INDONESIA Law and Practice Contributed by: Maria Sagrado, Frederick Simanjuntak and Stephanie Kandou, Makarim & Taira S.
4. Tax 4.1 Withholding Tax
3.8 Public Acquisition Finance There are no specific rules on “certain funds” in pub- lic acquisition finance transactions as the term is not explicitly defined in Indonesian law. Both short-form and long-form documentation are used, depending on the complexity of a deal. These documents, such as loan agreements and share purchase agreements, are generally not publicly filed unless for regulatory compliance. There is no recent case law on “certain JIBOR is scheduled to be permanently discontinued as of 1 January 2026, with the Indonesia Overnight Index Average (INDONIA) to be adopted as the bench- mark interest reference rate in Indonesia for overnight tenors. 3.10 Usury Laws There is generally no limit on the amount of interest that can be charged. However, the rate should be rea- sonable. 3.11 Disclosure Requirements An Indonesian company that obtains a loan from a foreign party will be subject to certain offshore loan reporting obligations and other requirements. Briefly, the company must report its offshore loan transactions to: • Bank Indonesia, which requires the following reports: (a) a preliminary report before concluding the Offshore Loan Transaction (ie, the offshore loan plan report); (b) post-signing reports; and (c) periodic reports; and • the Ministry of Finance, which requires: (a) post-signing reports; and (b) periodic reports. funds” that the authors are aware of. 3.9 Recent Legal and Commercial Developments In addition, companies must meet a credit rating requirement before signing a loan agreement, unless exempted.
Interest payments (including premiums, discounts and returns from debt repayment guarantees) made to lenders are subject to withholding tax in Indonesia, while the repayment of loan principal is not taxable. For Indonesian lenders, interest is subject to income tax (Income Tax Article 23 or PPh Pasal 23) at a rate of 15%, with certain exemptions for Indonesian banks and registered financial institutions. For foreign lend- ers, interest is subject to withholding tax (Income Tax Article 26 or PPh Pasal 26) at a rate of 20%. 4.2 Other Taxes, Duties, Charges or Tax Considerations In addition to taxes, there are Non-Tax State Revenue ( Penerimaan Negara Bukan Pajak – PNBP) imposed on the registration of mortgages, hypothecs (rights established by law over debtors’ property that remains in the debtors’ possession), and fiduciary security with the relevant authorities in Indonesia. Additionally, stamp duties ( bea meterai ) of IDR10,000 may apply to each copy of loan and security agreements. 4.3 Foreign Lenders or Non-Money Centre Bank Lenders As mentioned in 4.1 Withholding Tax , interest received by foreign lenders is subject to income tax at a rate of 20%. However, this rate may be reduced under a Double Taxation Agreement (DTA) between Indonesia and the lender’s country of residence.
5. Guarantees and Security 5.1 Assets and Forms of Security
In general, the assets available as collateral to lend- ers in Indonesia include moveable, immoveable, tan- gible, and intangible assets (whether present or future) of the borrower. The form of security used for each asset may differ depending on the type of asset being secured as a collateral. Therefore, securing assets as collateral in Indonesia typically involves several secu- rity documents.
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