Expatriate tax - Indonesia

Non-residents do not have to register for taxpayer-identification numbers (Tax ID) if the expatriate's presence in Indonesia does not exceed 183 days within 12 months. However, if the expatriate's presence in Indonesia exceeds 183 days within 12 months, according to Indonesia Income Tax Law, the expatriate shall be considered a resident taxpayer and shall be obligated to apply for a Tax ID. Therefore, the resident taxpayer has to calculate and settle the tax underpayment (if any) then submit the AIITR.

Generally, every expatriate who plans to work in Indonesia must have:

1. Work visa
2. KITAS (Kartu Izin Tinggal Terbatas or Temporary Stay Permit)
3. IMTA (Izin Mempekerjakan Tenaga Kerja Asing (IMTA) or Work Permit for foreigner) – to get Work Permit for foreigner, companies that have foreign workers must apply for a Rencana Penggunaan Tenaga Kerja Asing (RPTKA) or Foreign Employment Plan first and pay Dana Kompensasi Penggunaan Tenaga Kerja Asing (DKPTKA) or the Compensation Fund for Hiring of Foreign Worker
4. Other residence permits – such as Residence/Domicile Permit (Surat Keterangan Tempat Tinggal/SKTT), Indonesia Police Report Letter (Surat Tanda Melapor/ STM), Existence Report (Laporan Keberadaan).

For further information on visas for expatriates to work in Indonesia can be found on the Directorate General of Immigration’s official website, under the Immigration Information tab: https://www.imigrasi.go.id/en/

The Indonesia fiscal year runs from 1 January to 31 December.

Based on the newly issued Minister of Finance Regulation No. 122/PMK.03/2022 (MoF-122/2022), the Tax Authority has updated the tax-ID for Taxpayers in Indonesia since 14 July 2022 to reach the single identification program. Please note that previously, the number of Tax-ID in Indonesia comprises of 15 digits which shall be 16 digits with the following conditions as follows:

• Resident Taxpayer Individual
  Resident Taxpayer Individual shall use the Citizen Identification Number (Nomor Induk Kependudukan or NIK) as his/her Tax-ID, who has Tax-ID previously, the Resident Taxpayer Individual need to activate his/her Tax-ID number using NIK. For the Resident Taxpayer Individuals who apply for the Tax-ID after the issuance of MoF-122/2022, the Tax Authority will activate the NIK as Tax-ID and give the Tax-ID number using 15 digits.
  
  
• Non-Resident Taxpayer
  Non-resident Taxpayer who has Tax-ID before the MoF-122/2022 was issued and previously has Tax-ID with 15 digits, their Tax-ID shall be 16 digits with added zero on the beginning of Tax-ID Number. For the Non-Resident Taxpayer who apply the Tax-ID after the issuance of MoF-122/2022, then Tax Authority will provide the Tax-ID using 16 digits.

Please note that not all taxation administration service provided by the Tax Authority has accommodated the Tax-ID using 16 digits until 31 December 2023. Therefore, currently until 31 December 2023, the resident taxpayer can still use the Tax-ID using 15 digits.However, starting from 1 January 2024, the Taxpayer has to use Tax-ID with 16 digits since all taxation administration service has accommodated the Tax-ID which comprises 16 digits.

According to the prevailing tax regulations, income tax payments are based on a self-assessment system, which means resident taxpayers are responsible for calculating tax payable and report through the AIITR to the Tax Office.

The filing date and the settlement date for the tax underpayment (if any) for the AIITR shall be 31 March after the year-end. However, the filing deadline can be extended to two months if the resident taxpayer applies for a filing extension.

Please note that if the individual resident taxpayer is late in submitting their AIITR, there shall be a tax sanction of late submission amounting to IDR 100,000. In addition, if the AIITR is showing tax underpayment and if the individual resident taxpayer is late to settle the tax underpayment, thus the administrative sanctions shall apply on this late payment of tax.

The administrative sanction above shall be in the form of monthly interest rates stipulated by the Minister of Finance per month, starting from the tax payable up to the settlement date for a maximum of 24 months, and part of the month is counted as one month.

Based on the Income Tax Law, resident taxpayer individuals are taxed at progressive rates according to total taxable income with the updated progressive tax rate has been in force starting from FY 2022 as follows:

While non-resident taxpayer individual shall be subject to income tax article 26 at 20% of the gross amount or non-taxable based on tax treaty Indonesia and other tax treaty partner using valid and complete DGT Form and/or Certificate of Residence (CoR).

