osaka, Shanghai, Singapore, Sydney, Taipei, Tokyo and Yangon.
About Deloitte Indonesia

In Indonesia, services are provided by Deloitte Touche Solutions.
This communication contains general information only, and none of Deloitte Touche Tohmatsu
Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by
means of this communication, rendering professional advice or services. Before making any
decision or taking any action that may affect your finances or your business, you should consult a
qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss
whatsoever sustained by any person who relies on this communication.
© 2019 Deloitte Touche Solutions

Id Tax Indonesian Tax Guide 2019 2020 en

Uploaded by

Copyright:

Available Formats

Id Tax Indonesian Tax Guide 2019 2020 en

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Id Tax Indonesian Tax Guide 2019 2020 en

Uploaded by

Copyright:

Available Formats

Indonesia Tax Guide

This publication contains general information only, and none of

General Indonesian Tax Provisions 7

Corporate Income Tax 14

Individual Income Tax 29

Withholding Tax and Final Tax 33

Value Added Tax 45

Summary of Double Tax Avoidance Agreements 68

Automatic Exchange of Information (AEOI) 78

Indonesian Tax Guide 2019-2020 3

Deloitte is a leading global provider of audit and assurance,

Deloitte Asia Pacific Limited is a company limited by guarantee and a

Deloitte Southeast Asia Ltd comprises Deloitte practices operating in

Deloitte Indonesia has over 1,600 Partners and Staff located in

Our Tax and Legal Service

Deloitte offers clients a broad range of fully integrated tax and

In Indonesia, tax services are provided by Deloitte Touche Solutions,

Indonesian Tax Guide 2019-2020 5

Law Number 6 of 1983 regarding General Procedures and Provisions for

Basics of the Tax System

Indonesian Tax Guide 2019-2020 7

Administration, Books and Records

Indonesian Tax Guide 2019-2020 9

Tax Disputes – Appeal process

Tax Disputes - Request for Judicial Review by the Supreme Court

Tax Penalties and Sanctions

Late reporting Rp 500,000 for monthly VAT return;

Indonesian Tax Guide 2019-2020 11

Issuing incomplete VAT 2% of the taxable base

Fails to submit a tax return through 1 to 2 times the tax

Deliberately does not register for 2 to 4 times the

Misuses or uses without right the 2 to 4 times the tax refund

Intentionally issues and/or uses tax 2 to 6 times the tax amount

Indonesian Tax Guide 2019-2020 13

Law Number 7 of 1983 regarding Income Tax as most recently amended

The standard CIT rate also applies to income received or earned by

Corporate Tax Incentives

Calculation of Income – Deductible Expenses

Indonesian Tax Guide 2019-2020 15

There are also certain requirements that must be fulfilled in terms of

Calculation of Income – Non-Deductible Expenses

Indonesian Tax Guide 2019-2020 17

Besides complying with the prescribed DER, taxpayers are also

Depreciation commences either in the month the expenditure occurs

Group 1 4 (four) Years 25% 50%

Group 2 8 (eight) Years 12.5% 25%

Group 3 16 Years 6.25% 12.5%

Group 4 20 Years 5% 10%

Permanent 20 Years 5% N/A

Non-Permanent 10 Years 10% N/A

MoF determines the asset categories subsumed into the groups of

Loss Carried Forward

Indonesian Tax Guide 2019-2020 19

Sale of Land and/or Building

Exemptions are granted for certain types of transfer of land and

Income from Derivative Transactions

Tax Allowance Facility

Tax Holiday Facility

Indonesian Tax Guide 2019-2020 21