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:

  1. an individual who resides in Indonesia,
  2. an individual who has been present in Indonesia for more than  183 days within any 12 (twelve) months  period, or
  3. 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:

  1. 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
  2. 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:

  1. aids  or  donations,  including  ”zakat” and or compulsory  religious  donation  for the followers of religions received by the individual;
  2. 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;
  3. inheritance;
  4. 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;
  5. payments  by  an  insurance  company  to  an  individual  in  connection  with  health, accident, life or education insurance;
  6. 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:

  1. expenses  to  earn,  to  collect  and  secure;
  2. depreciation  of  tangible  asset  and  amortization  of  rights  and  other  expenditures which  have  useful  life  of  more  than  1  year;
  3. contributions to a pension fund which its establishment is approved by the Minister of Finance;
  4. 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;
  5. losses from foreign exchange;
  6. costs related to research and development carried out in Indonesia;
  7. scholarships, apprenticeships and training expenses;
  8. 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;
  9. costs  of  social  infrastructure  development  which  is  stipulated  by  a  Government Regulation;
  10. donation  in  the  form  of  education  facilities  which  is  stipulated  by  a  Government Regulation;
  11. 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:

  1. IDR 15.840.000,00/year  for  a single individual taxpayer;
  2. additional  IDR 1.320.000,00/year for a married taxpayer;
  3. additional IDR 15.840.000,00/year for married taxpayers’ spouse provided  they file a  joint tax return;
  4. 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:

  1. IDR 24,300,000.00/year  for  a single individual taxpayer;
  2. additional  IDR 2,025,000.00/year for a married taxpayer;
  3. additional IDR 24,300,000.00/year for married taxpayers’ spouse provided  they file a  joint tax return;
  4. 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.

About Jaja Zakaria

Nama saya Jaja Zakaria, saya tinggal di Depok, Jawa Barat, kurang lebih 40 km dari Jakarta Selatan. Saya alumni Fakultas Hukum Universitas Gadjah Mada, Yogayakarta, dan Opleidings Instituut Financien, Den Haag, Belanda di bidang Hukum Pajak Internasional. Saya pengarang beberapa buku, e-book, dan makalah-makalah perpajakan. Pengalaman saya antara lain pernah menjadi anggota delegasi Indonesia dalam perundingan Perpajakan dengan Denmark, Mesir, Kanada, Uni Emirat Arab, Kuwait, Turki, Brunei Darussalam, Pilipina, Vietnam, Mongolia, dan Taiwan; dalam Study Group on Asian Tax Administration and Research (SGATAR) meeting; dan dalam Joint Commission Indonesia - China. Saya juga anggota International Word Tax Expert.

Posted on May 27, 2013, in English Version, Forum, Indonesian Taxation Summaries and tagged , , , , , , . Bookmark the permalink. 15 Comments.

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