This is a brief overview of the requirements, calculation and payment of personal income taxes in Indonesia.
The Employer's and Individual's Role in Personal Income Tax
Your employer is the body responsible for the calculation, payment and annual return of all employees for the year in question. Under the old system, the income tax of an individual who only has one source of income was processed by his or her employer. Employers were able to pay the tax of all their employees under one NPWP number, assuming that employees only had this one source of income.
Now things have changed ... the individual taxpayer is legally responsible for ensuring that they've registered with the tax office and comply with the regulations and payment of the tax due.
Employers have three choices for the personal income tax calculation:
Of special concern to expatriates whose salaries were quoted and paid net ... though your employer may have agreed in your contract to pay your taxes - you are still personally liable for their payment. Ask your employer to show you receipts showing that taxes have been paid for you on a monthly basis. The form required is 1721-A1, which is the actual annual return and a S.S.P. which is the actual proof of payment. It's very good to have your package expressed as gross. It then is defensible that as you only received the net amount the employer has deducted tax and is therefore liable for the payment to the Tax Office.
Those expatriates working for local PT companies (not the case for multinational firms) may find that in the past their employer “negotiated” their tax with the tax officials. This could come back to haunt you in the future. If your salary was quoted net, and you felt your local employer had paid your taxes according to your agreement, you may find in fact that the taxes were not paid and you are now liable for back taxes.
NPWP ... The Tax Identification Number
Since 1984, the tax office has required all resident individuals in Indonesia to have their own personal tax numbers, Nomor Pendaftaran Wajib Pajak or NPWP. This regulation includes expatriates. Naturally this excludes young children who are too young to work.
This regulation has not been enforced in the past due to the reliance on individuals having no source of income outside their employment or whose earnings fall outside the minimum level for inclusion in the tax scheme. The government assumption was that companies were paying the tax for their employees but in fact it wasn't happening in many local firms.
In 2000, the tax office stepped up the drive to require all expatriates resident in Indonesia to register with the tax office and obtain their own separate tax number (NPWP) and pay monthly taxes and file annual tax returns, and pay tax on their income earned outside Indonesia, less tax paid in other jurisdictions on the additional overseas income.
The government defines an individual taxpayer, who is required to register for NPWP and file income tax returns, as:
Where to Register
Taxpayers must register at the Tax Service Office in your city of residence. Expats living in Jakarta are required to register with the Tax Office for Foreign Bodies and Expatriates (KPP BADORA).
Your registration, monthly tax payment and annual return can be prepared and submitted by appointed representative, usually an accountant specializing in tax matters. Be sure that you receive a good referral, as remember you yourself are accountable for any non-payment of taxes.
To register you need:
Enforcement and Linkage of NPWP to other Activities
In Year 2001, the Indonesian tax office renews its drive to widen the taxpayer base by registering all Indonesian Nationals for their own NPWP number. They have started linking this requirement to certain other registrations and regulations to enforce it.
There is a regulation shortly to issue that will require an NPWP for all Indonesians applying for a passport, renewing registration of a vehicle over a certain value, having a credit card limit in excess of a certain amount and the payment of housing tax on houses over a certain value.
When are they going to link expatriates as well? We do not know but will keep you advised as soon as we do know.
What Income is Included
The Indonesian personal taxation system is based on worldwide income. This includes:
Benefits in Kind are generally excluded: Housing, Cars, School fees, as well as income from inheritance. However, if your company pays you for housing in one lump sum, and then you make the payments ... the tax office may construe that lump sum as income. In this case, it may be better for your employer to pay the housing costs direct to the landlord. You take the money as an advance, not as housing allowance. The company then expenses one month at a time as housing, which is then treated as a fringe benefit.
Credit is given for income tax paid overseas, subjected to limits and perhaps dependent on double taxation treaties between Indonesia and your country. You may also receive credit for tax taken on interest income for local bank accounts and time deposits and other interest earning methods that are taxed.
Since income from Overseas Investment can be taxed, it is best to consult your accountant and your financial consultant to determine how these new regulations will affect any current and future investment strategies.
|Rp 1-25 million||5%|
|Rp 25 to 50 million||10%|
|Rp 50-100 million||15%|
|Rp 100-200 million||25%|
|over Rp 200 million||35%|
Deductions for an individual are Rp. 2,880,000, wife 2,880,000 and up to three children Rp. 1,440,000. Position Expense (Biaya Jabatan) is a deduction with a maximum 5% from gross income or a maximum of Rp 1,296,000.
If your company pays for house rental, car, etc. then it could be considered your income or not. It depends on how the company will treat the expense. It may go to your income tax report as an income, or may go to the company income tax report as an expense. There are no exemptions for personal house rental, car, etc. Insurance premiums paid by the company are seen as additional income.
You will receive credit against tax due for local tax prepayment through FISKAL departure tax, so save those receipts.
Consequences of Tax Registration
Many expats are used to being taxed on worldwide income but the Indonesia system is far broader than first meets the eye. As a registered tax person (body) you become liable for the full range and consequences of the system:
Failure to Register
According to the regulations, failure to secure an NPWP could mean imprisonment for a maximum of six years and a maximum fine of four times the total amount of tax due. Audits could be conducted on past years and would rely on local and overseas tax statements and bank records.
Canceling Your Tax Number
Once you are registered you can only cancel the NPWP number by having a tax audit. This will be extremely difficult as it take 2 - 3 years for the tax office to perform such audit meanwhile your new job in another country is beckoning. Or you are returning home. The government cannot keep you in Indonesia until the audit is completed as your immigration papers will expire. But they may hold your personal shipment until such time as the audit is completed.
Double Taxation Agreements
The Indonesian Tax Office has the authority to contact the tax offices in countries that have a Double Tax Treaty with Indonesia to ask for information about you from their database. Likewise your country can ask for information from the Indonesian Tax Office, if there is a Double Tax Treaty in place.
The DPKK is a tax that is paid by your employer to the Manpower ministry ostensibly to be used in training Indonesian workers. The cost is US$100/month and must be paid in full as a part of the process for obtaining a work permit. It is separate from and has nothing to do with income taxes.
Working Forms used to help prepare your tax information
Caution .. forms filed with the Indonesian tax authorities must be in Bahasa Indonesia ... these forms below are just meant to be “working forms” to give to your tax preparer.
Form 1770 -
Annual Individual Income Tax Return (MS
Word 285 KB)
Form 1770-I - Calculation of Domestic Net Income (MS Word 108 KB) (1770-I Page 2)
Form 1770-II - List of Tax Withheld or Collected (MS Word 236 KB)
Form 1770-III - Income subject to tax and non-taxable income (MS Word 249 KB)
Form 1770-IV - List of Assets and Liabilities (MS Word 226 KB)
1770S - Annual Individaul Income Tax Return - For indidivuals who do
not conduct business/independent work (MS
Form 1770S-I - Details of Net income and list of withholding tax (MS Word 247 KB)
Form 1770S-II - List of assets and liabilities (MS Word 141 KB)