Employment income includes salaries, overtime, bonuses, and any type of allowance (e.g. housing, leave allowance). Benefits in kind are generally not assessable in the hands of employees where the cost is borne by a local Indonesian entity. This also applies to benefits in kind that are required for the execution of a job (e.g. protective clothing, uniforms, transportation costs to and from the place of work, accommodation for ship crews and the like) and the cost of providing benefits in kind remote areas. However, benefits in kind are assessable in the hands of employees if they are provided by certain employers, such as:
- Mining companies and production sharing contractors that are subject to tax under the old tax laws (i.e. pre-1984 income tax laws).
- Representative offices of offshore companies that do not constitute taxpayers.
- Final-taxed companies.
- Deemed-profit companies.
The value of shares given to a director or employee or obtained under a share option scheme as a reward for services may be taxable as regular individual income.
There are cases where equity compensations are treated as a benefit in kind. In this case, the value is generally considered as non-taxable income for the individual and non-deductible expense for the company/employer.
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 expenditure 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.
Individual taxpayers conducting business activities or independent work whose gross annual turnover is less than IDR 4.8 billion may calculate their net income using a deemed profit based on a calculation norm of net income provided that they notify the Director General Tax (DGT) within three months of the fiscal year concerned. The calculation norm is determined by the DGT based on type and location of the business.
Certain individuals with business turnover of not more than IDR 4.8 billion are subject to final tax at 0.5% of turnover.
Under the Omnibus Law, income received by an Indonesian taxpayer from a permanent establishment (PE) abroad and other active business income from abroad (not from a PE or foreign subsidiary) is not taxable in Indonesia if being invested in Indonesia within a certain period.
Capital gains are generally assessable at ordinary tax rates together with other income of the individual. The exceptions are sale of land and buildings and exchange-traded shares (i.e. listed on the Indonesian stock exchange), given that these are subject to final tax at the point of sale (see Property taxes and Sale of shares taxes in the Other taxes section).
Dividends received from an Indonesian limited liability company are subject to final income tax at a rate of 10%. However, it becomes non-taxable if the recipient is a domestic individual taxpayer whose dividends are reinvested in Indonesia within a certain period.
Interest income on time deposits and savings with Indonesian banks or their overseas branches, as well as interest income on time deposits placed through Indonesian branches of foreign banks (in any currency), are currently subject to final income tax at rate of 20%. Interest on bonds is subject to final income tax at 15%, the tax collected through withholding by the payer.
Other investment income
Other types of investment income are generally assessable at ordinary tax rates.
Income from rentals of land and/or building is subject to 10% final tax. Income from rentals of assets other than land and buildings is subject to 2% WHT, which is considered as prepaid for the tax assessed on the total income of the individual.
Certain items are exempt from individual income tax, including property acquired by gift, gains from mutual funds, and profit distribution received by a member of partnership (the net income is already taxed at the entity level).