Indonesia adopts the self-assessment method for individuals to calculate, settle, and report income tax. The tax authorities have the right to audit any tax return to ensure the individual has calculated correctly the tax payable, within the five-year statute of limitations.
For Indonesian-source income, there is an extensive framework of withholding taxes so that income tax is often collected by deduction at the source, for example in relation to employment income, interest, dividends, royalties, rent, and income from sales of property, and listed shares.
The extent of the Indonesian income tax liability depends upon the individual’s residence status in Indonesia. An Indonesian tax resident is defined as an individual present in Indonesia for more than 183 days within any 12-month period and/or present in Indonesia during a tax year with the intention of residing in Indonesia. Resident individuals are taxed on their worldwide income, regardless of where such income arises or for whom work or services are performed. Non-resident individuals are exempted from the worldwide income reporting obligation and tax is imposed only on income derived in Indonesia.
Deductions are limited to individual personal allowances.
Starting 1 January 2009, income of a resident individual that exceeds the non-taxable income threshold for a calendar year is subject to income tax at progressive rates ranging from 5 percent to 30 percent. Income of a non-resident individual is subject to income tax at a flat rate of 20 percent on gross income.
Income tax is calculated and paid in the official currency of Indonesian Rupiah (IDR). Amounts in other currencies are converted for tax purposes into Rupiah using exchange rates published weekly by the Ministry of Finance.
Individual tax registration has only been widely enforced since 2001. As a result, there are uncertainties relating to individual taxes which have not yet been tested during tax audits or clarified in regulations or official guidance.
Herein, the host country refers to the country to which the employee is assigned. The home country refers to the country where the assignee lives when he/she is not on assignment.