Personal Income Tax
If a person fulfills any of the following requirements, he or she is considered a Taxpayer in Indonesia (unless the tax treaty overrides this rule):
the individual resides in Indonesia;
the individual has been in Indonesia for more than 183 days in a 12 month period;
the individual is in Indonesia during the fiscal year plus intends to reside in Indonesia.
The non-resident individuals are subject to a 20 percent withholding tax on income sourced from Indonesia.
Corporate Income Tax
Company is subjected to tax obligations determined by the Indonesian government if the company is domiciled in Indonesia. Likewise, foreign company that has a (permanent) establishment in Indonesia – plus carries out business activities through this local entity – are also subjected to the Indonesian tax regulations. If the foreign company does not have a permanent establishment in Indonesia but generates income through business activities in Indonesia, it must settle its tax obligations through withholding taxes by the Indonesian party who pays the income.
In general, the corporate income tax rate of 25 percent applies in Indonesia.
Overview of Withholding Tax in Indonesia
One of the tax collection systems implemented in Indonesia is the Withholding Tax System (withholding / collection of taxes). In this system, a third party is entrusted with carrying out the obligation to withhold or collect taxes on income paid to the recipient of the income, at the same time depositing it into the state treasury. At the end of the tax year, the tax withheld or collected plus has been deposited into the state treasury will be deducted from the tax or tax credit for the party withheld by attaching proof of withholding or collection.
The Withholding Tax System in Indonesia is applied to the mechanism of withholding/collecting Income Tax (PPh). The term withholding is intended to indicate the amount of tax withheld by the income provider on the amount of income given to the income recipient, resulting in a reduction in the income he or she receives (i.e. Ph. Article 21 plus Income Tax Article 23). Whereas what is meant by collection is the amount of tax collected on a payment amount that has the potential to generate income for the payee