Indonesia corporate tax rate, incentives, filing dates, and compliance explained

Why expand to Indonesia?

Indonesia is an obvious choice for foreign companies seeking to expand into Asia. Blessed with abundant natural resources (gold, silver, copper, coal, petroleum, natural gases, etc), a large and young labour pool, and a growing middle class, it's the largest economy in Southeast Asia and one of the world’s largest economies by purchasing power parity.

Foreign companies appreciate Indonesia's proximity to economies such as China, India, and Singapore. They're also encouraged by major business reforms in recent years and concerted efforts to improve the ease of doing business.

To attract more foreign investment, Indonesia has significantly simplified its tax regime and offers various tax incentives and tax holidays to companies establishing a physical presence in the country or trading from across borders. Add to that a plethora of tax treaties, free trade zones, and special economic zones, and Indonesia's business stock is only set to rise, much like its GDP.

Overview of corporate tax in Indonesia

The corporate income tax (CIT) rate in Indonesia is 22%.

Resident companies as well as foreign companies doing business in Indonesia through a permanent establishment (PE) are subject to CIT on their net income. For non-resident companies without a PE that earn income in Indonesia, a withholding tax is instead imposed.

A look at Indonesia's corporate tax history reveals that tax rates have consistently fallen in recent years to the delight of corporate taxpayers, both foreign and local. Indonesia’s corporate income tax rate dropped from 25% between 2009 and 2019 to the current 22% from 2020 onwards.

Corporate taxes in Indonesia are enforced and supervised by the Directorate General of Taxes, or Direktorat Jenderal Pajak, which is a directorate general under the Ministry of Finance.

Corporate tax rates and structures

There are some exceptions to the standard corporate income tax rate of 22%.

Publicly listed companies are taxed at a lower rate of 19%. To avail of this reduced corporate income tax rate, companies must meet certain minimum listing requirements —at least 40% of paid-up capital and shares must be listed on the Indonesia Stock Exchange, and the shares must be publicly owned by at least 300 shareholders.

Medium-sized enterprises (annual gross turnover not exceeding IDR 50 billion) enjoy a 50% reduction in CIT on taxable income from gross turnover up to IDR 4.8 billion. This lowers their corporate income tax rate to 11%.

Small enterprises (with an annual gross turnover of not more than IDR 4.8 billion) benefit from a final income tax rate of 0.5% of turnover instead of CIT.

Some businesses operating in specific fields (oil and natural gas) enjoy tax concessions based on contracts —Production Sharing Contracts (PSCs), Contract of Works (CoWs), and Mining Business Licences.

Certain companies in upstream oil, gas, and mineral mining that are under such contracts follow separate tax regimes with their own tax rates, deductible expenses, and tax calculations that differ from CIT. However, these are largely legacy systems and, as of 2009, have been withdrawn for new mining projects. However, the concessions might still be available for existing contracts.

Taxable income, deductible expenses, and allowances

In Indonesia, companies are taxed on profits after accounting for any deductible business expenses. Taxable income includes sales profits, interest, dividends paid, royalties, capital gains, and foreign-sourced income. Foreign companies pay CIT on income earned in Indonesia.

Companies can deduct business expenses directly related to running company operations from their taxable income. Deductible expenses include:

• Salaries
  
• Rent and utilities
  
• Maintenance costs
  
• Capital allowances (depreciation and amortisation costs)
  
• Interest on business loans
  
• Bad debt
  
• Donations for national disasters, education facilities, sport development, and social infrastructure (if certain conditions are met).
  

Note about foreign-sourced income: In Indonesia, the taxation of foreign-sourced income depends on a company’s tax residency status and the nature of the income. Resident companies may be subject to tax on foreign-sourced income, although exemptions can apply if certain conditions are met, such as the income having been taxed overseas or falling within specific exemption frameworks.

In contrast, non-resident companies are generally taxed only on income sourced from Indonesia. As a result, whether foreign-sourced income is taxable should be assessed on a case-by-case basis, taking into account residency status, applicable exemptions, and relevant double taxation agreements.

Non-deductible expenses

However, certain business expenses are non-deductible, such as:

• Fines and penalties
  
• Interest incurred on non-payment of debt
  
• Non-business-related expenses
  
• Gifts and donations not related to business
  
• Compensation to partners
  
• Expenses without valid supporting documents.
  

Employer contributions

There is often confusion around the tax treatment of contributions and compensation provided by employers to employees under Indonesian tax regulations. These benefits—known as Benefits in Kind (BIK)—may be deductible for employers, depending on how they are treated for tax purposes.

