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Indonesia - Taxation

It is the responsibility of the worker to ensure that they are registered with the Indonesian tax office that that all the regulations are complied with. Your employer will deduct tax from the salary and pay to the tax office but it is up to the worker to ensure that this is done. Your employer should produce receipts to show that this has been done, as if for any reason they have not, the tax office will make the worker responsible.

Employers are supposed to issue each employee with a calculation of the tax that is to be paid monthly and then give a statement at the end of the tax year to show that this has been paid. This statement is called a Formulir 1721-A1. This statement needs to be used with the tax return.

Each person living and working in Indonesia must have their own tax number. This is called a Nomor Pendaftaran Wajib Pajak (NPWP). There are measures in place now to ensure that all residents adhere to this after a number of small companies were found not to be paying the tax that they had deducted from salaries. This tax number also takes into account dependent spouses, who do not need their own number. It is important to have the tax number as it is required for a number of other financial activities, such as buying a house, opening a bank account and giving higher credit limits on cards.

All workers in the country are required to pay income tax on all earnings worldwide. If a person has income from their home country then tax is payable if the tax already paid in the other country does not exceed what would be due in Indonesia. Tax that is calculated takes into consideration payments that have already been made elsewhere.

An individual taxpayer is defined as someone who earns more than the level of tax-free income, who has another income in addition to their salary, and anyone who is resident in the country for more than half of the previous 12 months. This 12 month period is not necessarily the calendar year. This also applies to anyone who has spent that length of time in the country, regardless of the type of visa they are using to visit the country. If you are in the country for less than the required 183 days then you are not obliged to pay income tax there but you must have evidence to support your whereabouts.

Each city in Indonesia has its own tax office and you can go there to register. Expats are also obliged to register with the Tax Office for Foreign Bodies and Expatriates, which is also known as KPP BADORA. When you submit details of income to them you can have this done through an accountant if you prefer. If this is your choice you need to ensure that you use a reputable accountant as you are still responsible if payments are not made.

To register with the tax office you will need to complete the registration form, a complete photocopy of your passport, a copy of your work permit and certificate of residency status, a photocopy of the employer’s tax number and a letter of authorisation if you have chosen an accountant to deal with matters on your behalf. Once the registration has been done you need to ensure that your taxes due are paid by the 15th of the following month.

Income tax rates range from 5% for an income of less than 25 million Rupiahs to a rate of 35% for an income of more than 200 million Rupiahs. Deductions can be made for dependent spouses and children and you may be able to claim for some expenses which are paid for by the company you work for, such as accommodation or vehicles, although this will depend upon the way the company has classified these payments. Items such as healthcare costs which are covered by the company you work for will be classed as part of your income. You should also be aware that when you make payments to landlords or other such providers you are obliged to withhold the tax on the payments.

If you choose not to register for a tax number you can be fined or imprisoned, as well as having your finances examined in great detail.

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