Income Tax

In Indonesia, Personal Income Tax (PIT) is applicable to individuals at progressive rates ranging from 5% to 35%. Expatriates should be aware that PIT is determined through a self-assessment scheme, and the country follows a worldwide income taxation system. Indonesian tax residents must pay tax on both their domestic and foreign income unless a double tax agreement is in place. Non-residents are only taxed on income earned in Indonesia, subject to tax treaties. 

Eligibility for PIT is based on an individual’s presence in Indonesia for more than 183 days in a 12-month period or having the intention to stay in the country. Factors defining “residing in Indonesia” include having a place of residence, vital interests, and habitual abode in Indonesia. The “intention to stay” requires supporting documents like a permanent stay permit or limited stay visa. 

Foreigners who become domestic tax subjects are taxed only on Indonesian-sourced income if they meet expertise requirements. This expertise should be certified, and there should be an obligation for knowledge transfer to an Indonesian citizen. Certain foreign expatriates, like diplomatic personnel, military staff, and specific international organization representatives, are exempt from PIT. 

Residents are subject to progressive withholding tax rates, while non-residents face a flat 20% tax on gross income. Deductions and relief are available, including deductions for individuals, spouses, and dependents. 

The PIT rates for residents are as follows: 

• Up to IDR 60 million: 5% 
• Above IDR 60 million to IDR 250 million: 15% 
• Above IDR 250 million to IDR 500 million: 25% 
• Above IDR 500 million to IDR 5 billion: 30% 
• Above IDR 5 billion: 35% 

However, starting January 1, 2024, the PIT rates for residents will be withheld based on the new effective tax rates (ETR), as stipulated by Government Regulation No. 58 of 2023. These rates will be applied from January until November. Nevertheless, the annual calculation that is carried out in December is still done using the progressive income tax rate under Article 17(a) of the Income Tax Law as above, potentially leading to underpayment or overpayment in that month.

There are three categories of taxpayers based on GR 58/2023;

• Category A (Single with no dependent, Single with one dependent, Married with no dependent)
• Category B (Single with two dependents, Single with three dependents, Married with one dependent, Married with two dependents)
• Category C (Married with three dependents)

Employers are responsible for withholding and remitting taxes monthly, and expatriate employees must complete an annual tax return. Individual taxpayers, both residents and non-residents, can deduce specific amounts from their gross income when determining the annual taxable income. 

Tax deregistration is recommended for expatriates leaving Indonesia to avoid continuous tax residency. To do so, they must submit an application to the local tax office.  

Indonesia provides income tax exemptions for certain types of income, such as foreign dividends received by domestic taxpayers, subject to reinvestment requirements. 

Reporting individual tax returns can be done directly at the tax office, through postal services, or authorized online tax services. It’s crucial for expatriates to seek assistance from registered local tax advisors to understand their tax liabilities and potential exemptions. 

Social Insurance

The Workers Social Security Scheme in Indonesia covers various areas, with contributions based on monthly wages. Employers contribute to life insurance, accident insurance, old age benefits and pension plan. Here’s a breakdown: 

• Life insurance: 0.3% (recomposed into 0.2% in case there is a JKP (unemployment benefit) claims and will be automatically counted by Social Insurance). 
• Accident insurance: 0.24-1.74% (recomposed into 0.10 – 1.60% in case there is a JKP (unemployment benefit) claims and will be automatically counted by Social Insurance). 
• Old age benefits: 3.7% by employer and 2% by employee 
• Pension plan: 2% by employer and 1% by employee of fixed monthly salary with maximum cap at IDR 10,042,300. 

Under the BPJS Ketenagakerjaan program, mandatory for all businesses, employees contribute 3% of their monthly salary. The scheme covers accident compensation, old age benefits, pension benefits, and life insurance. 

Health Insurance 

The BPJS healthcare program (BJPS Kesehatan) is a vital national insurance initiative that encompasses all Indonesian residents. It is designed to provide members with three crucial categories of healthcare services: 

• Basic Healthcare Services 
• Advanced Healthcare Services 
• Hospitalization Services 

Contribution Rate:  

• Employer Contribution Rate: 4% (capped at IDR 480,000) 
• Employee Contribution Rate: 1% (capped at IDR 120,000) 

The maximum wage considered for these calculations is IDR 12 million. Even if an employee’s salary surpasses this threshold, both employer and employee contributions are capped at IDR 480,000 and IDR 120,000, respectively. 

Contributions are due on the 10th of each month. In cases where the 10th falls on a weekend or public holiday, the following business day is considered the due date. The healthcare program contribution extends coverage to a maximum of five members, encompassing the employee, spouse, and three children (including stepchildren).