In general, BIK expenses are deductible for employers only if the benefit is taxable in the hands of the employee, unless the benefit falls within a specific exemption. Common BIK items that are non-taxable to employees and still deductible for employers, provided they meet regulatory conditions, include:

• Meals and refreshments provided at the workplace
  
• Work-related equipment and facilities
  
• Healthcare and medical treatment
  
• Vehicles
  
• Housing
  
• Sports and recreational facilities
  
• Security benefits
  
• Gifts on religious occasions and prayer facilities
  
• Employer-paid pension contributions.
  

Because the tax treatment of BIK depends on the nature, purpose, and use of each benefit, companies should assess benefits on a case-by-case basis and refer to the latest guidance issued by the Directorate General of Taxes.

Tax incentives

Indonesia offers various tax incentives, especially in its 246 designated priority sectors, to attract foreign companies and investment. These incentives take many forms:

Tax holidays

• A 50% reduction in corporate income tax for 5 years for investments between IDR 100 billion and IDR 500 billion.
  
• A 100% reduction in corporate income tax for 20 years if investment exceeds IDR 500 billion.
  

Tax allowances

• A 30% reduction in net taxable income of the total investment value over a 6-year period (5% per year).
  
• A reduced 10% withholding tax on dividends paid to non-resident shareholders (excluding foreign entities with permanent establishment)—half the standard 20% withholding tax rate for non-resident companies.
  
• Ability to carry forward corporate tax losses for up to 10 years in certain priority areas.
  
• Accelerated depreciation and amortisation deductions.
  

Other tax incentives

Beyond tax holidays and allowances, Indonesia offers additional incentives to encourage long-term investment and capability building. These include:

• A 200% tax deduction for qualifying human capital development activities, such as approved apprenticeship and internship programmes.
  
• A 300% tax deduction for eligible research and development (R&D) activities conducted in Indonesia.
  
• Exemptions from value-added tax (VAT), import duties, and luxury goods sales tax for companies operating within designated special economic zones (SEZs) and free trade zones.
  

Indonesia’s SEZs—such as Batam, Bintan, and Galang Batang—are designed to support capital-intensive and export-oriented industries. Depending on the sector and investment size, qualifying projects in these zones may benefit from extended corporate income tax exemptions of up to 20 years, alongside full VAT and import duty relief. These incentives can materially reduce upfront and ongoing tax costs for businesses establishing operations in Indonesia.

When and how to file corporate tax returns in Indonesia

The deadline to pay corporate income tax and file tax returns is the end of the fourth month following the close of the financial year. While this is April 30 for most companies (who end their year on Dec 31), businesses with a non-calendar fiscal year (e.g., ending March 31) must file by July 31.

As per the Directorate General of Taxes' tax regulations, companies must have a taxpayer identification number to file taxes, fill their tax return forms in the Indonesian language, and pay taxes in IDR. Foreign companies permitted to keep English records must also fill out forms in Indonesian.

• Tax returns can be filed electronically on the authority's website.
  
• Tax payments can be settled by direct payment to the authority, third-party withholding, or both.
  

Foreign companies must take special note of the requirement to pay advance tax in monthly instalments. These are calculated on the basis of their tax liabilities in the previous year.

Failing to fulfil tax obligations and missing the tax return deadline will attract late fines, penalties, interest charges and a surcharge.

Reducing tax burden with double taxation agreements

Indonesia has 71 double taxation agreements (DTAs) with multiple countries. These treaties provide tax incentives in the form of reduced withholding tax on dividends, interest, and royalties and withholding tax exemption on service fees. To avail of DTA benefits, a company must be a tax resident of one or both of the contracting states.

For foreign companies doing business in Indonesia or pursuing the idea, the existence of a DTA with Indonesia can reduce their tax burden considerably and help them avoid being taxed on their income in two jurisdictions.

Singapore, for example, has a DTA with Indonesia that was signed in 1992 and revised in 2020. Under this tax treaty, the withholding tax rate on dividends is lowered to 10% (if the recipient company directly owns 25% of the capital of the paying company) or 15% (for all other companies).

Similarly, the reduced withholding tax rate on royalties is 8% (industrial, commercial or scientific equipment/information) and 10% (copyright of literary, artistic or scientific work).

Apart from a double taxation agreement, Singapore and Indonesia have also signed a free trade agreement and a bilateral investment agreement in a bid to strengthen economic ties.

Other taxes to take note of

Apart from the Indonesian corporate income tax, companies engaged in business there pay other taxes, such as:

Withholding tax

Indonesia applies withholding tax to certain types of payments, including dividends, interest, royalties, and service fees. The applicable rate depends on the taxpayer’s residency status, the nature of the income, and the relevant withholding tax article under Indonesian tax law.

As a general guide:

• Resident taxpayers are commonly subject to withholding tax at 15% on dividends, interest, and royalties.
  
