INDONESIA LAW AND PRACTICE Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
However, some components of the BPJS pro - gramme are subject to a salary cap, meaning contributions are not calculated on the full sal - ary. For example, BPJS Kesehatan (health) is capped at a maximum salary of IDR12 million/ month, while BPJS Jaminan Pensiun (pension programme) is capped at IDR10,547,400/month (as of March 2025). Any salary exceeding these limits is not subject to additional contributions under those specific programmes. 5.2 Taxes Applicable to Businesses A company is considered resident (and subject to tax on worldwide income) if it is established or domiciled in Indonesia. Non-resident companies are taxed only on Indonesian-sourced income, generally through withholding tax. Companies doing business in Indonesia are sub - ject to several taxes, including corporate income tax at a standard rate of 22%; VAT effectively at 11%; and withholding tax (WHT) on payments to resident taxpayers, generally 15% for divi - dends, interest, and royalties, and 2% for ser - vice fees, consulting, and rentals, except for land and building rentals, which are subject to 10% WHT. For non-resident recipients, WHT is typi - cally 20% on dividends, interest, royalties, and service fees, unless reduced under a tax treaty. Other applicable taxes include final income tax for certain sectors (eg, micro, small, and medium enterprises, and construction), land and build - ing tax, stamp duty, and excise tax on specific goods. Effective 1 January 2025, Indonesia has commit - ted to implement OECD Pillar Two, which targets large multinational groups with global revenues above EUR750 million to ensure a minimum 15% effective tax rate. To retain taxing rights and
maintain investment competitiveness, Indonesia has introduced a Domestic Minimum Top-Up Tax (DMTT) aligned with OECD safe harbour rules. Further regulations are expected soon. 5.3 Available Tax Credits/Incentives Tax Credits In Indonesia, tax credits are relatively limited and mainly apply to taxes already paid, either domestically or abroad. The two primary credits are the Foreign Tax Credit (FTC), which allows resident taxpayers to credit foreign income tax paid on foreign-sourced income, and prepaid taxes, such as income tax withheld at source (eg, Article 21 on salaries, Article 22 on imports, Article 23 on rental and services, and Article 25 on monthly instalments, all of the Income Tax Law). Additionally, input VAT incurred on purchases (goods or services) can be credited against out - put VAT collected on sales, provided it relates to taxable business activities, is supported by a valid tax invoice, and is claimed within three months of the invoice date. Tax Incentives Additionally, while not formal credits, Indonesia offers several tax incentives that reduce taxable income or provide additional deductions. These include tax holidays for pioneer industries (5–20 years CIT exemption), tax allowances for labour- intensive or export sectors (eg, 30% investment deduction), Special Economic Zone incentives (CIT/VAT/customs relief), super deductions of up to 300% for R&D, dividend reinvestment exemp - tions, Free Trade Zone benefits (eg, Batam and Bintan), and green energy incentives including potential carbon credits. Note that the tax holiday application must be submitted no later than 31 December 2025.
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