Additionally, non-residents are only liable to pay personal income tax (PIT) for Indonesian-owned income, unlike their tax resident counterparts who are taxed on the income they earn in Indonesia and abroad; unless there is a Double Taxation Avoidance Agreement between the individual’s country of residence and the Indonesian government.

Based on the Indonesian tax regulation, an individual who is a tax resident subject shall be any individual, whether he/she is an Indonesian citizen or non-Indonesian citizen who:

1. Resides or lives in Indonesia
2. Has been present in Indonesia for more than 183 (one hundred and eighty-three) days within any 12 (twelve) months period; or
3. An individual who has been residing in Indonesia within
   a particular taxable year and intends to reside in Indonesia.

Included in the term 'individual residing in Indonesia' shall be anyone who intends to reside in Indonesia. Whether a person has an intention to reside in Indonesia can be deemed according to certain conditions (eg, has a Permanent Stay Permit Card (KITAP), has a Temporary Stay Permit (ITAS) with a validity period of more than 183 days, has employment contract for more than 183 days, rent of house or apartment for more than 183 days).

An expatriate working in Indonesia has the option to apply for a territorial income basis with several requirements. For example, the expatriate must have particular expertise. In addition, it is only valid within 4 (Four) fiscal years from obtaining a Tax ID, does not apply to expatriates who utilize Tax Treaty, and the expatriate has to apply and provide the supporting documents to the Tax Office to receive this benefit.

The expatriate shall apply to the Tax Office where the expatriate is registered by filling the territorial basis application form and attach the supporting documents as follows:

1. One set of a copy of the plan for the utilization of foreign workers (RPTKA), which has been ratified by the minister whose field of duty is in charge of government affairs in the field of manpower or a research permit issued by the minister in charge of government affairs in the field of research, which contains information about the applicant
2. a copy of Tax ID of the applicant
3. a copy of valid passport
4. a copy of visa and Temporary Stay/Resident Permit Card (KITAS)
5. Certificate of expertise, education diploma, and/or a statement letter with proof of at least 5 (five) years of work experience.

The application mentioned above, including its supporting documents, will be assessed, and the Tax Office will decide to either grant or decline the application.

Based on Indonesia Tax Law, which has been amended by UU HPP which came into effect in 1 January 2022, the tax treatment of the fringe benefit (i.e Benefit In Kind/BIK and/or enjoyment) for Withholding Tax (WHT) Article (Art.) 21.

The Summary of the update of the tax treatment for the fringe benefit for WHT Art. 21 are as follows:

1. Certain types of fringe benefits shall be subject to WHT Art. 21 while previously the fringe benefit as mentioned above is not subject to WHT Article 21.
2. Please note that the fringe benefit means under the above law are in the form of (1) kind or natura such as benefit in form of something other than cash and/or (2) enjoyment or kenikmatan in Indonesian language is the reward in the form of the right to utilize a facility and/or service.
3. Further, the UU HPP also stipulates that the following reimbursements or rewards in relation to work or services isreceived or obtained in the form of natura and/or kenikmatan, shall not be subject to WHT Art.21 for the employees:
   • food, food ingredients, beverage ingredients, and/or drinks for all employees;
   • natura and/or kenikmatan provided in certain areas;
   • natura and/or kenikmatan that must be provided by the employer due to work;
   • natura and/or kenikmatan sourced or financed by the Budget State Revenue and Expenditure, Regional Revenue and Expenditure Budget, and/or Village Revenue and Expenditure Budget; or
   • natura and/or kenikmatan with certain types and/or limitations.
4. As of now, the implementation tax regulation regarding fringe benefits has not been issued. If there is no contrary between the previous and amended law, then the prevailing implementation tax regulation should still be applied.

Indonesian tax residents can utilize foreign tax credit for any tax that has been paid outside of Indonesia, which is available up to a certain calculation based on the prevailing tax regulation with the basis of threshold shall not be exceeding from the tax payable amount in Indonesia, for Annual Individual Income Tax Return (AIITR) calculation purposes.

General tax deductions are available for a resident taxpayer in Indonesia in the form of personal tax reliefs (Penghasilan Tidak Kena Pajak/PTKP), depending on the marriage status and the number of dependents that taxpayers have. In addition, determine the amount of personal tax relief is based on the status of a resident taxpayer in the initial fiscal year are as follows:

In addition, for the employer to calculate Article 21 Income Tax, the employer shall deduct employee’s income with the personal tax relief above and occupation support with the following amount:

In Indonesia, if a resident taxpayer has a capital gain, which is derived from income subject to final tax (e.g., sale of shares listed on Indonesia Stock Exchange (IDX), sale of land/building, dividend), then it shall not be taxable on the AIITR but shall be declared on the AIITR attachment - III under the final tax income section.

