Indonesia

Corporate - Withholding taxes

Last reviewed - 20 December 2019

Indonesian income tax is collected mainly through a system of WHTs. Where a particular income item is subject to WHT, the payer is generally held responsible for withholding or collecting the tax. These WHTs are commonly referred to using the relevant article of the Income Tax (Pajak Penghasilan or PPh) Law, as follows.

Article 23/26 Income Tax (PPh 23/26)

PPh 23/26 is levied on a variety of payments to corporations and individuals, resident and non-resident, at the following rates:

Recipient WHT (%)
Dividends Interest Royalties Branch profits (8)
Portfolio Substantial holdings
Resident corporations 15 0 15 15 N/A
Resident individuals 10 10 15 15 N/A
           
Non-resident corporations and individuals          
Non-treaty 20 20 20 20 0/20
Treaty:          
Algeria 15 15 0/15 (6a) 15 10
Armenia 15 10 0/10 (6a) 10 10
Australia 15 15 0/10 (6a) 10/15 (7b, 7c) 15
Austria 15 10 0/10 (6a) 10 12
Bangladesh 15 10 0/10 (6a) 10 10
Belarus 10 10 0/10 (6a) 10 10
Belgium 15 10 0/10 (6a) 10 10
Brunei 15 15 0/15 (6a) 15 10
Bulgaria 15 15 0/10 (6a) 10 15
Cambodia (9) 10 10 0/10 (6a, 6b) 10 10
Canada 15 10 0/10 (6a, 6b) 10 15
China (2) 10 10 0/10 (6a) 10 10
Croatia 10 10 0/10 (6a) 10 10
Czech Republic 15 10 0/12.5 (6a) 12.5 12.5
Denmark 20 10 0/10 (6a) 15 15
Egypt 15 15 0/15 (6a) 15 15
Finland 15 10 0/10 (6a) 10/15 (7d) 15
France 15 10 0/10/15 (6a, 6b) 10 10
Germany (1) 15 10 0/10 (6a) 10/15 (7b, 7c) 10
Hong Kong 10 5 0/10 (6a) 5 5
Hungary (3) 15 15 0/15 (6a) 15 20
India (1) 10 10 0/10 (6a) 10 15
Iran 7 7 0/10 (6a) 12 7
Italy 15 10 0/10 (6a, 6b) 10/15 (7b, 7c) 12
Japan 15 10 0/10 (6a) 10 10
Jordan (3) 10 10 0/10 (6a) 10 20
Korea (North) 10 10 0/10 (6a) 10 10
Korea (South) (2) 15 10 0/10 (6a) 15 10
Kuwait 10 10 0/5 (6a) 20 0/10
Laos 15 10 0/10 (6a) 10 10
Luxembourg (1) 15 10 0/10 (6a) 12.5 10
Malaysia (4, 5) 10 10 0/10 (6a, 6b) 10 12.5
Mexico (5) 10 10 0/10 (6a, 6b) 10 10
Mongolia 10 10 0/10 (6a) 10 10
Morocco 10 10 0/10 (6a) 10 10
Netherlands 10/15 5 0/5/10 (6a, 6b) 10 10
New Zealand (3) 15 15 0/10 (6a) 15 20
Norway 15 15 0/10 (6a, 6b) 10/15 (7a, 7b, 7c) 15
Pakistan (1) 15 10 0/15 (6a) 15 10
Papua New Guinea (1) 15 15 0/10 (6a) 10 15
Philippines 20 15 0/10/15 (6a, 6b) 15 20
Poland 15 10 0/10 (6a) 15 10
Portugal 10 10 0/10 (6a) 10 10
Qatar 10 10 0/10 (6a) 5 10
Romania 15 12.5 0/12.5 (6a, 6b) 12.5/15 (7a, 7b, 7c, 7d) 12.5
Russia 15 15 0/15 (6a) 15 12.5
Serbia 15 15 0/10 (6a) 15 15
Seychelles (3) 10 10 0/10 (6a) 10 20
Singapore 15 10 0/10 (6a) 15 15
Slovakia 10 10 0/10 (6a) 10/15 (7d) 10
South Africa (3) 15 10 0/10 (6a) 10 20
Spain 15 10 0/10 (6a) 10 10
Sri Lanka 15 15 0/15 (6a) 15 20
Sudan 10 10 0/15 (6a) 10 10
Suriname 15 15 0/15 (6a) 15 15
Sweden 15 10 0/10 (6a) 10/15 (7b, 7c) 15
Switzerland (1) 15 10 0/10 (6a) 10 10
Syria 10 10 0/10 (6a) 15/20 (7d) 10
Taiwan 10 10 0/10 (6a) 10 5
Tajikistan (9) 10 10 0/10 (6a, 6b) 10 10
Thailand 20 15 0/15 (6a) 15 20
Tunisia 12 12 0/12 (6a) 15 12
Turkey 15 10 0/10 (6a) 10 10
Ukraine 15 10 0/10 (6a, 6b) 10 10
United Arab Emirates 10 10 0/5 (6a, 6b) 5 5
United Kingdom 15 10 0/10 (6a, 6b) 10/15 (7b) 10
United States of America 15 10 0/10 (6a) 10 10
Uzbekistan 10 10 0/10 (6a) 10 10
Venezuela (1) 15 10 0/10 (6a, 6b) 20 10
Vietnam 15 15 0/15 (6a) 15 10
Zimbabwe (1, 5) 20 10 0/10 (6a) 15 10

