Withholding Tax in Indonesia

Withholding tax in Indonesia is a system where a third party is given the responsibility to cut or collect taxes from a certain payment. They later pay that amount to the government in order to comply with the regulations. Within the context of personal income taxes, withholding tax is paid in installments which are done by cutting certain amounts by the third party as a part of the tax services.

What are the Types of Withholding Tax in Indonesia?

 In Indonesia, there are several types of withholding tax payments. Such as withholding tax under Article 21 (PPh 21), withholding tax under Article 22 (PPh 22), withholding tax under Article 23 (PPh 23), withholding tax under Article 26 (PPh 26), withholding tax under Article 4 Chapter 2 (PPh 4 Ayat 2), and withholding tax under Article 15 (PPh 15). 

Withholding Tax under Article 21

In this article, it is stated that employers have to withhold tax from salaries and severance payments to their laid off employees while also paying tax to the State Treasury for the employee’s behalf. The employer is obliged to file the article 21 withholding tax on the 10th to 20th day of the following month when the tax is due to be paid. The tax taken from the employee’s salary can be claimed as tax credit on the employee’s annual tax return. It is important to note that taxpayers with no Tax ID Number (NPWP) will be charged 20% higher than the normal rate. 

Withholding Tax under Article 22

In this article, the taxes are taken from the company’s imported goods, income from the State Treasurer or other state-owned enterprises, or from the purchase of luxury products. For companies that are importing goods, the withholding tax rate stands at 2.5%. For unregistered importers, the withholding tax rate stands at 7.5%. Purchases of luxurious goods like cruisers, yachts, aircrafts etc are charged with a tax rate of 5%.  

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Withholding Tax under Article 23

This article stipulates that certain payments made to taxpayers are due to be cut by a withholding tax rate of 15%. These stipulations apply for payments like dividends, interest, swap premiums, loan fees, royalties, prizes, and bonuses. 

Withholding Tax under Article 4 Chapter 2

This article further regulates that withholding taxes must be paid for incomes like rental of land and buildings, transfers of land and building rights, construction services, IPO, saving deposits, bank certificates, discount on bonds, lottery prizes, and dividends. 

Withholding Tax under Article 15

This final article regulates a withholding tax rate of 1.8% for the charter of local airlines, 1.2% for using the services of a local shipping company, and 2.64% for foreign shipping and airlines. 

How can Double M help?

Withholding Tax is a type of tax that is collected by a third party to be deposited for the government later on. With Double M’s help, you will be able to calculate and pay these taxes while complying with the regulations.