Tax Compliance Service

Understanding the types of taxes in Indonesia, their deadlines, payment schedules, and reasons for imposition is crucial for maintaining compliance. Here is a detailed overview with terms familiar to the Indonesian context. Below are some common taxes in Indonesia:

1. Corporate Income Tax (Pajak Penghasilan Badan – PPh Badan)
   • Definition: Tax applied on the income of companies operating in Indonesia.
   • Reason for Imposition: To generate revenue for the government from corporate profits and ensure businesses contribute to the economy.
   • Example: A manufacturing company earning profits from its operations in Indonesia must pay PPh Badan.
   • Deadline: Annual tax returns must be filed by the end of the fourth month following the end of the fiscal year (due on April 30th for calendar year taxpayers).
   • Payment Schedule: Monthly installments (PPh 25) based on the previous year’s tax liability, with final settlement upon filing the annual return.
     
     
2. Value-Added Tax (Pajak Pertambahan Nilai – PPN)
   • Definition: Tax applied to the sale of taxable goods and services.
   • Reason for Imposition: To generate revenue from consumption and ensure that businesses contribute to the public finances based on their sales.
   • Example: A retailer selling electronics in Indonesia charges PPN on each sale.
   • Deadline: Monthly VAT returns must be filed by the end of the following month.
   • Payment Schedule: PPN payments are due at the same time as the filing of the monthly return.
     
     
3. Withholding Tax (Pajak Penghasilan – PPh)
   • PPh 21: Tax withheld on employee salaries and wages, which may also include gifts, services, and any other fees received by an individual.
     • Reason for Imposition: To ensure timely collection of income tax from employees and reduce the administrative burden on individuals.
     • Example: An employee earning a monthly salary has PPh 21 deducted by the employer.
     • Deadline: Monthly returns must be filed by the 20th of the following month.
     • Payment Schedule: Payments are due by the 10th of the following month.
   • PPh 23: Tax withheld on certain types of income, such as services, rent, interest, and royalties.
     • Reason for Imposition: To ensure tax is collected at the source on passive income and reduce tax evasion.
     • Example: A company paying fees for an auditor services withholds PPh 23.
     • Deadline: Monthly returns must be filed by the 20th of the following month.
     • Payment Schedule: Payments are due by the 10th of the following month.
       
       
4. Transfer Pricing
   • Definition: Pricing in transactions affected by a special relationship.
   • Reason for Imposition: To prevent profit shifting and tax base erosion by ensuring that transactions between related parties are conducted at arm’s length and reflect market conditions.
   • Example: A parent company in Indonesia sells goods to its subsidiary abroad. The price set for these goods must comply with transfer pricing regulations to ensure it is consistent with the price that would be charged between independent parties.
   • Deadline: Annual tax returns must be filed by the end of the fourth month following the end of the fiscal year (due on April 30th for calendar year taxpayers).
   • Payment Schedule: Transfer pricing adjustments, if required, must be made in the corresponding tax year when the transactions occurred, with any additional taxes due being settled as part of the annual corporate income tax return.
     
     
5. Land and Building Tax (Pajak Bumi dan Bangunan – PBB)
   • Definition: Tax on land and buildings, based on their assessed value.
   • Reason for Imposition: To generate revenue from property ownership and encourage efficient land use.
   • Example: A homeowner in Jakarta pays PBB based on the assessed value of their property.
   • Deadline: Annual payment for PBB P2 (Perkotaan dan Pedesaan), typically due by the end of August.
   • Payment Schedule: Payment is made annually upon receipt of the tax assessment notice.
     
     
6. Luxury Goods Sales Tax (Pajak Penjualan atas Barang Mewah – PPNBM)
   • Definition: Additional tax on the sale of luxury goods.
   • Reason for Imposition: To generate revenue from luxury items and discourage excessive consumption.
   • Example: A luxury car dealership charges PPNBM on high-end vehicles.
   • Deadline: Filed and paid together with the PPN return.
   • Payment Schedule: Due at the same time as the PPN payment.
     
     
7. Personal Income Tax (Pajak Penghasilan Orang Pribadi – PPh Orang Pribadi)
   • Definition: Tax on the income of individuals.
   • Reason for Imposition: To generate revenue from individual earnings.
   • Example: An individual with freelance income files an annual PPh Orang Pribadi return.
   • Deadline: Annual tax return must be filed by March 31st.
   • Payment Schedule: Monthly installments for employees through payroll withholding, with final settlement upon filing the annual return.