Are foreigners who earn income in Indonesia and already have KITAS become subject to domestic taxes?
The Indonesian Income Tax Law states that non-Indonesian residents are deemed resident tax subjects if they stay for more than 183 days in a 12-month period or a fiscal year. If you generate an income in Indonesia, own a business, or are employed by an Indonesian company, you most definitely have to pay income taxes, or taxes on dividends, etc. on all the income you generate within Indonesia.
The subjective tax obligation of a private person begins at the time the person is born, resides, or intends to reside in Indonesia and ends at the time of his or her death or leaves Indonesia forever Article 2A (1) of Law No. 36 of 2008
Individual tax subjects indicate their intention to reside in Indonesia can be proven by documents in the form of a working Visa, a Limited Residence Permit Card (KITA) of more than 183 days, or a contract/agreement to do work, business, or activities carried out in Indonesia over 183 days. A KITAS (Kartu Izin Tinggal Terbatas) is an Indonesian stay permit that enables foreigners to legally stay in the country for up to 24 months, depending on its type. In most cases, this permit can be extended without exiting the country for a maximum of 5 years
Foreigners with a Work KITAS (Temporary Stay Permit) are domestic tax subjects in Indonesia that will only be taxed on the money they earn within the country, and not their global income, for four years. The “omnibus legislation scheme” recently changed the tax provisions to provide incentives for expats. Of course, if you are also still registered as a tax resident in another country, you might still have to declare the income you make in Indonesia in your country.
However, foreigners who do not count as tax residents (i.e. staying less than 183 days in Indonesia, cannot present a KITAS and thus do not have an NPWP) and do not have a permanent establishment in the country are subject to a flat withholding tax (WHT) of 20% of their global income when they generate income upon conducting business activity in the country.
Or take actions that indicate that he will reside in Indonesia or prepare to live in Indonesia such as renting or contracting a place including renting a place in Indonesia, moving family members, or obtaining a place provided by other parties.
In this article, we are going to highlight the most important things that a foreigner should know about personal income taxes in Indonesia.
Type of Personal Income Taxes
PPh 21 Income Taxes
If you are a foreign employee residing in Indonesia with a Work Permit (KITAS), you are subject to PPh 21 Income Tax. Your employer will deduct the tax from your salary and pay it directly to the tax office. Foreigners under an Investor KITAS are not required to register for an NPWP, however, if you do not have an NPWP a 20.0% surcharge will be applied to your tax rate. For example, if with an NPWP you would have faced a tax rate of 15.0%, without an NPWP you would face a tax rate of 18%.
PPh 26 Income Taxes
If you are only staying temporarily in Indonesia and you receive an income in Indonesia, you are also subject to Indonesian income tax (PPh) 26. For example, a musical artist from the UK who performs in Indonesia and is hired by an Indonesian promoter will be subject to local income tax. In this example, the promoter would withhold the PPh 26 income Tax (Withholding Tax) from the artist.
Certain foreign workers are exempt from personal income taxes, namely foreign consular and diplomatic personnel, military personnel, foreign civil servants and international representatives specified by the Minister of Finance.
Income Tax (PPh) 21 rates are progressive—meaning that your rate of tax increases as your income grows higher.
Foreigners who will leave Indonesia and have no intention to return for work have to submit an Exit Permit Only (EPO) document to the local immigration office by providing their Tax Obligation Compliance Certificate (Surat Keterangan Pemenuhan Kewajiban Perpajakan or SKPKP) issued by the Tax Office where they are registered, to prove that they have fulfilled their tax obligations while in Indonesia. If you don’t submit the EPO, the government might still consider you a domestic tax subject even if you have already left the country
If you have any further questions regarding the personal income taxes in Indonesia that we have not addressed in this article or need assistance in filing your tax return, please reach out to us at firstname.lastname@example.org or via this link. Our team will get in touch with you shortly afterward.