Taxable Income

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Taxable income is any income imposed by tax, which income means any additional economic ability received or obtained by the taxpayer, regardless of whether it originates from Indonesia or foreign countries, which can be used for consumption or increase wealth by name and in any form, including: 

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• reimbursement to or compensation for work or services including salaries, wages, allowances, honoraria, commissions, bonuses, gratuities, pensions, or other forms of compensation, including natural and/or enjoyment;

• reimbursement or compensation about work or services received or obtained including salaries, wages, allowances, honoraria, commissions, bonuses, gratuities, pensions, or other forms of compensation including in kind and/or enjoyment, unless otherwise specified in the law;

• prizes from sweepstakes or work or activities, and awards;

• business profit;

• profit due to the sale or transfer of assets;

• Reception of tax payments that have been charged as expenses and additional tax refund payments;

• interest including premiums, discounts, and rewards on account of guarantees of repayment of debt;

• dividends by whatever name and in whatever form;

• royalties or fees for the use of rights;

• rents and other income in respect of the use of property;

• receipt or acquisition of periodic payments;

• gain on exemption from debt;

• foreign exchange gains;

• excess difference due to revaluation of assets;

• insurance premium;

• dues received or obtained by an association from its members consisting of

• Taxpayers conducting business or independent work;

• additional net worth derived from income that has not been taxed;

• income from sharia-based business;

• interest income; and

• Bank Indonesia surplus.

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Non-Taxable Income

Non-taxable income is any income accrued by tax subject, nonetheless not subject to taxation, including as follows: 
 

• Assistance or contributions, including zakat (Islamic almsgiving), infaq (voluntary giving), and sedekah (charitable giving), received by zakat institutions or charitable institutions established or approved by the government, and received by eligible zakat recipients or mandatory religious contributions for followers of recognized religions in Indonesia, received by religious institutions established or approved by the government, and received by eligible contribution recipients, the terms of which are regulated by or based on government regulations;

• Gifts received by immediate blood relatives within one degree of lineage, religious institutions, educational institutions, social institutions including foundations, cooperatives, or individuals engaged in micro and small businesses, as long as there is no relationship with businesses, employment, ownership, or control between the parties involved;

• Inheritance;

• Assets, including cash deposits, received by an entity as referred to in Article 2 (1) (b) Law No. 7/1983, as a substitute for shares or as a substitute for capital participation; 

• Compensation or remuneration in connection with work or services received or obtained in the form of goods and/or services, including:​

1. food, food ingredients, beverages, and/or drinks for all employees;

2. goods and/or services provided in specific areas;

3. goods and/or services that must be provided by the employer in the performance of work;

4. goods and/or services funded by the States Revenue and Expenditure Budget;

5. goods and/or services with specific types and/or limitations.​

• Payment from insurance companies due to accidents, illness, or the death of the insured individual, and insurance payments for scholarships;

• Dividends or other incomes with the following criteria:​

1. Dividends obtained within the State by Indonesian individuals or Indonesian legal entities so long as such dividends were invested in The Republic of Indonesia;

2. Dividends obtained from outside the State or income (after tax) from a permanent business establishment obtained by Indonesian Individuals or Indonesian legal entities so long as it is utilized to support business activities within the Republic of Indonesia for a period and fulfills the following criteria:

   • dividends and post-tax income from such investments amounting to at least 30% (thirty percent) of after-tax profits; or​​

   • dividends derived from foreign entities whose shares are not traded on the stock exchange are invested in Indonesia before The DGT issues a tax assessment letter for the dividends in connection with the implementation of Art.18 (2) Law No. 7/1983. 

