Withholding Tax Applicable to Non-Resident Taxpayer

The withholding tax applicable to non resident taxpayer is governed in Article 26 of Law Number 36 Year 2008. Therefore such withholding tax is recognized as “Income Tax Article 26 withholding”.

Parties which are obliged to withhold Income Tax Article 26 are government  institutions, resident taxable entities, a person who  organizes  activities,  permanent  establishments,  or  a  representatives  of  a  non-resident companies.

Tax subjects of Income Tax Article 26 withholding are non-resident taxpayers. Under the Indonesian Income Tax Law the term “non-resident taxpayer” means:

  1. Any  individual who  does not reside in Indonesia,  has  been  present in Indonesia for not  more  than  183  days  within  any  12  months  period,  and  an  entity  which  is  not  established  and  is  not domiciled  in Indonesia    conducting  business  or  carrying  out  activities  through  a  permanent establishment in Indonesia; and
  2. Any individual who does not reside in Indonesia, has been present in Indonesia for not  more  than  183  days  within  any  12  months  period,  and  any  entity  which  is  established  outside  Indonesia  and    is  not domiciled  in Indonesia,  which may  receive  or accrue  income  from  Indonesia  other than  from  conducting  business  or  carrying  out  activities  through  permanent establishment.

Objects of Income Tax Article 26 withholding are as follows.

  1. dividends;
  2. interest  including  premium,  discount.  and  compensation  for  loan  repayment guarantees;
  3. royalties, rent and other income in connection with the use of the property;
  4. compensation in connection with services, works, and activities;
  5. prizes and awards;
  6. pension and other periodic payments;
  7. premium of swap and other hedging transactions; and/or
  8. gains from the discharge of indebtedness;
  9. gains from the transfer of assets (movable or immovable).’;

received or earned by non-resident taxpayers, and

10. insurance  premiums  paid  to  a  foreign  insurance company

Tax rate of Income Tax Article 26 withholding is as follows:

  1. Tax rate applicable to tax object as referred to in the tax object number 1 up to number 8 mentioned above is 20% of the gross income.
  2. Tax rate applicable to tax object as referred to in the tax object number 9 mentioned above is 20% of the estimated net income.
  3. Tax rate applicable to tax object as referred to in the ax object number 10 mentioned above is 20% of the deemed profits.


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 October 16, 2013, in English Version, Indonesian Taxation Summaries and tagged , , . Bookmark the permalink. 11 Comments.

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