Indonesia entered the ranks of the country of interest to foreigners as a place not only for travel, but also for business (kompas.com). Not even a few who decide to settle and change the status of citizenship with a variety of considerations, such as marriage for example, or in love already with this beautiful country.

If they choose to work in Indonesia, then they are also become subject to the same obligations as Indonesian citizens. For example imposition of tax income. This can be seen from the status of the expatriate, whether included as a domestic tax subject or abroad.

Domestic Tax Subject
In the income tax act (“Income Tax”), the meaning of the domestic income tax subject is an individual resident in Indonesia, is an individual in Indonesia over than 183 (one hundred and eighty three) days within a period of 12 (twelve) months, or an individual who is in a taxable year resides in Indonesia and has an intention to reside in Indonesia.

The obligation to have a taxpayer identification number (NPWP) applies equally to expatriates with the status of domestic tax subjects.

Thus, income which becomes the object of tax according to the provisions of Article 4 of Income Tax Law that any additional economic capability received or obtained by taxpayers, both originating from Indonesia and from outside Indonesia. Sources of income can be grouped as follows:

  1. Earnings from employment in employment relationships such as salary, benefits, honorium, and so forth.
  2. Income from free employment such as income from doctors’ practice, notaries, actuaries, accountants, lawyers, and so forth.
  3. Income from business and activities, which consists of merchandise services, industry and others such as livestock, agriculture, fisheries, and so forth.
  4. Income from capital, in the form of movable or immovable property, such as interest, dividends, royalties, rent, and profit on sale of property or rights not used for business.
  5. Other income, such as debt relief and prizes.

Foreign Tax Subject

Whereas the subject of the foreign tax is an individual who does not reside in Indonesia, an individual who resides in Indonesia for not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) months, and a non-established in Indonesia, who carries on business or engages in activities through a permanent establishment in Indonesia and an individual who does not reside in Indonesia, an individual in Indonesia of not more than 183 (one hundred and eighty three) days within a period of 12 (twelve) ), and a non-established and non-domiciled entity in Indonesia, which may receive or obtain income from Indonesia not from conducting business or engaging in activities through a permanent establishment in Indonesia.

For an expatriate who is a foreign tax subject this is not subject to the obligation to make NPWP. Meanwhile, the income tax imposed is income tax article 26. In article 26, it is mentioned that the deduction by the tax-cutter (the party making the payment for the income of the employer) is 20% of the gross amount.

Here are the income that becomes the object of withholding income 26:

  1. Dividend
  2. Interest includes premiums, discounts, and rewards, in respect of debt repayment guarantees
  3. Royalties, leases and other income, in connection with the use of property
  4. Rewards in respect of services, employment and activities
  5. Prizes and awards
  6. Pensions and other periodic payments
  7. Swap premiums and other hedging transactions
  8. Profit due to debt relief

How Can Elson Help You?
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