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Business Taxation in Indonesia


Individuals or statutory bodies which meet relevant criteria stipulated, including certain tax collectors or withholders are obligated to pay tax.

Statutory bodies are defined by Indonesian Taxation Law as groups of persons and/or capital which constitutes a unit. These are more clearly defined as such entities undertaking or not undertaking businesses, covering limited liability companies, limited partnership companies, other companies, state or regional administration-owned companies in whatever names and forms, firms, joint companies, cooperatives, pension funds, partnerships, groups, foundations, mass organisations, social and political organisations or organisations of the same type, institutions, permanent establishments and other forms of statutory bodies.

Companies and entrepreneurs are defined in the context of Indonesian Taxation Law as those in their business activities or works/jobs produce goods, import goods, export goods, undertake trading businesses, utilise goods, provide or utilise services from regions outside the customs area.

Companies are subject to Value Added Tax, pursuant to Law of 1984 and all amendments, excluding the few small-scale businesses whose criteria are stipulated by the Minister of Finance.

The Indonesian tax period is defined as one calendar month or other periods stipulated by a decision of the Minister of Finance at the maximum of three calendar months (quarters). Tax year shall be the period of one calendar year unless taxpayers use accounting years different from the calendar year.

Indonesian taxpayers must submit a Tax Return form which details and reports the calculation of tax payment owed by them. Tax Returns may cover a tax period or a tax year.

Tax payments shall be letters used by taxpayers to pay or remit tax due to the state cash through post offices and/or state- or regional administration-owned banks or other payment point appointed by the Minister of Finance.

The penalties for tax evasion and avoidance are very strict in Indonesia. For Underpaid-Tax, Additional Underpaid-Tax, Overpaid-Tax and Nil-Tax Assessments- which may be received by the debtor in the form of letters, warrants and administrative sanctions. Tax credits for over-taxation or overpayment is withheld until the subsequent year- as payouts are not issued within the same financial year. Independent works/jobs shall be jobs executed by individuals having special expertise in a bid to earn income not bound by certain working relations.

Appeals against the Taxation Department may be arbitrated via the Court of Appeals at taxpayer expense.

Corporate Tax

Resident companies are subject to taxation on their worldwide income. Foreign direct investment companies must pay corporate income tax based upon Indonesian source revenues.

Corporation income tax is calculated on the basis of income less certain deductions. Any foreign tax paid by the company may be used to credit the amount of income tax to be paid to Indonesia. Non-resident companies are only liable for taxes withheld.

Tax losses may be carried forward for five years as an offset against profits in those years. Some types of industries are allowed to carry forward such losses as an offset to profits for up to eight years.

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