Domestic Article 23 WHT is also payable at the rate of 2% for most types of services where the recipient of the payment is an Indonesian resident.

Notes

  1. Service fees, including for technical, management, and consulting services, rendered in Indonesia are subject to WHT at rates of 5% for Switzerland; 7.5% for Germany; 10% for India, Luxembourg, Papua New Guinea, Venezuela, and Zimbabwe; and 15% for Pakistan.
  2. VAT is reciprocally exempted from the income earned on the operation of ships or aircraft in international lanes.
  3. The treaty is silent concerning BPT rate. The ITO interprets this to mean that the tax rate under Indonesian Tax Law (20%) should apply.
  4. Labuan offshore companies (under the Labuan Offshore Business Activity Tax Act 1990) are not entitled to the tax treaty benefits.
  5. A protocol amending the tax treaty has been signed, pending the ratification of the protocol and the exchange of ratification documents.
  6. Interest:
    1. Exempt if paid to the government.
    2. Exempt if paid to a bank but linked to a government loan agreement or paid to specific financial institutions/banks.
  7. Royalties:
    1. The use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark, or other like property or right.
    2. The use of, or the right to use, any industrial, commercial, or scientific equipment.
    3. The supply of scientific, technical, industrial, or commercial knowledge or information.
    4. The use of, or the right to use, any copyright of literary, artistic, or scientific work, including cinematography films and films or tapes for television or radio broadcasting.
  8. PEs that reinvest their after-tax profits in Indonesia within the same year or no later than the following year are exempt from BPT on these profits (see the Tax credits and incentives section).
  9. Ratified but not yet effective, pending the exchange of ratification documents. 

The issue of beneficial ownership has come under tax office scrutiny. For treaty WHT rates to apply to passive income such as interests, dividends, and royalties, the recipient of such income must be the beneficial owner. The recipient must also provide a Certificate of Domicile (CoD) in the form required by the ITO and certified by their home country tax authority that the recipient is a tax resident of that country. The CoD in the form prepared by the other country’s tax authority may only be used in limited circumstances. Further, the CoD form also requires a number of declarations to be made by the recipient that acknowledges that the use of the treaty jurisdiction was not merely for obtaining the benefit of the treaty. These declarations place onerous obligations on both the Indonesian payer and the recipient entity. Without a certified CoD, a WHT at a rate of 20% will apply. These aspects need to be considered when paying income of this nature.

