Indonesia

Value-added tax (VAT)

The VAT rate is currently 12%. However, the government has decided to implement the 12% rate by using Other Value as Tax Base (Dasar Pengenaan Pajak/”DPP Nilai Lain”) of 11/12, resulting in an “effective” VAT rate of 11% for most taxable goods and services. Effective VAT rate of 12% is only applicable to certain luxurious goods. This may be increased or decreased to 15% or 5% by issuing a GR after consultation with the Parliament. VAT on export of goods is zero-rated, whilst the import of goods is subject to applicable VAT rate for the relevant goods. Zero-rated VAT is also applicable on exported services, but subject to a Ministry of Finance (MoF) limitation. The range of services subject to 0% VAT has been expanded as of 1 April 2019 as follows:

• Services connected to movable goods utilised outside of the Customs Area that comprise:
  • toll manufacturing services
  • repair and maintenance services, and
  • freight forwarding services on export-oriented goods.
• Services connected to immovable goods located outside of the Customs Area in the form of consultation services for construction.
• Other services where the output is utilised outside of the Customs Area and utilisation is based on a request from an overseas recipient. These services comprise:
  • information and technology services
  • inter-connection, satellites, and/or data connectivity services
  • R&D services
  • the rental of aircraft and/or ships for international flight for shipping activities
  • trading services that assist in finding domestic sellers to procure goods for export purposes, and
  • certain consultation services, accounting services, financial audit services, and tax services, among others.

Inbound use or consumption of foreign services or intangible goods, with a few exceptions, is also subject to a self-assessed VAT at an applicable rate for the relevant goods/services.

The utilisation of foreign intangible goods and services provided via e-commerce system to users in Indonesia’s Customs Area will be imposed with an applicable VAT rate for the relevant goods/services.

The delivery of taxable goods on consignment as well as inbreng (i.e. transfer of taxable goods for the purpose of capital deposit in lieu of shares) become non-VATable goods.

In general, VAT collection is based on the accrual principle, whereby VAT must be collected at the time of delivery of taxable goods or services. The term delivery, in this case, is defined as the time when risk and ownership of goods have been transferred or when income from a service delivery can be reliably estimated or measured. In the accrual system, income or receivables are acknowledged when a transaction takes place, regardless of whether the transaction has been paid for or not. The recognition of revenue or receivables is indicated by the issue of a commercial invoice, which is a source document for this recognition and a basis for recording it.

VAT filing is done on a monthly basis, with payment and filing being due no later than the last day of the month following the taxable delivery.

Luxury-goods sales tax (LST)

In addition to VAT, some goods (e.g. motor vehicles, luxury residences) are subject to LST upon import or delivery by the manufacturer to another party at rates currently ranging from 10% to 95%.

Import duty

Import duty is payable at rates from 0% to 150% on the customs value of imported goods. Customs value is calculated on the cost, insurance, and freight (CIF) level.

*The 0% import duty rate applies until 31 December 2025

As a commitment to liberalising trade, the Indonesian government is progressively lowering import duty rates on most products. Higher duty rates remain to protect certain industries and goods regarded as sensitive for security or social and cultural reasons.

Duty relief/exemption/deferral

The Indonesian government offers duty relief, duty exemption, and duty deferral concessions to foreign and domestic investors in order to promote the development of local and export industries. These concessions usually combine with other tax facilities, such as VAT and income tax. Such concessions include the Badan Koordinasi Penanaman Modal (BKPM) Masterlist, Bonded Zone, Bonded Warehouse, import duty exemption and drawback for exports, Free Trade Zone (FTZ), Free Trade Area (FTA) agreement duty rates with several countries, Economic Partnership Agreement with several countries, MITA (main partners) lanes, and Authorised Economic Operator. Certain entities that import goods related to research and development (R&D) activities can also be granted with import duty and/or excise exemptions.

Land and buildings tax

Land and buildings tax (Pajak Bumi dan Bangunan or PBB) is a part of regional taxes, which are governed under Financial Relationship between the Central Government and the Regional Government (Hubungan Keuangan antara Pemerintah Pusat dan Pemerintahan Daerah or HKPD) Law in which each regional government has to issue a regulation (Peraturan Daerah or PERDA) to regulate PBB in its territory.

The scope of PBB under HKPD Law covers all land and buildings except for the following industries, which are governed by separate regulations:

• Forestry.
• Plantation.
• Mining.
• Other industries located in national waters outside the territory of the regional area.

