Indonesian Individual Income Tax
Legal base for imposing individual income tax is Act Number 7 Year 1983 concerning Income Tax as several times amended lastly by Act Number 36 Year 2008 and its implementing regulations.
Tax subject of individual income tax consists of a) resident individual tax subject, b) non-resident individual tax subject.
The term resident individual tax subject means:
- an individual who resides in Indonesia,
- an individual who has been present in Indonesia for more than 183 days within any 12 (twelve) months period, or
- an individual who has been residing in Indonesia within a particular taxable year and intends to reside in Indonesia.
Whilst the term non-resident individual tax subject means:
- an individual who does not reside in Indonesia, has been present in Indonesia for not more than 183 days within any 12 months period conducting business or carrying out activities through a permanent establishment in Indonesia; and
- an individual who does not reside in Indonesia, has been present in in Indonesia for not more than 183 days within any 12 months period which may receive or accrue income from Indonesia other than from conducting business or carrying out activities through permanent establishment.
Tax object of individual income tax is income that is any increase in economics capacity received by or accrued by a taxpayer from Indonesia as well as from offshore, which may be utilized for consumption or increasing the taxpayer’s wealth, except:
- aids or donations, including ”zakat” and or compulsory religious donation for the followers of religions received by the individual;
- gifts received by relatives within one degree of direct lineage, and to religious body, educational or other social entity including foundation, cooperative, or to any individual who conducting micro and small business which stipulated by or based on a Minister of Finance Regulation;
- consideration or remuneration in the form of benefits in kinds in respect of employment or services received or accrued from a taxpayer or the Government;
- payments by an insurance company to an individual in connection with health, accident, life or education insurance;
- distribution of profit received or accrued by a member of a limited partnership, whose capital does not consists of shares, partnership, association, firm, and kongsi, including a unit holder of collective investment contract.
Calculating taxable income of the resident individual taxpayer:
In calculating taxable income the resident individual taxpayer may claim some deductions. The deductions which may be claimed to deduct gross income in calculating taxable income are as follows:
- expenses to earn, to collect and secure;
- depreciation of tangible asset and amortization of rights and other expenditures which have useful life of more than 1 year;
- contributions to a pension fund which its establishment is approved by the Minister of Finance;
- losses incurred from the sale or transfer of properties owned and used in business or used for the purpose of earning, collecting and securing income;
- losses from foreign exchange;
- costs related to research and development carried out in Indonesia;
- scholarships, apprenticeships and training expenses;
- donation for national disaster which is stipulated by a Government Regulation; donation for research and development conducted in Indonesia which is stipulated by a Government Regulation;
- costs of social infrastructure development which is stipulated by a Government Regulation;
- donation in the form of education facilities which is stipulated by a Government Regulation;
- donation for sport enhancement which is stipulated by a Government Regulation.
Any loss incurred, after subtracting the deductions from gross income, shall be carried forward for a maximum of five successive years.
Special for employee, the deduction which may be claimed against his/her gross income is a functional cost amounting to 5% of gross income but at maximum of IDR 6,000,000.00/year.
Besides the above deductions an individual who is a resident taxpayer is also entitled to claim personal exemptions (non taxed income). The prevailing amount of personal exemption (non taxed income) is as follows:
- IDR 15.840.000,00/year for a single individual taxpayer;
- additional IDR 1.320.000,00/year for a married taxpayer;
- additional IDR 15.840.000,00/year for married taxpayers’ spouse provided they file a joint tax return;
- additional IDR 1.320.000,00/year for each dependent family member related by blood and by marriage in a direct lineage, and an adopted child with a maximum of three dependents.
By 1 January 2013 the non taxed income shall be changed as follows:
- IDR 24,300,000.00/year for a single individual taxpayer;
- additional IDR 2,025,000.00/year for a married taxpayer;
- additional IDR 24,300,000.00/year for married taxpayers’ spouse provided they file a joint tax return;
- additional IDR 2,025,000.00/year for each dependent family member related by blood and by marriage in a direct lineage, and an adopted child with a maximum of three dependents.
The applicable tax rates for resident individual taxpayer are as follows:
Taxable Income Brackets Tax Rates
- IDR 50 million or less 5%
- Over IDR 50 million up to IDR 250 million 15%
- Over IDR 250 million up to IDR 500 million 25%
- Over IDR 500 million 30%
The income earned or received by non resident individual taxpayer is subject to withholding tax of Income Tax Article 26 at the rate of 20% of the gross income, except for capital gain derived from the sale of the shares. The applicable tax rate on capital gain derived from the sale of share not sold in stock exchange is 5% of the gross sale.
Posted on May 27, 2013, in English Version, Forum, Indonesian Taxation Summaries and tagged functional cost, Indonesian Individual Income tax, non taxed income, personal deduction, tax object, tax rate, tax subject. Bookmark the permalink. 15 Comments.