3. Dividends obtained from outside the State as mentioned in Point 7 are:

   • ​overseas companies whose stocks are traded in the Indonesian Stock Exchange;

   •  overseas companies whose stocks are not traded in the Indonesian Stock Exchange;

4. In the case of dividends as referred to in Point c (ii) and post-tax income from a permanent establishment abroad as referred to in Point 7 is invested in the territory of the Republic of Indonesia is less than 30% (thirty percent) of the total after-tax profits as referred to in Point b (ii), the following shall apply:

   • dividends and post-tax income invested as mentioned in point 8 (b) are exempt from income tax;

   • the difference between 30% (thirty percent) of the after-tax profits minus dividends and/or post-tax income invested as referred to in letter (a) is subject to income tax; and

   • the remaining after-tax profits minus dividends and/or post-tax income invested as referred to in letter (a) and the difference as referred to in letter (b) are not subject to income tax.

5. In the case of dividends as referred to in Point c (ii) and post-tax income from a permanent establishment abroad as referred to in Point 2 is invested in the territory of the Unitary State of the Republic of Indonesia by more than 30% (thirty percent) of the total after-tax profits as referred to in Point b (i), the following provisions shall apply:

   • dividends and post-tax income invested as mentioned in Point c (ii) are exempt from income tax;

   • the remaining after-tax profits minus dividends and/or post-tax income invested as referred to in number (i) are not subject to income tax;

6. ​In the case of dividends originating from foreign entities whose shares are not traded on the stock exchange and are invested in Indonesia after the DGT issues a tax assessment letter for such dividends in connection with the implementation of Art. 18 (2) Law No. 7/1983 , the mentioned dividends are not exempt from Income Tax as referred to in Point. 

7. The imposition of Income Tax on income from abroad not through a permanent establishment received or obtained by domestic corporate taxpayers or domestic individual taxpayers is exempted from Income Tax if such income is invested in the territory of the Republic of Indonesia for a specific period and meets the following conditions:

   • the income is obtained from active business activities abroad; and

   • it is not income from a company owned abroad.

8. Income tax that has been paid or is due abroad on income as referred to in points (b) and (g), the following provisions apply:

   • it cannot be offset against the income tax due;

   • it cannot be charged as a cost or deduction from income; and/or

   • excess tax payments cannot be requested for a refund;

9. If the taxpayer does not invest the income within a specified period as referred to in points (b) and (g), the following provisions apply:

   • the income from abroad is considered income for the tax year ut is obtained; and

   • the income tax that has been paid or is due abroad on such income is considered a tax credit as referred to in Art. 24 of law no. 7/1983.

• Fees received or obtained by a pension fund whose establishment has been approved by the Financial Services Authority, whether paid by the employer or the employees;

• Income from capital invested by pension funds as referred to in Point (8), in specific fields;

• Share of profits or residual business results received or obtained by members from cooperatives, limited partnership companies, whose capital is not divided into shares, partnerships. Association, firms, and joint ventures, including holders of participation unites in collective investment contract;

• Income received or obtained by venture capital companies in the form of profit shares form a business partner entity established and operating in Indonesia, provided that the business partner entity:

1. is a micro, small, medium-sized enterprise, or engages in sectors regulated by or based on the MoFR; and

2. Its shares are not traded on the Indonesian Stock Exchange;

• Scholarships that meet certain criteria;

• Surplus received or obtained by non-profit educational and/or research and development institutions, registered with the relevant authority, invested in the form of facilities and infrastructure for educational and/or research and development activities, for a maximum period of 4 (four) years from the date of receipt of such surplus;

• Assistance or benefits paid by the Social Security Administrator to specific Taxpayers;

• Deposits for the Costs of Hajj Implementation and/or Special Hajj Implementation, and income from hajj financial development in specific financial instruments or fields, received by the Hajj Financial Management Agency;

• Surplus received or obtained by registered social and/or religious institutions, reinvested in the form of social and religious facilities and infrastructure for a maximum period of 4 (four) years from the date of receipt of such surplus, or placed as an endowment fund.

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Implementation of Tax Income

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In regards to the income tax rate and taxable income above, herewith, the following implementation provision of taxation thereof: 

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