A Straightforward Guide to Company Taxes in Indonesia

The Basics: Revenue vs. Profit

1. Revenue (Pendapatan):
This is all the money a company receives from its operations before any expenses are deducted. If the company sells IDR 10 billion worth of goods in a year, its revenue is IDR 10 billion.

2. Profit (Keuntungan):
This is what remains after all company expenses have been deducted. If the company earns IDR 10 billion in revenue and spends IDR 8 billion on payroll, rent, and inventory, its profit is:
IDR 10 billion - IDR 8 billion = IDR 2 billion.

1. Corporate Income Tax, or PPh Badan

What is it?
This is the tax a company pays on profit - the money left after allowable expenses. It is based on what the company earns net of those expenses and must pay to the government.

Corporate Income Tax Rates Under the Regular Regime

• Standard rate: 22% of profit.
• Reduced rate of 11%: if annual revenue does not exceed IDR 50 billion, an 11% rate may apply to the first IDR 4.8 billion of taxable profit.
• If annual revenue exceeds IDR 50 billion, the reduced rate does not apply and all taxable profit is taxed at 22%.

How Is Corporate Income Tax Paid?

1. Annually:
At the end of the fiscal year, the company calculates its total profit and files a tax return. The final PPh Badan liability is paid based on that return.

2. Monthly installments:
During the year, the company must make monthly advance payments under PPh Article 25. Those payments are credited against the annual tax due.

How is the installment calculated?
Take the corporate income tax paid for the previous year and divide it by 12.
For example, if last year's tax was IDR 12 million, the monthly installment is IDR 1 million.

The Simplified Tax Regime: Available Only for the First Three Years

What is it?
This is a special concession for small companies with annual revenue of no more than IDR 4.8 billion. Instead of calculating profit and paying the 22% regular rate, an eligible company may pay a flat 0.5% tax on revenue.

How Does It Work?

• The tax is based on gross revenue, or Pendapatan, rather than profit, or Keuntungan.
• The concession is available only during the first three years after the company is registered.

Example:
If the company earns IDR 3 billion in annual revenue, the tax is:
IDR 3 billion x 0.5% = IDR 15 million.

When is it paid?
The tax is paid monthly. If monthly revenue is IDR 250 million, the tax for that month is:
IDR 250 million x 0.5% = IDR 1.25 million.

2. Value-Added Tax, or PPN

What is it?
VAT is added to the price of the goods or services a company sells. It is not paid out of the company's profit. The company collects it from customers and remits it to the government.

Who Must Charge VAT?

Companies with annual revenue above IDR 4.8 billion must register as VAT collectors and add 11% VAT to their goods or services.

VAT rate: 11%.

Example:
If an item sells for IDR 100 million, the company adds 11% VAT. The customer pays IDR 111 million, and the company remits IDR 11 million to the government.

When is it paid?
VAT is paid monthly by the 15th day of the following month.

3. Employee Income Tax, or PPh Article 21

What is it?
This tax is withheld from employee salaries. The employer is responsible for deducting it from payroll and remitting it to the tax authority.

Tax Rates

• Up to IDR 60 million per year: 5%.
• More than IDR 60 million and up to IDR 250 million per year: 15%.
• More than IDR 250 million and up to IDR 500 million per year: 25%.
• More than IDR 500 million per year: 30%.

Example:
An employee earns IDR 5 million per month, or IDR 60 million per year. The tax is:
IDR 60 million x 5% = IDR 3 million per year, or IDR 250,000 per month.

When is it paid?
Employee income tax is paid monthly by the 10th day of the following month.

4. Social Insurance Contributions, or BPJS

What is it?
BPJS is Indonesia's public insurance system, covering health care and social security.

Components

1. BPJS Kesehatan, or health insurance:

• The employer contributes 4% of the employee's salary.
• The employee contributes 1%.

2. BPJS Ketenagakerjaan, or employment social security:

• The rate depends on the type of coverage and ranges from 0.24% to 8%.

Example:
For an employee earning IDR 5 million per month, BPJS Kesehatan contributions are:

• IDR 200,000 from the employer: IDR 5 million x 4%.
• IDR 50,000 from the employee: IDR 5 million x 1%.

When is it paid?
BPJS contributions are paid monthly by the 10th day of the following month.

5. LKPM, or Laporan Kegiatan Penanaman Modal

What is it?
LKPM is an investment activity report. It is mandatory for foreign-owned companies, or PT PMAs, and for companies that have received investment incentives.

What Does an LKPM Include?

• Investment amounts, such as equipment purchases or office rent.
• Company revenue and expenses during the reporting period.
• Employee headcount, including Indonesian and foreign employees.
• A description of any difficulties the business has encountered.

Who Must File?

• Foreign-owned companies, or PT PMAs.
• Companies that have received incentives or grants.

Filing Deadlines

• First quarter: April 10.
• Second quarter: July 10.
• Third quarter: October 10.
• Fourth quarter: January 10.

6. The Director's Personal Tax Return

What is it?
This is the personal tax return that a company director must file. It is especially important for foreign directors because it documents their tax obligations and status in Indonesia.

When Is It Filed?

The director's personal return is filed once a year through the tax authority's system, by March 31 of the following year.

Even when a company is inactive and reports zero activity, some filings must still be submitted to the tax authorities with zero figures.

Indonesia also has taxes that apply only to certain transactions or industries. Examples include restaurant tax of up to 10% of the check, one-time transaction taxes such as 10% tax on rent each time rent is paid, and 15% tax on dividends when they are distributed. The applicable obligations depend on the company's actual transactions, and we can review them with you individually.