Tax Minimization in Indonesia

Updated on Monday 08th January 2018

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Foreign investors have many reasons to set up companies in Indonesia. Among these, the skilled and cheap workforce, the easy procedure of incorporating a business and the advantageous taxation system are just a few. Speaking of taxation, the Indonesian tax authorities provide for numerous incentives and deductions which form very competitive tax minimization solutions when comparing Indonesia to other Southeast Asian countries.

Our Indonesia company incorporation consultants can explain the taxation system applicable here and the tax reduction tools available to foreign investors.
 

Taxation in Indonesia

Even if Indonesia does not have one of the lowest tax rates on income in the region, there are numerous reductions which make it very advantageous for investors to set up companies here. Foreign investors who want to minimize the taxes they pay in Indonesia should know that from the 25% income tax applied to companies, the following reductions apply:

-          a 5% reduction for companies listed on the Stock Exchange under certain circumstances;
-          a 50% reduction for companies with an annual gross income of 50 billion IDR (approximately 5,5 million USD);
-          withholding tax reductions for certain incomes earned by companies.

Also, Indonesia has signed several double taxation treaties which provide for various tax exemptions and reductions on certain incomes. Our company registration consultants in Indonesia can offer information on the double tax agreements signed by the tax authorities here.
 

Tax minimization solutions in Indonesia

Tax minimization implies using the taxation system applicable in Indonesia to legally reduce the taxes paid on the income generated here. From this point of view, Indonesia has enabled the following regimes which provide for efficient tax planning for companies in Indonesia:

-          the holding company regime which provides for lower taxes applied on dividends paid to non-resident shareholders;
-          the controlled foreign company (CFC) regime which refers to local investors owning shares in offshore companies;
-          tax breaks for investments in research and development activities;
-          tax exemptions of various transactions, such as mergers and acquisitions;
-          tax reliefs for investing in special economic areas.

For full information on the tax minimization solutions available and assistance in company registration in Indonesia, please contact us.
 

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