Opening a company in Indonesia comes with several requirements for foreign investors who must also consider the tax implications for which they can get help from our accountants in Indonesia. For this reason, getting better acquainted with the taxation system is a must before starting the company registration procedure in Indonesia. In order to know as much as possible about the tax system, many foreign citizens request advice from our CPA in Indonesia. We want to help our clients as much as possible, so we have prepared packages that include both accounting and company formation services in Indonesia.
| Quick Facts | |
|---|---|
| Accounting principles | Indonesian Generally Accepted Accounting Principles (GAAP) |
|
Auditing rules |
Only for certain types of companies (such as public companies) |
|
Taxable income |
– business income, – asset sales gains, – passive income |
| Corporate tax rate | 22% |
| Dividend taxation |
– no witoholding tax for dividend payments made by an Indonesian company to a resident company; – a 10% final withholdign tax can apply for dividends paid to an Indonesian resident individual, in some cases |
| Losses |
Tax losses can be carried forward for five years; subject to conditions |
| Tax year |
The calendar year |
| Consolidated returns |
Not permitted |
| Annual filing | Within 4 months from the end of the accounting year in most cases |
| Payment | The annual corporate income tax payments are made before the tax return is filed |
| Penalties for late/incomplete tax filing or underpayment |
Charged at variable rates |
| VAT registration threshold |
For delivering goods/services exceeding IDR 4.8 billion in one fiscal year |
| VAT rates |
11% (as of April 2022) |
| VAT filing |
Monthly |
| VAT payment |
Before filing the monthly VAT return |
Table of Contents
What are the accounting services offered by our team in Indonesia?
Our accounting services cover a wide range of needs for those who come to Indonesia. Among these are:
- the above-mentioned tax minimization and planning solutions;
- payroll and HR services for companies;
- tax filing services with the Directorate Generate of Taxes;
- drafting financial statements;
- accounts payable and accounts receivable services;
- VAT registration and filing.
Our accountants in Indonesia can offer information on all the financial services available in Indonesia.
Working with a trusted team of lawyers in Indonesia, in addition to our accountants, will allow you to rest assured that your business is fully compliant. We offer solutions for business and corporate issues, answer questions about labor law or immigration, as well as offer services for litigation. Our law firm focuses on delivering tailored solutions for each of our clients.
Please watch our video on accounting services in Indonesia:
How can our accountants assist foreign investors in Indonesia?
For foreign investors in Indonesia, it’s important to know that rules about checking and reporting money matters are spread out in different laws. Understanding these rules well can help keep your business following the right procedures. Foreign investors should pay attention to the Company Law. This law decides when businesses must get their finances checked and the standards they must follow when writing down their money details. To make sure you get it right, it’s a good idea to get help from our accountants in Bali who know the rules well. They can guide you through the current regulations and keep your business on the right track.
Our Indonesian accountants provide valuable insights into the country’s specific accounting standards, including the convergence of local standards with international norms. They assist foreign investors in optimizing their financial strategies, managing tax obligations effectively, and ensuring transparent and accurate reporting. Additionally, our team offers comprehensive support in areas such as risk assessment, financial planning, and compliance with local business practices. By leveraging the expertise of our accountants, foreign investors can make informed decisions, mitigate risks, and establish a solid financial foundation for their ventures in Indonesia.
A few facts on the taxation system in Indonesia
We mentioned earlier that Indonesia imposes several taxes. When it comes to the taxation of individuals the income tax is the most important one. However, companies in Indonesia must pay the following taxes:
- the corporate tax which is levied on the business profits of companies;
- the sales tax which applies to goods imported or delivered in Indonesia;
- the value-added tax (VAT) which applies to goods and services sold in Indonesia;
- the customs and excise taxes, however, Indonesia has signed various trade agreements that reduce these taxes;
- the withholding taxes applicable on incomes from dividend payments, interests, and royalties.
Tax incentives in Indonesia
The following tax incentives are available for foreign investors and companies in Indonesia:
- companies can benefit from various tax concessions and incentives;
- various holiday tax benefits are also available for companies;
- foreign companies with branches can also benefit from tax cuts when reinvesting the profits of their branches;
- corporate tax reductions for small companies with an annual income below 5 million USD.
