Indonesia is Southeast Asia’s largest economy, and one of the region’s most promising markets for foreign investment. However, understanding the Indonesia tax system is crucial for ensuring legal compliance, managing risk, and optimizing financial performance.
This Indonesia corporate tax guide breaks down tax rates, obligations for foreign businesses, payroll contributions, filing procedures, and recent reforms, helping you make informed decisions whether you’re incorporating, expanding, or streamlining operations in Indonesia.
Corporate Tax Rates in Indonesia
As of 2025, corporate tax in Indonesia follows these general rates:
| Business Type | Corporate Tax Rate |
| Standard rate for most companies | 22% |
| Public companies with ≥ 40% shares publicly traded | 19.00% |
| Small enterprises (gross turnover < IDR 50B) | 0.5% final tax on turnover for up to 3 years |
Indonesia corporate tax rates are expected to stabilize, with the government shelving previously proposed rate cuts due to post-pandemic recovery needs.
Foreign and domestic companies alike must also factor in withholding taxes and branch profit taxes where applicable.
Types of Corporate Taxes in Indonesia
Indonesia’s corporate tax regime consists of several tax types:
1. Corporate Income Tax (CIT)
The core tax levied on net profits of resident entities and foreign PEs. CIT applies on a self-assessment basis.
2. Withholding Tax
Companies must withhold tax on payments such as:
- Dividends: 10% (domestic) or treaty-based for non-residents
- Interest and royalties: 15–20% unless reduced by treaty
- Services provided by foreign entities: 20%
3. Value-Added Tax (VAT)
Charged at 11% on most goods and services. Businesses with revenue above IDR 4.8 billion must register for VAT.
4. Branch Profit Tax
A 20% tax (may be reduced under treaties) is imposed on profits remitted abroad by branches of foreign companies.
5. Regional/Local Taxes
Some sectors may be subject to local levies, such as hotel, entertainment, and advertisement taxes.
These make up the broader framework of Indonesia business taxes that companies need to monitor and comply with.
Tax Obligations for Foreign Businesses
Foreign entities must understand their Indonesia foreign business tax obligations, which generally arise from creating a Permanent Establishment (PE):
What Triggers a PE?
- A fixed business location in Indonesia
- Dependent agents concluding contracts
- Service provision for over 60 days within 12 months
- Online/digital presence that generates revenue from Indonesian users (under the “Significant Economic Presence” rules)
Once deemed to have a PE, foreign companies are taxed similarly to local companies on Indonesia-sourced income.
Tax Treaties
Indonesia has over 70 tax treaties that offer relief from double taxation and reduced withholding rates. Proper documentation (e.g., Certificate of Domicile) is required to apply treaty benefits.
Payroll Taxes and Employer Contributions
Indonesia imposes mandatory employer contributions to national social security schemes under BPJS (Badan Penyelenggara Jaminan Sosial):
| Contribution Scheme | Employer Rate | Employee Rate |
| BPJS Health | 4% (employer) | 1% (employee) |
| BPJS Employment (JHT) | 3.70% | 2% |
| Work Accident Insurance (JKK) | 0.24–1.74% | , |
| Death Benefit (JKM) | 0.30% | , |
| Pension Security (JP) | 2% | 1% |
There is no Indonesian payroll tax on salary income, but these contributions are mandatory for all eligible employees.
Tax Filing and Compliance Requirements in Indonesia
Corporate Tax Filing
- Annual Return: Due by the end of the fourth month after fiscal year-end
- Monthly Payments: Based on installment calculations (Article 25)
- Withholding Reporting: Monthly reports for Article 21, 23, and VAT
Bookkeeping Requirements
All companies must maintain double-entry bookkeeping in Bahasa Indonesia and IDR (rupiah), unless permission is granted to use a foreign language or currency.
Penalties
- Late filing: IDR 1 million fine
- Late payment: Interest at 2% per month
- Incorrect reporting: Up to 100% of the underpaid tax
Maintaining good Indonesia tax compliance is vital, especially as audits have become more frequent under the Directorate General of Taxes’ digital risk profiling system.
Tax Incentives and Exemptions
Indonesia offers several tax incentives to attract investment:
1. Tax Holidays
For pioneer industries (e.g., petrochemicals, renewable energy), tax holidays of 5–20 years are available depending on investment value.
2. Tax Allowances
Includes:
- 30% reduction in net income over 6 years
- Accelerated depreciation and amortization
- 10% withholding tax on dividends for foreign investors
3. Special Economic Zones (SEZs)
Companies operating in SEZs may enjoy:
- 0% VAT on certain domestic inputs
- Import duty exemptions
- Streamlined licensing and regulatory processes
4. R&D Deductions
Eligible R&D expenses can receive a super deduction of up to 300%.
These are central to supporting businesses within the Indonesia corporate tax system and encouraging innovation-led growth.
Recent Developments and Reforms
Recent changes in corporate tax in Indonesia include:
- E-Faktur and E-Bupot: Mandatory digital systems for VAT and withholding receipts
- OECD-Compliant Transfer Pricing: Indonesia has expanded its CbC reporting and documentation requirements
- Carbon Tax: Introduced but implementation remains in early phases
- Digital Services Tax (DST): Introduced under the umbrella of VAT for non-resident digital service providers
- Global Minimum Tax Implementation: Indonesia supports OECD’s Pillar Two initiative, with planned enforcement for large MNEs
Keeping track of these reforms is critical for long-term compliance and strategic planning.
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FAQs
Do all companies in Indonesia pay corporate tax?
Yes, except for micro businesses eligible for final tax regimes or tax-exempt sectors like religious institutions.
Are dividends subject to tax?
Yes, but domestic dividends are exempt if reinvested. Foreign dividends are taxable unless from countries with exchange-of-info treaties.
How does Indonesia tax foreign companies?
Through PE rules, withholding taxes, and branch profit remittance taxes.
What is the tax rate for Free Zones?
Indonesia does not operate “free zones” like the UAE but offers SEZs with tax reliefs.
Can tax be filed in English?
Records must be kept in Bahasa Indonesia, but some filing interfaces may provide partial English support.
