Personal income tax in Indonesia is calculated based on a progressive tax rate system, where tax rates increase with higher income levels. The process involves determining taxable income, applying the appropriate tax rates, and deducting any eligible tax credits or deductions.
Individuals are liable for personal income tax in Indonesia if they meet the criteria for tax residency, as defined by Indonesian tax law. Tax residency is typically determined based on the duration of stay in Indonesia, with individuals present for more than 183 days in a tax year considered tax residents.
| Taxable Income Range (IDR) | Tax Rate (%) |
|---|---|
| Up to 60 million | 5 |
| 60 million - 250 million | 15 |
| 250 million - 500 million | 25 |
| 500 million - 5 billion | 30 |
| Above 5 billion | 35 |
Indonesia offers various deductions and tax credits to reduce taxable income, including deductions for certain expenses such as education, health care, and insurance premiums.
Types of Taxable Income: Taxable income in Indonesia includes various types of income, such as salaries, wages, bonuses, business profits, rental income, capital gains, and dividends. These incomes are categorized and treated differently for tax purposes based on applicable tax regulations.
Examples of Exempt Income: Certain types of income are exempt from taxation in Indonesia, such as:
- Dividends received from Indonesian companies.
- Interest income from government bonds.
- Certain income from foreign sources under tax treaty provisions.
Legal Basis for Exemptions: Exemptions from taxation are provided under specific provisions of Indonesian tax law, such as Article 4 paragraph (1) of Law No. 36 of 2008 on Income Tax. These exemptions aim to encourage investment, promote economic growth, and ensure fairness in the tax system.
Applicable Laws: The primary legislation governing personal 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 and Sections:
- The specific articles and sections relevant to tax rates, taxable income, and exemptions include Article 17, Article 21, Article 22, Article 23, and Article 26 of Law No. 36 of 2008 on Income Tax.
The objectives of these legislative provisions include:
- Ensuring progressive taxation to promote social equity.
- Encouraging investment and economic development through tax incentives.
- Facilitating compliance and administration of the tax system.