Please note that the sales of non-founder’s shares listed on the IDX shall be subject to final income tax article 4(2) at 0.1% from the gross transaction amount. In comparison, the sales of founder’s shares shall be subject to final tax article 4(2) at 0.1% from the gross transaction amount and
additional income tax article 4(2) at 0.5% from the share price at the Initial Public Offering.

However, if there is a capital gain from the income which is not subject to final tax (eg, sale of stock that is not listed on IDX, sales of fixed assets except land and/or building), it shall be treated as taxable income to calculate the tax payable using the progressive tax rate on his/her AIITR.

Further, for the capital gain on the sales of non-listed shares, the capital gain comes from the discrepancy between sales of transactions and book value of non-listed shares, which shall be subject to progressive tax as stated in section 'Income tax rates' on the AIITR.

Any income received other than payroll and capital gain both sourced from outside and/or inside Indonesia shall be declared on the AIITR, which is taxable based on the prevailing tax regulation.

The employer is responsible for calculating any taxes that need to be withheld from employee salary, monthly payment of these taxes to the tax authorities, and annual numbers to the employee. The individual employee must then file a yearly income tax return at the latest end of March of the following year.

Currently, the individual taxpayer is legally responsible for ensuring that they have registered with the tax office and comply with the regulations and payment of the taxes due.

Employers have three choices for the personal income tax calculation:

1. Employees' salaries are classified as Gross, and tax is calculated on this, withheld from employees, and paid via the banking system to the tax office.
2. Employee's salaries are classified as Net and then grossed up to establish a gross amount from which the tax is calculated to bring the remainder back to the net amount as expressed in the employment letter.
3. The tax is calculated on the Net and treated as a fringe benefit.

Each employee will receive the tax slip form 1721-A1 from their employer, which summarizes the monthly taxes paid by the employer to authorities. Form 1721-A1 is needed to prepare the employee’s annual individual income tax return.

Indonesian tax resident companies and permanent establishments are required to withhold income tax (Article 21 Income Tax) from the salaries payable to their employees as individual resident taxpayers monthly basis and pay the tax to the State Treasury on their behalf and then report to the Tax Office.

Employment income in Indonesia is subject to tax, regardless of where the salary payment is paid. In addition to salary, taxable employment income includes bonuses, commissions, overseas allowances, fixed allowances for education, housing etc. In-kind benefits paid for by the employer, such as company-provided cars and housing, traveling accommodation from home country etc., are not, in most cases, taxable as income to the employee. However, it should be noted that payments of these benefits are not tax-deductible by the employer. The in-kind benefits could be subject to tax if certain categories of employers provide them.

There are 2 (two) social security programs in Indonesia, there are BPJS Ketenagakerjaan (BPJS Employment) and BPJS Kesehatan (BPJS Healthcare). The expatriate who works for at least 6 (six) months in Indonesia must participate in the BPJS programs. Following are the BPJS programs which mandatory to expatriates:

BPJS employment

BPJS Healthcare

Notes:
* BPJS Healthcare Scheme:

1. Cap on the regular salaries/wages is IDR 12,000,000 per month
2. The mandatory premium will cover husband, wife, and three children. An additional family member can be covered with an additional premium of 1% per person.

The employee stock option is based on the Directorate General of Taxation Circular Letter No.SE-13/PJ.43/1999 regarding the tax treatment for stock options. The stock option shall be defined as a promise or offer granted by a foreign company that has sold its shares on a foreign stock exchange country to employees or private individuals from a company in Indonesia which related parties of the foreign company. The employee has the right to buy shares at a certain price and within a certain period, which the offer will revoke after passing the specified period.

Therefore, if the employee takes the option to buy the stock option, the income received by the employee who obtains the stock option shall be a dividend and/or capital gain. The dividend and/or capital gain, which is received from the obtained stock, shall be treated as income from overseas (ie, non-final tax) and shall be calculated on the AIITR with progressive tax rates as stipulated on section 'Income tax rates' and settle if there is any tax underpayment. In addition, the tax paid in relation to the dividend and/or capital gain from obtaining stock overseas can be claimed as a tax credit through a certain calculation as stated in section 'Relief for foreign taxes'.

Please note that dividend received by the resident taxpayer from an entity (ie, PT Company) in Indonesia; thus, the dividend shall be subject to final income tax article 4(2) at 10% on the gross amount with or without Tax ID. In addition, the final income tax article 4(2) shall be declared on the AIITR attachment - III under the final income tax income section. However, if the dividend from outside and/or inside Indonesia is being re-invested in Indonesia, thus the said dividend shall be non-taxable.