Indonesia applies the self-assessment method to calculate, settle and report income tax. The tax authorities have the right to audit any tax return to ensure the individual has correctly calculated the tax payable, within the 5-year statute of limitations. For Indonesian-sourced income, there is an extensive framework of withholding taxes so that income tax is often collected by deduction at the source.

An Indonesian tax resident is defined as an individual who: 
– Is an Indonesian citizen; or 
– A foreigner who resides in Indonesia, or being present in Indonesia for more than 183 days within any 12-month period, and/or present in Indonesia during a tax year with the intention of residing in Indonesia. – Resident individuals are taxed on their worldwide income, regardless of where such income arises or for whom work, or services are performed. Non-resident individuals are exempted from the worldwide income reporting obligation and tax is imposed only on income derived in Indonesia.

Indonesian tax residents are required to file annual individual tax returns when their total income derived from sources within and outside of Indonesia exceeds the minimum threshold, which is between IDR 54,000,000 for a single individual to IDR 72,000,000 for a married individual with maximum 3 children/ dependents.

The obligation to withhold, remit, and report tax on compensation paid in connection with employment rests with the local employing entity. Income tax withheld by employers must be remitted on a monthly basis by the 10th of the following month and reported by the 20th of the following month.

An individual taxpayer is obliged to comply with the following procedures: 
• registration 
• payment of monthly instalments 
• lodgment of an annual individual income tax return 
• de-registration upon leaving the country permanently

An expatriate is taxed on their actual salary, although salary guideline levels are sometimes used by the tax office where there is evidence of undeclared or under declared income. (Expatriates working in the offshore oil drilling sector are subject to tax at statutory-deemed salary levels, not actual salary.)

Foreign employees meeting “certain skills” requirements will be exempted from worldwide income reporting for four years from first arrival in Indonesia. They are only subject to Indonesian-sourced income. Indonesian-sourced income includes income in connection with a job, service or activity in Indonesia under whatever name or form obtained or paid within and outside Indonesia.