When you decide to live in Indonesia, you must make sure to learn about the taxation system that comes with your residency. Along with the basics of Indonesian currency, it’s also important to recognize the importance of expat taxes that will become your responsibility.
Up to this point, you may have wondered, “how does expat tax work?”, and it may make you slightly worried. It may be complicated at first, but once you understand and manage it, you can settle in without any issues in the long-term.
Before getting to the part about tax residency, it’s necessary to get an overview of Indonesian tax regulations for expatriate workers. Without further ado, let’s get to the guide we have prepared for you right away!
Indonesian Tax Regulation for Expats
Essentially, foreign individuals who are required to pay taxes in Indonesia are those who hold residency permits. In other words, not every foreign national who enters the country is obligated to pay an individual tax.
According to Indonesian tax regulations, an expat is subject to tax payment for the following reasons:
- Resides in Indonesia.
- Has a working visa.
- Has been staying in Indonesia for longer than 183 days within a one-year period.
- Obtains an employment contract that lasts beyond 183 days.
It’s important to note that the Indonesian fiscal or tax year runs from January 1st to December 31st. As for the calculation itself, Indonesia applies the self-assessment system, which means that the taxpayers have to file their own individual tax returns.
The Withholding Progressive Tax system is used in the Indonesian tax system. It means that the tax rate will progressively get bigger as your income gets higher. Here is the applicable tax band that you should know:
| Tax Band | Annual Income (IDR) | Tax Rate |
| I | > 60,000,000 | 5% |
| II | 60,000,000 – 250,000,000 | 15% |
| III | 250,000,000 – 500,000,000 | 25% |
| IV | 500,000,000 – 5M | 30% |
| V | > 5,000,000,000,000 | 35% |
Since calculating expat taxes may not be your specialty, you can look for local tax advisors that offer services for foreign workers like you. With the help of the professionals in their fields, you will be able to work safely while living in Indonesia without encountering any legal issues.
Read also: Second Home Visa: Long-Term Residency for Foreigners
What Kind of Incomes are Taxed in Indonesia?
In general, all types of income obtained by Indonesian residents are subject to taxes. This regulation is based on Article 4 and Chapter 3 of the Personal Income Tax Law of the Indonesian taxation system.
According to Indonesian law, personal incomes that are taxable include:
- Income from employment.
- From an independent business.
- Passive incomes; interest, royalties, dividends, and insurance payouts.
- Rent collection from properties.
- Capital gains from selling properties.
Registration Procedures for Paying Expat Taxes
To pay for expat taxes, you must go through the registration process first. You can proceed with the procedure at the Tax Service Office located in the city that you reside in or via online. So, what exactly do you do there, and what do you need to prepare?
In short, you will get your tax identification number (NPWP), which grants you certain rights as a resident who lives in Indonesia, including obtaining a driver’s license, opening a bank account, and purchasing a vehicle. As for the registration itself, you should bring in the following documents:
- A tax registration form that has been filled.
- A copy of your passport pages.
- A copy of your work permit (KITAS/ITAS).
- A domicile certificate of yours and your employer.
- A copy of your employer’s tax identification number (NPWP).
You can bring a trusted representative with you when applying for the tax identification number. However, you must make sure that any unsettled taxes or legal issues that occur may become your sole responsibility and not that of the person you trusted during the registration process.
When Should You Pay Expat Taxes?
All residents in Indonesia, including expatriates, are required to file annual individual income taxes. You should take note of these important dates, annual tax returns run from January 1st to December 31st and submit the tax return on March 31st at the latest.
When it comes to annual tax returns, you should submit them no later than the 3rd month after the fiscal year ends. Remember these important dates because paying the tax late is a subject to penalty.
This regulation is based on initial guidance from the Minister of Finance. The penalty will be determined on a monthly basis.
That was all you needed to know about expat taxes in Indonesia. We hope we can shed some light on the way you understand the Indonesian tax system. However, you may still need to get the necessary help from professional legal advisors to help you deal with the tax accordingly.
If you intend to reside as an expat in Indonesia, you can contact DoorToID to get quick, professional, and transparent advice for your smooth entry to the country. With DoorToID, you can get your work visa and submit your tax reporting without any hassle.
Read also: Indonesia Immigration: Know-How about Visa Applications
