Corporate Income Tax
The flat rate is 25%.
Income Tax Rate
- 0 – 50,000,000: 5%
- 50,000,001 – 250,000,000: 15%
- 250,000,001 – 500,000,000: 25%
- > 500,000,000: 30%
VAT is taxed at 10%.
- Dividends: 15%
- Interest: 15%
- Royalties: 15%
Income Tax (Personal Allowance)
Employers have responsibility to withhold employees’ income tax every time they pay their salary, other allowances, and benefits. The deduction is based on Article 21 Income Tax Act. The rates are progressive, starting from 5% and increasing gradually up to 30% for the higher income layers.
Time to prepare and Pay Taxes
Employers Social Security and statutory contributions
- Working accident protection: 0.24%-1.74%
- Death insurance: 0.3%
- Old age saving: 3.7%
- Healthcare: 4%
Employees Social Security and statutory contributions
- Working accident protection: N/A
- Death insurance: N/A
- Old age saving: 2%
- Healthcare: 1%
There are specific rules for payroll and taxation in Indonesia, depending upon whether your company employs foreign nationals or local Indonesian employees. The primary concerns for a foreign company that needs to comply with tax laws in Indonesia are: Individual income tax (IIT) for employees in Indonesia, social security costs, capital gains tax, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns. Most Indonesian taxes are largely similar to that of other jurisdictions.
A remote payroll in Indonesia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Indonesia. The best option for a non-resident company to payroll its employees (local and foreign) in Indonesia is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Indonesia under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to Indonesia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Indonesian payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Indonesian employment laws.
Setting up payroll in Indonesia
Indonesian Rupiah (IDR)
Social Security Registration
Jamsostek is mandatory for every employment in Indonesia, especially for local employees. Depending on the type of business, the rate ranges from 6.24% to 7.74% of the fix income, from which 2.00% is employee contribution.
The breakdown of the rate is as follows:
- Work Accident Insurance, ranging from 0.24% to 1.74%, depending on type of business.
- Life Insurance, 0.30%
- Pension Fund, 3.70% employer contribution and 2.00% employee contribution.
In addition to the above, the company can insure its employees with Jamsostek Health Insurance (3.00% for single employee, 6.00% for married employee). This insurance is not mandatory, provided that the company has offered a better health insurance choice than what Jamsostek offers.
Frequency of Salary Payment
Invoice / Payslips required
Monthly pay slips available on web-site, pdf or paper