Expatriate tax ebook - Indonesia

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Indonesian residents are taxed on worldwide income for their period of residence, whilst non-residents are generally taxed on Indonesian income only.

Residence
Expatriates who are physically present in Indonesia for more than 183 days in any 12 month period, or who intend to reside in Indonesia, will become tax resident of Indonesia from their first day of presence within that relevant 12 month reference period (i.e. tax residence status applies retrospectively). The number of days is counted from the date the expatriate arrives in Indonesia as shown in his/her passport.

Income from employment
Taxable income from employment includes salaries, wages, bonuses, a lump sum payment, or other benefits provided by an employer in the form of cash payments. Remuneration made outside Indonesia but charged to the Indonesian employer is also subject to Indonesian income tax.

Source of employment
Employment compensation is deemed as Indonesian sourced where the services are performed in Indonesia.

Benefits (in kind)
Whether benefits in kind; such as housing provided by the employer, school fees for children and medical expenses; are subject to income tax for expatriates depends on the kind of business the employer is in.

If the employer is not subject to corporate income tax (for instance a representative office) or subject to final corporate income tax (for instance an office space rental employer), the benefits in kind have to be added as additional salary for the expatriate.
For employers subject to corporate income tax, benefits in kind are not subject to income tax for the expatriate, but they are regarded as non-deductible expenses for the employer.

Expatriate concessions
There are no expatriate concessions in Indonesia.

Relief for foreign taxes
Indonesian tax residents are given credit for foreign tax paid on foreign sourced income. In general terms, the tax recognised in Indonesia will not be more than the effective tax rates applicable to the expatriate concerned.

Deductions against income
The following amounts are regarded as annual tax free income for every taxpayer including expatriates:

Allowance rupiah (IDR)
Single person or married woman	13,200,000
Married gentleman	14,400,000
Married gentleman: with 1 child with 2 children  with 3 children (max)	15,600,000 16,800,000 18,000,000

Other allowances which can be deducted from the gross income of an expatriate is tithe (zakat) for Moslem people. Such allowances must be proved by a receiving slip issued by a religious body recognised by the Indonesian government. In addition to the above allowance, expatriates are entitled to a functional allowance of five per cent from the gross salary with a maximum of IDR 1,296,000 per annum.

Information about Indonesia:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities