What are the taxes like in Bali and Indonesia?

Alexis
Modified on December 28, 2023

Key Points of the Indonesian Tax System The Indonesian tax system is not very different from that of many other countries in the world. You are taxed on your worldwide income if you are an Indonesian tax resident Indonesia has a residence-based taxation system. This means that, in theory, a person residing in Bali (thus […]

Key Points of the Indonesian Tax System

The Indonesian tax system is not very different from that of many other countries in the world.

You are taxed on your worldwide income if you are an Indonesian tax resident

Indonesia has a residence-based taxation system. This means that, in theory, a person residing in Bali (thus in Indonesia) must pay all their global taxes in Indonesia, unless otherwise agreed upon.

This system is in contrast to the "territorial" taxation that taxes only the income generated in the country of residence and exempts income generated outside the country, known as offshore income.

If you live in Indonesia year-round, you must declare all your worldwide income to the Indonesian tax authorities. You might or might not benefit from double-tax treaties depending on your nationality and the source of your income.

Withholding tax is widespread

An important aspect of the Indonesian tax system is that withholding tax is prevalent.

If you are required to file your annual tax return, in reality, the company employing you is responsible for collecting and settling all taxes related to your employment.

This means that if you only have income from an Indonesian employer, you won't have much to do regarding taxes, except filing your tax return before the end of March each year.

However, if you have income from sources other than salaried employment in Bali or Indonesia, the situation can quickly become more complicated.

Who needs to pay taxes in Bali?

Now that you understand the basics of the Indonesian tax system, let's explore those who, in theory, need to pay taxes in Bali.

Individuals officially residing (and fiscally) in Indonesia

From the moment you have an Indonesian residence permit (KITAS or KITAP), you are an Indonesian tax resident. This means you must have a tax number (called NPWP) and must file an annual tax return.

Read the article on visas in Indonesia for more details.

The responsibility for filing the tax return lies with both you and the company employing you. Even if you have no income to declare (unemployment, etc.), it is still your duty to declare your income (even if it's zero) each year.

Individuals spending more than 183 days a year in Indonesia are in theory tax residents

When you live more than 183 days per year on Indonesian soil, you must settle your taxes in Indonesia.

The law is clear on this, but its implementation is less so, as it requires a residence and/or work permit to be considered a tax resident.

The case of digital nomads living year-round in Bali on tourist or social visas illustrates this paradox. However, recently, immigration declared that they would be stricter, especially in Bali, with those working illegally and not paying their dues to their country of residence.

Individuals living abroad but working for companies in Indonesia

If a person is not an Indonesian tax resident (living abroad, for example) but performs occasional work for an Indonesian company, they must pay taxes in Indonesia, generally withheld directly at the source by the company.

Companies operating in Indonesia are all deemed tax resident

Not surprisingly, any company legally operating in Indonesia and earning income is liable to taxation.

What are the taxes in Bali for individuals?

If you are liable to tax as an individual in Bali, here are the main taxes and deductions you should see on your pay slip.

Income tax: Withheld at the source in most cases

Income tax is the main tax paid by expatriate and non-expatriate employees living in Bali. Like in many countries, the rate is progressive, ranging from 5% for low incomes to 30% for the highest brackets.

Here are the details of the annual income tax brackets:

  • IDR 50 million and below: 5%
  • Between IDR 50 and 250 million: 15%
  • Between IDR 250 and 500 million: 25%
  • Over IDR 500 million: 30%

If all your income comes from employment in Indonesia, then your income tax will be entirely settled by the company employing you through withholding tax. Quite convenient. If you have multiple source of income, that's a bit more complicated naturally, and you might have to transfer extras to the tax department.

DPKK Tax: Mandatory $100/month for employing a foreigner in Indonesia

The DPKK tax is a skills development fund collected on expatriate permits to reinvest in the education of Indonesians.

The idea behind this tax is that an expatriate must bring a skill that the employer cannot find locally. It aims to discourage unjustified hiring of foreign employees and to fund the education of Indonesians so that the need for expatriate employees is reduced.

This tax is paid annually, and the work permit only begins once this payment is received.

If you are employed in Indonesia, it is usually the company employing you that must pay it, as they are your sponsor.

Mandatory contributions to social security and retirement (BPJS)

Although not technically taxes, certain contributions to social security or retirement remain mandatory once you are employed in Bali and Indonesia in general.

Contributions to BPJS Kesehatan (healthcare system)

Various contribution levels exist depending on the level of healthcare you want or the agreements you have with your company.

Contributions to BPJS Kesehatan are generally at a minimum of 5% of the gross salary:

  • 1% paid by the employee
  • 4% paid by the employer

The maximum monthly contribution limit is calculated on a salary basis of 12 million, so in principle, you should not pay more than 600,000 rupiahs per month on that.

Read more on the subject: Indonesian Healthcare System: How Does It Work?

Contributions to BPJS Ketenagakerjaan (retirement system)

The contributions to BPJS Ketenagakerjaan are mandatory but entirely belong to you. It is, in fact, a mandatory capitalized retirement system, which you can withdraw freely when changing jobs or leaving Indonesia.

The required contribution amounts are 3% of your gross salary:

  • 1% paid by the employee
  • 2% paid by the employer

So to sum up, your social contribution are 8% of your gross income when you are an Indonesian tax resident. They are not really taxes as they also open new rights for you as a resident of Indonesia.

5% allows you to use the local healthcare system and thus benefit from certain healthcare for free.

The remaining 3% is at your disposal for your retirement, or for when you decide to withdraw it between two job contracts or upon leaving Indonesia.

What are the taxes in Bali for companies?

If you are an Indonesian company, taxes and fees can be both simple and complicated depending on your sector.

Here are the main taxes to be aware of.

Corporate income tax: Variable depending on the size of your company

Corporate income tax in Indonesia depends on the size of your company, particularly your annual turnover.

  • Below IDR 4.8 billion turnover: 0.5% of your turnover
  • Between IDR 4.8 and 50 billion turnover: 11% of profits
  • Above IDR 50 billion turnover: 22% of profits

However, some industries have specific tax rates that may be higher or lower than these mentioned rates. This is notably the case in the mining industry, construction, or geothermal sector.

VAT: Generally 11% in Bali

VAT is 11% in Indonesia, including Bali. The amount may change between 5% and 15% by government decision. In 2025, the new VAT should be set at 12% for most sectors.

Some sectors require permits or licenses to enter the market or perform certain operations (importation, manufacturing, etc.). The laws are quite complex, and permit prices vary but can be considerable.

Some more regional or even local taxes are often required from companies, especially in Bali. As some banjars manage part of the village administration, you may have to contribute if you settle in their jurisdiction.

Customs duties should also not be neglected if you plan to import certain products into Indonesia. Some products, like alcohol, can be taxed up to 150%!

Conclusion

The Indonesian tax system is not so confusing when you are an employee, even a foreigner, living in Indonesia.

However, it can quickly become more complex if you are employed in Indonesia and have multiple sources of income from different countries. In this case, it is highly recommended to consult with accountants or even specialized lawyers who can help you avoid pitfalls with both Indonesia and your home country.

For businesses, the situation is inherently more complex, and significant responsibility is attributed to them in collecting taxes. It is highly recommended to consult with qualified consultants before establishing a business in Indonesia to have a complete understanding of operational costs and direct and indirect taxes your business sector is subject to.

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