Tax laws Indonesia
Indonesia's tax system encompasses various taxes, including income tax, value-added tax (VAT), and property tax, among others. Here's an overview of the key components:
Personal Income Tax:
Indonesia employs a progressive income tax system for individuals, with rates as follows:
- Up to Rp54,000,000: 0% (tax-free threshold)
- Rp54,000,001 – Rp60,000,000: 5%
- Rp60,000,001 – Rp250,000,000: 15%
- Rp250,000,001 – Rp500,000,000: 25%
- Rp500,000,001 – Rp5,000,000,000: 30%
- Above Rp5,000,000,000: 35%
These rates are applied progressively based on annual income levels.
Corporate Income Tax:
The standard corporate income tax rate in Indonesia is 25%. However, companies that publicly list at least 40% of their shares on the Indonesia Stock Exchange may qualify for a reduced rate of 20%. Additionally, small enterprises with gross turnovers below Rp50 billion are eligible for a 50% discount on the standard rate, effectively paying 12.5%. Micro-enterprises with gross turnovers under Rp4.8 billion are subject to a final tax of 0.5% of total revenue, payable monthly.
Value-Added Tax (VAT):
As of January 1, 2025, Indonesia increased its VAT rate from 11% to 12%, applicable to luxury goods. The VAT rate for other goods and services remains at 11%, while staple items continue to be exempt. This selective hike aims to strengthen the national budget without significantly impacting the purchasing power of the general populace.
Property Tax:
Property taxes in Indonesia are imposed on a progressive scale:
- Properties valued up to Rp200,000,000: 0.01%
- Rp200,000,001 – Rp2,000,000,000: 0.10%
- Rp2,000,000,001 – Rp10,000,000,000: 0.20%
- Above Rp10,000,000,000: 0.30%
Non-profit activities, social and educational services, and healthcare services may qualify for a 50% reduction in property tax.
Digital Goods and Services Tax:
Since July 2020, Indonesia imposes a 10% VAT on intangible foreign goods and services transacted through electronic systems. This includes digital products like software and multimedia, as well as services such as web hosting and video conferencing. Foreign suppliers engaged in e-commerce activities are designated as VAT collectors by the Ministry of Finance and are required to report and remit the VAT collected quarterly.
Global Minimum Tax:
Effective January 1, 2025, Indonesia implemented a 15% global minimum corporate tax, aligning with an international agreement led by the OECD. This tax applies to multinational companies with annual global revenues exceeding €750 million, aiming to prevent tax avoidance and promote a fairer global tax system.
These components reflect Indonesia's ongoing efforts to adapt its tax policies to both domestic needs and global economic trends.
Recent Developments in Indonesia's Tax Policies.
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