Tax rates in Indonesia
The following tax rates apply in Indonesia:
| Tax | Rate |
| Corporate tax | 1%-25% |
| Personal income tax | 5%-30% |
| Withholding tax | 2%-20% |
| Value added tax | 20% |
Categories of financial accounting in Indonesia
The financial accounting standards in Indonesia consist of four pillars, each representing a specific set of accounting standards (SAK). If you have questions about any category, please get in touch with our accountants in Indonesia, you can also find below general information:
- International Financial Accounting Standards (IFRS):
– This pillar involves the full adoption of IFRS, specifically the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). The standards under Pillar 1 are direct translations of IFRS, with no modifications or adjustments made. Our CPA in Indonesia can offer you more information about the regulations of IFRS in Indonesia.
- Indonesian Financial Accounting Standards (IFRS Convergence SAK):
– Pillar 2 encompasses the convergence of Indonesian Financial Accounting Standards with IFRS issued by the IASB. The convergence involves issuing Indonesian Financial Accounting Standards that reference IFRS but with adjustments to accommodate local conditions. Pillar 2 also considers effective dates, which may differ from those of IFRS. Additionally, it incorporates specific PSAKs tailored to meet Indonesia’s unique requirements. To learn more about these requirements, you can ask our certified public accountants in Indonesia.
- Financial Accounting Standards for Private Entities:
– Pillar 3 applies to entities without public accountability and, under certain regulatory conditions, to entities with public accountability. It involves the convergence of Indonesian Financial Accounting Standards for Private Entities with the IFRS for SMEs issued by the IASB. Adjustments are made to align with Indonesian conditions, and Pillar 2 of Indonesian Financial Accounting Standards is taken into account. These standards will replace Indonesian Financial Accounting Standards for Entities Without Public Accountability and become effective from January 1, 2025, with early adoption allowed. Our certified management accountant in Indonesia can help you comply with these standards if you have a private entity.
- Accounting Standards for Micro, Small, and Medium Enterprises (MSMEs):
– Pillar 4 applies to micro, small, and medium entities based on the requirements outlined in the Indonesian Financial Accounting Standards for Micro, Small, and Medium Entities. These standards are designed to be straightforward, providing convenience and meeting the specific reporting needs of these entities. To comply with the standards of accounting in Indonesia, you can get help from our CPA.
In addition to these four pillars, there are Sharia Financial Accounting Standards (PSAK) and Interpretation of Sharia Financial Accounting Standards (ISAK) that apply to entities and transactions governed by Sharia principles. These Sharia standards can be applied to Pillars 2, 3, or 4, as long as the requirements for implementing Sharia-compliant transactions in each pillar are met. It’s important to note that Sharia PSAK and Sharia ISAK do not apply to Pillar 1 of International Financial Accounting Standards. If you are interested in learning more about Sharia Financial Accounting Standards (PSAK), the experienced CPA at our accounting firm in Indonesia can offer you practical assistance.
You can also avail of the services of our company formation agents in Indonesia if you want to open a company. Not only our specialists will help you set up a company in Indonesia, but also our accountants will help you comply with the accounting regulations.
Why do I need accounting services in Indonesia?
If you want to open a company in Indonesia, you first know that this small country imposes a larger number of taxes compared to other countries. Even if the levies are not imposed at very high rates, you should consider some tax minimization solutions that can be offered by our company incorporation agents in Indonesia.
The opening of a company in Indonesia should be a good reason to ask for accounting services, especially for tax planning reasons. For example, the government offers various incentives when investing in certain special free zones or industries.
Our immigration lawyers in Indonesia can also assist you if you are planning to relocate to this country. Indonesia has its own set of immigration rules and procedures, and they can sometimes be intricate. Hiring our legal assistance can help ensure that you understand and adhere to the requirements, making the immigration process smoother and minimizing the risk of errors. Consult us if you are interested in immigration to Indonesia.
For full information on the taxation system applicable in Indonesia, please contact our accountants in Indonesia. We can also assist with the company and tax registration procedures in Indonesia.