Income Tax

Income tax shall be imposed on any taxable person in respect of income during a taxable year. Thus, the imposing of income tax has to fulfill that there are tax person and tax object i.e the income. The imposing income tax is engaged in a certain period named taxable year. The taxable year is calendar year but if the taxpayer want, the taxable year can be accounting year also.

The Income Tax Law regulates income tax imposition on Taxable Persons in relation to income received or accrued in a taxable year. Taxable Person will be subject to tax if that person receives or accrues income. A Taxable Person who derives income is called a Taxpayer under this law. A Taxpayer is taxed on the income received or accrued during a taxable year or a fraction of a taxable year, if the tax obligations commence or end in a taxable year.

The term a taxable year under this law means a calendar year. However, a Taxpayer may use an accounting year which is different from the calendar year insofar as the accounting year has the period of 12 (twelve) months.

Taxpayer
Taxable person consist of resident and non resident tax person. The resident tax person consist of individual and entity. The non resident tax person are Permanent Establishment (PE) and Non PE. The resident taxpayer and PE have to fill the annual tax return. The individual resident taxpayer is an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia. The entity resident taxpayer is an entity established or domiciled in Indonesia.
The term non resident taxpayer means :

• an individual who resides in Indonesia or is present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, or an individual who in particular taxable year is present and intends to reside in Indonesia
• an individual who does not reside in Indonesia or is present in Indonesia for not more than 183 (one hundred and eighty-three) days within any 12 (twelve) month period, and an entity which is not established or domiciled in Indonesia deriving income from Indonesia other than from conducting business or carrying out activities through a permanent establishment

One important difference between a resident taxpayer and a non-resident taxpayer is that a resident taxpayer is taxed on his/her income originating from Indonesia and/or from abroad, however a non-resident taxpayer is taxed on his/her income derived only from Indonesia. Therefore, any individual residing in Indonesia or any individual staying in Indonesia for more than 183 days within a period of 12 months, or any individual who, within a fiscal year, stays in Indonesia and intend to reside in Indonesia, is taxed on his/her worldwide income under any name and form whatsoever.

Taxable Object
The Tax Object shall be the income, namely any increase in economic benefit derived by a taxpayer, which may be used for consumption or increase the wealth of the taxpayer concerned, under any name and form whatsoever, including:

• Any remuneration or compensation in relation to work, services, or activities, derived from employment or independent profession, including: wages, salary, honoraria, doctor’s fees, actuarial fees, accountant’s fees, lawyer’s fees
• Any income or compensation from any business or activity
• Any income from capital including from movable and immovable assets, such as reward and gain from forgiveness of debt (“haircuts”), etc.

Tax Rate
The income tax is used to find how much yearly taxpayer income tax. Yearly income tax is tax rate x (taxable object - deductible expense - loss carry forward.)
Tax rate for resident individual taxpayer :

• 5% (five percent) for Rp25,000,000.00 (twenty five million rupiahs) or less
• 10% (ten percent) for over Rp25,000,000.00 (twenty five million and one rupiahs) - Rp50,000,000.00 (fifty million rupiahs)
• 15% (fifteen percent) for pver Rp50,000,000.00 (fifty million and one rupiahs) - Rp100,000,000.00 (one hundred million rupiahs)
• 25% (twenty five percent) for over Rp100,000,000.00 (one hundred million and one rupiahs) – Rp200,000,000.00 (two hundred million rupiahs)
• 35% (thirty five percent) for over Rp200,000,000.00 (two hundred million rupiahs)

Tax rate for resident corporate taxpayer and PE :

• 10% (ten percent) for Rp50,000,000.00 (fifty million rupiahs) or less.
• 15% (fifteen percent) for over Rp50,000,000.00 (fifty million and one rupiahs) – Rp100,000,000.00 (one hundred million rupiahs)
• 30% (thirty percent) for over Rp100,000,000.00 (one hundred million rupiahs)