Personal Income Tax in Indonesia (Advanced)

Have you been paying the right amount of tax to the tax office in Indonesia? Save time and trouble. Estimate your own income tax for the current year through our Personal Income Tax Calculator.

What is Personal Income Tax

Personal income tax is the levying of tax subjects, belonging to individuals, on income received or earned within the tax year.

Personal Income Tax Rate in Indonesia

If you are currently employed, your company will be responsible for deducting income tax from your salary. However, it’s important to note that the amount that will be deducted may vary depending on the gross salary that you receive each month.

At the end of the fiscal year, your employer will provide you with your annual tax return, which you will need to submit to the tax authority in Indonesia by March 31st of the following year.

In Indonesia, a basic tax allowance applies to everyone’s income. Your taxable income is not subject to tax up to this amount. However, if your taxable income exceeds the basic tax allowance, you must pay income tax based on Indonesia personal income tax rate. Generally, the more you earn, the higher your tax obligations will be.

What Will You Need to Count Personal Income Tax?

ere are some general elements that you may need when calculating your personal income tax in Indonesia: 

•  Taxpayer Identification Number (NPWP):  Individuals in Indonesia who are tax subjects are required to have a Taxpayer Identification Number.
• Electronic Filing Identification Number (E-FIN): To be able to make tax payments online through DJP (Dirjen Pajak) online, you need to have an E-FIN code that can be registered at the tax office.
• Taxation Information and Details: Information on tax items, such as taxable income, non-taxable income, taxable allowances and deductions, tax rates, and tax credits.
• Annual Tax Return Filing: Individuals are generally required to file an annual income tax return in Indonesia.
• Tax Forms: Use the right tax forms for filing income tax returns. Different tax forms might have different tax rates, which could lead to the incorrect use of the personal income tax rate as well as deductions.
• Record Keeping: Maintain records and supporting documentation for income, deductions, and other relevant financial information/documents.

How Is Income Tax Calculated in Indonesia?

The Indonesian financial system relies heavily on income tax to fund the nation’s development. As such, residents and expats need to understand the calculation process to ensure they contribute their fair share and comply with tax regulations. Failure to do so can result in penalties, which can be avoided by following the guidelines.

Determine Taxable Income

The first step in calculating income tax is determining taxable income, which is the gross income minus deductions and exemptions.

Allowable Deductions:

• Occupational expenses: Up to 5% of gross income or a maximum of IDR 6,000,000
• Old-age saving contribution: Paid by employee (2% of gross income)
• Personal allowances: IDR 54,000,000 + (IDR 4,500,000 x number of dependents)

Exemptions:

• Certain income from specific industries, such as agriculture, forestry, and fisheries
• Income from overseas sources for individuals residing in Indonesia for less than 183 days per year

Identify Applicable Tax Rate

After calculating taxable income, the appropriate tax rate is determined based on the income bracket. Indonesia has a progressive tax system, with higher rates for higher revenues.

What Is The Income Tax Rate in Indonesia 2023?

The following tax rates can be used as your basic guide to calculate how much income tax you have to pay.

What Is The Personal Income Tax in Indonesia for Expats

If you are an expat working in Indonesia, you will be categorized as a non-resident taxpayer and must pay a withholding tax (WHT) of 20% on any income you earn in Indonesia.

However, depending on the applicable tax treaties, you may be eligible for exemptions or reductions. Additionally, you may receive tax deductions for certain expenses such as housing, education, and health insurance.

Managing your tax payments can be difficult and that’s why you will need a personal income tax advisor regarding Corporate or Personal Income Tax calculations in Indonesia, please get in touch with our tax experts.