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Personal Taxation

The taxation system in Indonesia is rapidly changing and providing accurate information in this area is sometimes challenging. Paying tax is not something many Indonesian people are familiar with and most would rather cut off their right arm than register with the tax office. Current figures suggest only 6 million people out of 250 million actually pay tax.

In recent times the tax office is getting very serious about people registering for a personal tax number (NPWP) and is introducing new tax incentives to try and encourage businesses and individuals to pay tax. The result will be a lower personal taxation rate, substantial reductions for businesses and the scrapping of the FISKAL tax at the airport.

You can review the taxation laws that currently apply here:

http://www.kanwilpajakkhusus.depkeu.go.id/en_v/manual_taxation.pdf

One final word of warning for expatriates who are tempted to be a little "creative" in the way they are paid. While it has been common practice to be paid a salary in Indonesia and then a second payment overseas to reduce tax, it should be pointed out this practice is illegal. It should also be pointed out that the tax office is investigating a number or companies and individuals to try and stamp out this practice. While you may not be Indonesian, you are a resident in Indonesia and therefore you have a responsibility to pay tax.

Many international accounting firms offer personal tax reporting services, but they are geared for the higher end of the market. Grassroots firms such as Okusi Associates offer basic reporting services for foreigners who don't want to be too "clever" or "creative".

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