Under HKPD Law, the PBB rate is maximum 0.5% and the tax due is calculated by applying the tax rate on the sale value of the tax object (Nilai Jual Objek Pajak or NJOP) (ranging from 20% to 100%) deducted by non-taxable NJOP. The non-taxable NJOP is set at a minimum of IDR 10 million. Any changes are to be made by issuing a PERDA.

Tax on land and buildings transfer

A transfer of land and buildings will cause income tax on the deemed gain on the transfer/sale to be charged to the transferor/seller. The tax is set at 2.5% of the gross transfer value or the government-determined value, whichever is greater (see Final income tax in the Taxes on corporate income section).

Duty on the acquisition of land and building rights

In a land and building transfer, the acquirer is liable for duty on the acquisition of land and building rights (Bea Pengalihan Hak atas Tanah dan Bangunan or BPHTB) at a maximum of 5% of the greater of the transaction value or the government-determined value. Similar to PBB, BPHTB has been made a part of regional taxes.

Stamp duty

Stamp duty is nominal and payable as a fixed amount of either IDR 10,000 on certain documents.

Carbon taxes

Carbon Tax is imposed on carbon emissions which have a negative impact on the environment. Carbon Tax can be imposed to individual or body, which:

1. carries out activities that emit a certain level of carbon; and/or
2. purchases carbon content goods.

Carbon Emission

Emitting certain level of carbon emission is subject to Carbon Tax at the rate of currently at the least of:

1. carbon credit price in the domestic carbon market per kg CO2e; or
2. IDR 30/kg CO2e.

This Carbon Tax is calculated through the mechanism of “cap and trade” of emission. Besides Carbon Tax deduction via emission trading, other mechanism (unknown at this stage) under the environment regulations is also allowed.

The first (and only) industry adopting the “cap and trade” mechanism and consequently is subject to Carbon Tax is Coal-Fired Power Plant. The Carbon Tax can be expanded to other industry subject to readiness of respective industry and possibly other factors.

Carbon emitter is required to record the carbon emission activities, self-remit and report the Carbon Tax on annual basis.

Purchase of Carbon Content Goods

Purchase of carbon content goods (not yet implemented at this stage) could also be subject to Carbon Tax upon the purchase. This Carbon Tax is to be collected by the seller (appointed as Carbon Tax collector). The Carbon Tax collector is required to record the relevant sales, pay and report the Carbon Tax on monthly basis.

Payroll taxes

There are no additional payroll taxes applicable other than those for social security contributions (see below) and employee income tax withheld by employer on the salary payment.

Social security contributions

Employers are responsible for ensuring that their employees are covered by the workers social security program managed by Badan Penyelenggara Jaminan Sosial (BPJS), which provides working accidents protection, death insurance, old age savings, health care, unemployment insurance, and pension. The program calls for premium contributions from both the employers and the employees. Employees’ contributions are collected through payroll deductions. The premium contributions borne by employers are calculated as a percentage of regular salaries/wages, ranging from 0.24% to 4%. The scheme applies to all employees, including expatriates who have been working in Indonesia for at least six months.

Public housing savings

The purpose of public housing savings (Tabungan Perumahan Rakyat) is to collect and provide long-term sustainable low-cost funds for housing finance in order to meet the needs of decent and affordable housing for participants. Deposits contributions are paid by employees and employers based on a certain percentage of wages (i.e. 0.5% for employer and 2.5% for employee or 3% for independent workers).

The scheme applies to employees and independent workers who work and receive wages or rewards of at least a minimum wage amount and are at least 20 years old or have been married at the time of registering, including both Indonesian citizens and expatriates who hold working visas and have been working for a minimum of six months in Indonesia.

Sanctions apply for non-compliant employers and independent workers who do not follow the government provisions.

Regional taxes

A corporate taxpayer may be liable for a number of regional taxes and retributions. The rates range from maximum 0.2% to 75% of a wide number of reference values determined by the relevant regional governments. The following are regional taxes, other than PBB and BPHTB, that may apply:

• Motor vehicle tax.
• Motor vehicle ownership transfer fee.
• Motor vehicle fuel tax.
• Heavy equipment tax. 
• Surface water tax.
• Cigarette tax.
• Advertisement tax.
• Non-metal and rock minerals tax.
• Ground water tax.
• Swallow-nest tax.
• Certain goods and services tax.