Corporate income tax in Indonesia is calculated based on the net taxable income of corporations. The process involves determining gross income, deducting allowable expenses, and applying applicable tax rates. Corporations must adhere to generally accepted accounting principles or Indonesian Financial Accounting Standards when preparing financial statements, with taxable income determined based on these statements adjusted for tax purposes.
Corporations in Indonesia are required to follow generally accepted accounting principles (GAAP) or Indonesian Financial Accounting Standards (IFAS) when preparing financial statements. Taxable income is typically determined based on the financial statements adjusted for tax purposes.
Tax Rates for Corporations
| Taxable Income Range (IDR) | Tax Rate (%) | Specific Conditions |
|---|---|---|
| General Rate | 22 | Applicable to all corporations |
| Public Companies | 19 | Minimum 40% listing on IDX and meeting other criteria |
| Small Enterprises (Turnover ≤ IDR 50 billion) | Varied | 50% discount on standard rate for part of gross turnover up to IDR 4.8 billion; final income tax at 0.5% of turnover for companies with gross turnover below IDR 4.8 billion |
There are no standard deductions for corporate income tax in Indonesia. However, corporations may be eligible for tax credits or incentives for certain activities, such as investments in designated industries or regions.
Types of Taxable Income:
Taxable income for corporations in Indonesia includes various types of revenue, gains, and other financial inflows, such as:
- Business profits
- Interest income
- Rental income
- Royalties
- Capital gains
- Dividends received
These forms of income are aggregated and subject to taxation after deducting allowable expenses, such as operating costs, depreciation, and interest expenses, as prescribed by tax regulations.
Certain types of income are exempt from corporate income tax in Indonesia, including but not limited to:
- Dividends received from Indonesian companies
- Interest income from government bonds
- Certain capital gains from the sale of shares
Exempting certain types of income aims to encourage investment, promote capital market development, attract foreign investment, and foster economic growth. These exemptions also help prevent double taxation and ensure a competitive business environment.
Applicable Law: The primary legislation governing corporate income tax in Indonesia is Law No. 36 of 2008 on Income Tax ("Undang-Undang Nomor 36 Tahun 2008 tentang Pajak Penghasilan"), as amended.
Articles of the Law: The articles and sections of the law relevant to corporate income tax include Article 17, Article 22, Article 23, and Article 26 of Law No. 36 of 2008 on Income Tax.
