Important Facts You Need to Know About Indonesia’s Annual Tax Return
Everything You Need to Know About Filing Your Taxes in Indonesia
Filing your taxes in Indonesia got you all stressed out? Filing taxes is not an easy task, especially when there are so many questions which need to be answered.
Everything You Need to Know About Filing Your Taxes in Indonesia
If you’re a foreigner who’s planning to start a business in Indonesia for the first time, knowing how to comply with the local tax laws are crucial if you hope to avoid penalties. Indonesia’s tax law requirements are more complicated than you might think. Here is everything that you need to know about filing your taxes in Indonesia to avoid late filing and the penalties that follow:
Annual Tax Returns Explained:
Annual tax returns in Indonesia must be filed yearly by all taxpaying citizens. Taxpaying citizens are both businesses and individuals who have an income (salaries, dividends, interests, wages, revenues) or tax ID during the taxable year.
Annual tax returns are tax forms which are used to report corporate and personal income, and taxes are filed with the Directorate General of Taxes (DGT), which is the tax authority in Indonesia.
Corporate annual tax returns still must be filed in Indonesia even if you are not physically present in Indonesia. You do not need to file your individual annual tax returns if you do not live in Indonesia.
Individual vs Corporate Tax Returns
Foreign and local companies will be subjected to the corporate income tax rate of 25% if they have a permanent establishment in the country. This means they must file a corporate tax return yearly. Individuals who are on a payroll will be subject to personal income tax rates which can range from 5% to 30%. Non-residents in Indonesia will be subjected to a 20% withholding tax of income that is received in the country.
NPPN and Net Income Tax Norm
Norma Penghitungan Pengasilan Neto (NPPN) is the calculated norm used by the taxpayers. This is used to calculate the net income which will be taxable for a year and serves as a basis for income tax calculation.
What Needs to Be Submitted for Your Tax Returns?
Tax ID is known as Nomor Pokok Wajib Pajak (NPWP). Everyone living in Indonesia will need to register with the DGT with the required mandatory documents to acquire the NPWP.
You will not be able to submit your annual tax returns if you do not have a tax ID in Indonesia.
Documents Which Need to be Prepared for Corporate Tax Returns
The documents which must be prepared for Corporate Tax Return purposes are annual income tax, monthly income tax, annual withholding tax and monthly withholding tax.
What Is Form 1721-A1 and Is It Important?
If you are an employee, then yes, it is vital because it is proof that your employee income has already been withheld by you. This form is a mandatory requirement.
The Proper Way to File Corporate Tax Returns
Corporate tax income is calculated based on the accounting principles which are modified by tax adjustments. Some deductions will be allowed form business expenditure. The demands of the corporate tax return would depend on the accounting period and tax reporting. These two factors are very crucial factors of Indonesian tax compliance requirements. Corporate tax returns should be outsourced to an external accounting party.
Only small companies will be eligible for the simple 1% tax if its annual revenue is less than 4.8IDR.
What Are the Tax Return Deadlines?
Individual tax returns must be submitted by the 31st of March each year. Corporate tax returns must be filed within 4 months after the end of the calendar or taxable year. Corporate tax return deadlines can be extended for two months if the DGT is notified.
Forms for the tax returns can be acquired at tax offices (KKPs) or downloaded online at DGT’s website. All tax returns must be sent to the KKP that the individual or company is registered as a taxpayer.
Failure to file annual tax returns on time will result in a 2% monthly interest which will be charged upon the payable tax, and you will be required to pay the administrative sanction fee, which is IDR1,000,000 for corporate and IDR100,000 for personal income tax.
Individuals who have lived in Indonesia for less than 183 days in a year are not obligated to file income tax returns.
Individual Tax Returns for Full-Time Employees vs Sole Proprietor Businesses vs Individuals with Multiple Incomes
Sole proprietors will need to submit Form 1770 for their annual tax returns. Individuals with multiple incomes will need to fill up Form 1770-S. Full time employees with an annual gross income which don’t exceed IDR 60 million will have to fill up Form 1770-SS.
e-Filings and e-Billings – Knowing the Difference
E-Filings are tax returns which are filed electronically. E-Billings are tax payments which are billed electronically. Both forms of filings can be done online via the DGT website.
Where Are eFins Obtained?
A company that is applying for an eFin must have it done at the KPP office where the company is registered. Individuals can get their eFins from the KPP. eFins can also be activated at the KPP office.
Do Tax Returns Need to Be Submitted for Those Leaving Indonesia?
If you are only leaving Indonesia temporarily, tax returns will must be filed.
My Business Has a Nominee Arrangement. How Do I Submit My Tax Returns?
Businesses with a nominee arrangement are still liable for corporate taxes. Nominees will be able to submit the tax returns on behalf of the business, because they are considered one of the company’s shareholders. All annual tax returns must be submitted at the tax office, and the dividends from that return will be submitted by the business owner. Withholding taxes will still be deductible.