• Non-resident taxpayers are generally subject to withholding tax at 20% on the same types of income, unless a lower rate applies under a double taxation agreement (DTA).
  

Because withholding tax rates can vary by income type and may be reduced under applicable tax treaties, businesses should assess each payment individually and confirm the correct rate before withholding and remittance.

Value-added tax (VAT)

The VAT rate in Indonesia is officially 12%, but an effective rate of 11% applies to most goods and services. Only certain luxury goods are taxed at 12%.

Luxury goods sales tax

This tax applies to luxury goods such as cars and homes. The tax rate ranges from 10% to 95%.

Import duty

Import duties between 0% and 150% are levied on imported goods. Alcohol, for example, attracts the highest duty (150%).

Other taxes

• Land and building tax
  
• land and building transfer tax
  
• Stamp duty
  
• Carbon tax
  
• Regional taxes (heavy equipment tax, advertising tax, groundwater tax, etc).
  

Tax compliance and registration

Here are some basic tax obligations to fulfil in order to stay compliant:

• Register with the Directorate General of Taxes to receive your tax identification number, so you can start filing your corporate income tax returns in Indonesia.
  
• Check to see if your company is eligible for reduced corporate tax rates or tax incentives under double taxation treaties.
  
• Keep note of the tax return deadline and dates for making monthly advance tax payments to avoid late fees and other penalties.
  
• Keep proper records to claim deductions and exemptions smoothly.
  
• Make sure your corporate income tax returns are signed, hold accurate information, and have supporting documents, or they might be considered 'not filed'.
  
• Use a corporate income tax calculator to compute your payable tax correctly and stay compliant.
  

Recent tax reforms and developments

Significant developments in Indonesia's corporate tax landscape this year:

• As of January 1, 2025, Indonesia has officially implemented its Core Tax Administration System (CTAS). It integrates registration, filing, payments, and even audits into a single "Taxpayer Portal".Therefore, corporate filings are progressively being centralised through this system. It features pre-populated data drawn from third-party sources (like banks and customs), which significantly simplifies the annual return process and reduces manual entry errors.
  
• In the same month, Indonesia also implemented a global minimum tax rate of 15% on multinational enterprises with annual revenues of EUR 750 million or more and operating in jurisdictions where the effective tax rate is below the 15% threshold.¹¹
  
• The third major reform, which also took place in January, was an increase in the VAT rate from 11% to 12% and aimed at boosting revenue. While the formal VAT rate increased, the government has introduced a measured transition.For most non-luxury goods and general services, the tax base is calculated as 11/12 of the transaction value. As a result, although your invoice will officially state a 12% rate to remain compliant with the law, the effective payable rate remains 11% for the time being to safeguard public purchasing power and business stability.
  

How Aspire supports your business in Indonesia

Managing corporate tax in Indonesia goes beyond knowing the rates. From meeting filing deadlines and handling withholding tax to managing cross-border payments and maintaining clean records, the right financial setup can make compliance far simpler.

• Business account: Manage local and international transactions through a multi-currency account supporting 30+ currencies across 130 countries. Pay Indonesian suppliers, receive overseas revenue, and manage cash flow efficiently as your business scales. It comes with unlimited virtual corporate cards to boost your company's cash flow.
  
• Global payments: Make same-day international transfers in 15+ currencies at competitive FX rates, helping you settle supplier payments and intercompany charges on time and with lower costs.
  
• Invoice management: Create professional, tax-compliant invoices and automate reconciliation. With built-in accounting integrations, preparing for corporate tax filing and audits becomes faster and more accurate.
  

FAQs

What is the corporate income tax in Indonesia?

Indonesia imposes a 22% standard corporate income tax on the net income of resident companies and foreign companies with permanent establishment. Small and medium-sized enterprises can avail of reduced rates if they meet certain conditions.

What is the corporate tax rate in Indonesia 2025?

The Indonesian corporate income tax rate in 2025 is 22%, having remained consistent since 2020. The tax rate will remain the same in 2026.

Is the VAT rate in Indonesia 12% or 11%?

In 2025, Indonesia increased its VAT rate to 12% from 11%. However, most goods—with the exception of certain luxury goods—are still effectively taxed at the old rate of 11%.

Can a foreigner own a company in Indonesia?

Yes, foreign individuals and entities can establish companies in Indonesia. A foreign-owned company in Indonesia is commonly called a PT PMA—a limited liability company that can be either partially or wholly foreign-owned. Setting up a PT PMA requires a minimum investment plan of IDR 10 billion (excluding land and property), a minimum paid-in capital of IDR 2.5 billion, and at least two shareholders.

Does Indonesia have a tax treaty with Singapore?

Yes, Indonesia and Singapore have a double taxation agreement.