Taxes and duties in Indonesia
Indonesia last amended its Income Tax Law (Law No. 17/2000) in 2008. This law sets down the tax code for both personal and corporate income tax. The law applies to business activities that are conducted in Indonesia, or the offices of its management and administration (including financial administration) are located in the country.
Apart from tariffs, imports are also restricted by the value-added tax (VAT). The current VAT rate is 10%. The Law 42/2009 allows the government to set the VAT rate between 5 and 15%.
Importers and producers of certain means of transport and transport related services, including ocean vessels, river vessels, ferries and fishing vessels, are allowed to credit their input VAT. This law (GR69/2015), effective since October 2015, aims to strengthen the national transportation industry.
Corporate income tax
The standard corporate income tax rate is a 25% flat rate for all companies with an annual income exceeding Rp4.8bn. Corporate tax payers that have gross annual income of below Rp4.8bn pay a flat tax rate of 1% of their total turnover.
Yet there are some exceptions that can be found under Article 23 of the Income Tax Law. These apply to resident companies and certain other designated taxpayers. Withhold tax on gross amounts at the following rates in situations including:
- payment of interest, including premiums, discounts and loan- guarantee fees; royalties; prizes and awards: 15% residents and 20% for non-residents
- payment of interest on time and savings-bank deposits: 20%
- payment of dividend: 10% residents and 20% non-residents
- rental of land and/or buildings: 10%
- proceeds from transfers of land and building rights: 5%
- construction planning and supervision services: 4%
- construction, depending on the business qualification of the company and the services performed: 3-6%
- rentals of land-transport vehicles: 3%
- 2% on fees for rentals of assets other than land and buildings; technical services; management services; consulting services; appraisal services; actuary services; accounting, book-keeping and attestation services: 2%
The government revised its tax-holiday regulations in 2015. Certain industries categorised as “pioneer”, including agricultural, forestry- and fishery-based processing industry, marine transportation, qualify for tax reductions of between 10% and 100% for 5–15 years for new investments.