Article 22 Income Tax (PPh 22)

PPh 22 is typically applicable to the following:

Event Tax rate (%) Tax base
1 The import of:   Import value (i.e. CIF value plus duties payable) 
a. Certain end customer goods 10
b. End customer goods other than (a) 7.5
c. Goods other than (a) and (b) using an Importer Identification Number (Angka Pengenal Impor or API):  
i. Soybeans, wheat, and flour wheat 0.5
ii. Other than (i) 2.5
d. Goods other than (a) and (b) without an API 7.5
2 The auctioned imported goods 7.5 Auction prices
3 The sale of goods to the government requiring payment from the State Treasury and Proxy of Budget User (Kuasa Pengguna Anggaran or KPA) (1) 1.5 Selling prices
4 The sale of goods to State-Owned Enterprises (Badan Usaha Milik Negara or BUMN) and some of their subsidiaries (1, 3) 1.5 Selling prices
5 The purchase of oil fuel by gas stations from Pertamina and its subsidiaries (2) 0.25 Selling prices
6 The purchase of oil fuel by gas stations from parties other than Pertamina and its subsidiaries (2) 0.3 Selling prices
7 The purchase of oil fuel by parties other than gas stations (2) 0.3 Selling prices
8 The purchase of gas fuel (2) 0.3 Selling prices
9 The purchase of lubricants 0.3 Selling prices
10 The purchase of cement by local distributors 0.25 Selling prices
11 The purchase of paper products by local distributors 0.1 Selling prices
12 The purchase of steel products by local distributors 0.3 Selling prices
13 The purchase of automotive products by local distributors 0.45 Selling prices
14 The purchase of pharmaceutical products by local distributors 0.3 Selling prices
15 The purchase of motor vehicles from Sole Agents (Agen Tunggal Pemegang Merek or ATPM), Agents (Agen Pemegang Merek or APM), and general importers (4) 0.45 Selling prices
16 The sale of forestry, plantation, agriculture, cattle breeding, and fishery products to manufacturers or exporters (1) 0.25 Selling prices
17 The export of coal, metal, and non-metal minerals by exporters other than those engaged in a mining cooperation agreement or a contract of work with the government 1.5 Export value
18 The sale of coal, metal, and non-metal minerals by companies or individuals holding a mining license (Izin Usaha Pertambangan or IUP) (1) 1.5 Selling prices
19 The purchase of gold bars (5) 0.45 Selling prices
20 The purchase of very luxurious goods 5 Selling prices

Notes

  1. In events (3), (4), (16), and (18), the PPh 22 collectors must withhold PPh 22 from the amount payable to a particular vendor, except payments for the purchase/use of:
    • oil fuel, gas fuel, lubricants, postal products
    • water and electricity
    • oil or gas (including upstream by products) from a contractor of a PSC, the contractor’s head office, or the contractor’s trading arms, and
    • geothermal or electricity from a contractor of a Joint Operation Contract.

    There is also an exemption for the purchase of goods with a value of up to IDR 2 million, IDR 10 million, and IDR 20 million for events (3), (4), and (16) respectively. In the other events, the importer or the buyer of the designated goods must pay PPh 22 in addition to the amounts payable for the goods imported or purchased.
  2. The withheld PPh 22 constitutes a pre-payment of corporate/individual income tax liabilities, except for the purchase of oil and gas fuel by distributors/agents, which is categorised as final tax.
  3. Exception applies on the sale of forestry, plantation, agriculture, cattle breeding, and fishery products since it is already subject to PPh 22 in event (16).
  4. Exception applies on the purchase of very luxurious motor vehicles since it is already subject to PPh 22 in event (20).
  5. Exemption applies on the sale to Bank Indonesia.

The tax does not apply, either automatically or with an Exemption Certificate issued by the DGT, on the following types of events:

  • Import/purchase of goods not subject to income tax.
  • Import of goods exempted from import duties and/or VAT, subject to 0% import duty, or where VAT is not collected.
  • Goods that have been temporarily imported (i.e. goods for re-export).
  • Goods for re-importing (i.e. exported and re-imported in the same quality or to be repaired/tested).
  • Import of gold bars for the production of jewellery for re-export.
  • Purchase of goods related to the use of government school operations subsidy (Bantuan Operasional Sekolah or BOS) fund.
  • The purchase of grain or rice by the State Treasury, KPA, and the Bureau of Logistics (Badan Urusan Logistik or BULOG).
  • The purchase of necessary food products by BULOG or appointed BUMN.

Taxpayers without a Tax Identification Number will be subject to a surcharge of 100% in addition to the standard tax rate.