Resident corporations are taxed based on worldwide income. A foreign company carrying out business activities through a permanent establishment (PE) in Indonesia will generally be required to assume the same tax obligations as a resident taxpayer.
Taxable business profits are calculated on the basis of normal accounting principles as modified by certain tax adjustments. Generally, a deduction is allowed for all expenditures incurred to obtain, collect, and maintain taxable business profits. A timing difference may arise if an expenditure recorded as an expense for accounting cannot be immediately claimed as a deduction for tax (see the Deductions section).
Resident taxpayers and Indonesian PEs of foreign companies have to settle their tax liabilities either by direct payments, third party withholdings, or a combination of both. Foreign companies without a PE in Indonesia have to settle their tax liabilities for their Indonesian-sourced income through withholding of the tax by the Indonesian party paying the income.
Corporate income tax (CIT) rates
A flat CIT rate of 22% generally applies to net taxable income. However, certain tax objects or industries have special tax regimes.
Public company discount
Public companies that satisfy a minimum listing requirement of 40% and certain other conditions are entitled to a tax discount of 3% off the standard rate, providing an effective tax rate of 19%.
Small company discount
Small enterprises (i.e. corporate taxpayers with an annual turnover of not more than 50 billion rupiah [IDR]) are entitled to a 50% tax discount of the standard rate, which is imposed proportionally on taxable income on the part of gross turnover up to IDR 4.8 billion. Certain enterprises with gross turnover of not more than IDR 4.8 billion are subject to final income tax at 0.5% of turnover.
Special industries and activities
Certain contractually based concessions are available in Indonesia. These include Production Sharing Contracts (PSCs), Contract of Works (CoWs), and Mining Business Licences (Izin Usaha Pertambangan or IUP).
Companies engaged in upstream oil and gas typically have to calculate CIT in accordance with their PSCs. The PSCs can be 'conventional' with CIT effectively based on cost recovery principles or 'gross split', which more closely follow the general CIT rules.
Certain companies engaged in metal, mineral, and coal mining are governed by CoWs for the income tax calculation. Different provisions may apply to them, pertaining to CIT rates, deductible expenses, and how to calculate taxable income. Note that such contractual-based concessions are no longer available to new mining projects since the enactment of the Mining Law in 2009. The Mining Law stipulates that general prevailing tax laws/regulations apply to mining projects. Specific tax regulations, however, also exist for non-coal mining IUPs.
Certain industries (e.g. shipping, airlines) are subject to deemed profit margins for tax purposes.
Local income taxes
There are no provincial or local taxes on income in Indonesia. For a list of other local taxes, see Regional taxes in the Other taxes section.