Indonesia: Living There - Tax Issues

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INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. An individual is a resident if he stayed in Indonesia for 183 days in any 12-month period or if resident in Indonesia with the intention of staying in the country. Married couples are taxed jointly.

INCOME TAX

Residents are assessed on the total income derived from all sources less allowable deductions for each source. The net taxable income is then subject to the following tax rates:

Residents are entitled to the following personal allowances:

• IDR2,880,000 (US$308) personal allowance
• IDR1,440,000 (US$154) spouse allowance
• IDR1,440,000 (US$154) allowance for each dependent, maximum of three dependents
• 5% of gross income or a maximum of IDR1,296,000 (US$139) for earned income
• Contribution to approved pension funds
• Contribution to JAMSOTEK for old age savings

Rental Income

The rental income of residents is taxed at an effective withholding tax rate of 12% of gross income. All expenses related to property rental are deductible.

CAPITAL GAINS TAX

Transfers of Indonesian properties are subject to tax. Income from the transfer of lands and buildings is subject to final withholding tax rate of 5% of the selling price. The final withholding tax rate for the transfer of houses and apartments is 2% of the selling price.

Gains from the sale or transfer of property, land and buildings owned by resident individuals before 01 January 1984 and not used in the operation of a business are taxed at the effective average income tax rate if sold on or after 01 January 1984.

VALUE ADDED TAX (VAT)

10% Value-added tax (VAT) is levied on gross rental income.

CORPORATE TAXATION

Resident companies pay tax on worldwide income and are allowed for deductions. An entity is considered a resident company if set up or domiciled in Indonesia, or a permanent establishment of an entity not set up or domiciled in Indonesia but regularly used to carry on business in Indonesia.

Capital gains earned by resident companies are taxed at the standard income tax rates for companies. Capital losses are deductible.

Rental Income

The rental income of resident companies is taxed at an effective withholding tax rate of 6% of gross income.

PROPERTY TAX

Property tax is levied at 0.5% on the assessed value of the property. The assessment value of taxable property is determined as a percentage of the deemed fair market value of the property, as follows:

• 40% for forestry and plantation land
• 20% for mining land
• 40% for any other type of land where the sale value of the land is more than IDR1 billion (US$106,893)
• 20% for any other type of land where the sale value of the land is less than IDR1 billion (US$106,893)

Indonesia - more data and information

• Lawyers (attorneys) with property law practices in Indonesia

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