Indonesia Corporate Tax - Guide for International Expansion

Are you planning to do business in Indonesia? Then it's essential to understand how corporate income tax works and what it means for your company.

In this guide, we'll break down everything you need to know about corporate taxes in Indonesia, from setting up your business to staying compliant. Whether you're launching a new venture or expanding your business, understanding your tax obligations is key to running a successful operation in this dynamic Southeast Asian market.

And if you're looking for smart ways to save money and manage international payments, we'll also show you how a Wise Business account can help simplify cross-border transactions and keep your finances running smoothly.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Indonesia corporate tax rate in 2025

The standard corporate income tax (CIT) rate in Indonesia is 22%. However, businesses with an annual gross turnover of up to IDR 50 billion can benefit from a reduced rate. A 50% discount on the standard rate is applied to taxable income up to IDR 4.8 billion (approximately £250,000), resulting in an effective tax rate of 11%. Taxable income above IDR 4.8 billion is subject to the standard 22% rate.¹

For publicly listed companies that meet certain criteria, including having at least 40% of their shares owned by the public and traded on the Indonesia Stock Exchange, a reduced corporate tax rate of 19% applies (down from the standard 22%).²

Indonesia operates a territorial tax system for resident companies, meaning they are taxed on both domestic and foreign-sourced income. Non-resident companies are only subject to Indonesian corporate income tax on income derived from Indonesian sources.²

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Indonesia

Corporate tax payments in Indonesia must be made in Indonesian Rupiah (IDR) through the country's electronic tax system. The Directorate General of Taxes (DJP) requires all corporate taxpayers to use the online tax system for filing returns and making payments.⁴

Companies must register for a Tax Identification Number (NPWP) before commencing business operations. Once registered, businesses are required to make monthly advance payments (known as Article 25 payments) based on their estimated annual tax liability. These advance payments are typically calculated as 1/12th of the previous year's tax liability.³

The annual corporate income tax return (SPT Tahunan) must be filed by the end of the fourth month following the end of the tax year. For companies following a calendar year, this means the deadline is 30 April. Any remaining tax liability after deducting advance payments must be settled when filing the annual return.¹

Indonesia imposes penalties for late filing and late payment. Late filing penalties are fixed at IDR 1,000,000 per corporate tax return. Late payment penalties accrue monthly interest based on the Ministry of Finance rate plus a surcharge (currently ranging from about 0.5% to 2.2% per month of the outstanding tax).⁵ ⁶

Let's say your company has a turnover of IDR 22.5 billion (approximately £1.5 million) and operates with a profit margin of 10%, giving it a taxable profit of IDR 2.25 billion.

At Indonesia's standard corporate tax rate of 22%, the tax owed would be:

IDR 2.25 billion × 22% = IDR 495 million

However, since this company's turnover is under IDR 50 billion, it qualifies for the reduced rate of 19%:

IDR 2.25 billion × 19% = IDR 427.500 million

If the company fails to pay by the deadline and is 30 days late, it will incur interest charges of 2% per month:

IDR 427.500 million × 2% = IDR 8.550 million in penalties

So the total amount owed would be: IDR 427.500 million (tax) + IDR 8.550 million (interest) = IDR 436.050 million

When expanding your business to Indonesia, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Indonesia

Below are some tips to keep your company compliant with Indonesian tax regulations:

• Register for taxes early: Register with the Directorate General of Taxes after incorporation. This ensures you can operate legally and meet obligations such as corporate income tax, VAT, and employee-related taxes.
• Know the deadlines: Corporate taxpayers must file an annual corporate tax return by the end of the fourth month after the financial year ends. Monthly tax obligations such as VAT and withholding tax must also be filed and paid on time. Delays can result in administrative penalties and interest charges.
• Understand tax rates: The minimum corporate tax rate in Indonesia is applied on net income, and specific industries may be subject to special rules. Accurate corporate tax management is essential to avoid disputes.
• Seek expert support: Many businesses use corporate tax advisory services or engage a corporate tax lawyer to stay on top of changing regulations. Professional guidance also helps with filing corporate taxes correctly and reducing the risks of errors.

Note that abiding by Indonesian law can help your business reach its targets. Staying compliant in this country requires accurate record-keeping, timely filings, and awareness of updates in tax law.

International Expansion to Indonesia

Many businesses are eyeing Indonesia for further expansion, and rightfully so. As of 2024, the country ranks as the world’s 8th largest economy by purchasing power parity, with a GDP of US$4.66 trillion.⁷ Its economy grew by 5.03% in 2024, driven by exports worth US$266 billion.⁸ This stable growth highlights the opportunities available for foreign investors.

The country is also home to ASEAN’s largest labor market. It has a population of over 282 million, 60% of whom are under 40. More than 130 million workers are available, and they’re supported by competitive wage levels compared to neighboring markets.⁷ This provides a cost-effective advantage for companies planning long-term expansion.

Their growing middle class is further strengthening their consumer base. Over 52 million Indonesians now belong to this group, and the government aims to expand it further to 80% of the population.⁹ This shift signals rising demand for quality goods and services, creating new market opportunities.

Infrastructure development is another driver. The government has committed over US$400 billion to projects such as airports, highways, power plants, and the construction of the new capital city in Borneo.⁷ These initiatives make logistics and business operations more efficient for international firms.

On the tax side, Indonesia’s corporate income tax rate is competitive, and companies benefit from more than 70 double taxation avoidance agreements.¹⁰ These agreements reduce the risk of double payments on income, which helps businesses comply with the Indonesian corporate tax rate and avoid issues related to corporate tax evasion. Businesses operating in Bali also follow the same Bali corporate tax rules as the rest of the country, with deadlines set by the Indonesian Tax Office.¹⁰

You can set up your business in Indonesia by following these steps:¹¹

1. Conduct market research.
2. Develop a business plan.
3. Choose a legal structure and reserve a business name.
4. Register with the Investment Coordinating Board (BKPM).
5. Enroll with the Indonesian Tax Office.
6. Secure licenses and permits.

You can also explore Wise’s Doing Business in Asia 2025: Opportunities and Challenges guide for insights on regional market dynamics.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Indonesia

To incorporate a business in Indonesia, you must register with the Investment Coordinating Board (BKPM). It’s the authority responsible for approving foreign and domestic investment. This process ensures that your business is legally recognized and fully compliant with local regulations.

The following details are required to set up a company in Indonesia:¹²

• Company name: A unique name that must be reserved before registration.
• Type of entity: The legal structure determines ownership rights, liability, and tax treatment.
• Articles of Association: A document that outlines the company’s purpose, shareholder responsibilities, and governance.
• Registered office: A physical business address in Indonesia where official correspondence will be sent.
• Directors and Commissioners: Directors oversee daily operations, while Commissioners monitor compliance and provide oversight.
• Share capital: The minimum investment required varies depending on the chosen entity and business scale.
• Tax registration: Mandatory enrollment with the Indonesian Tax Office (Direktorat Jenderal Pajak) to manage obligations such as corporate income tax filings, corporate tax calculation, and corporate gains tax reporting.

Business Entity Types in Indonesia

According to The Company Law issued in 1995, businesses expanding into Indonesia can choose from several structures:¹³

• Local PT (Perseroan Terbatas): This is a limited liability company set up by Indonesian nationals. It is the most common entity for local enterprises.
• PT PMA (Perseroan Terbatas Penanaman Modal Asing): A foreign-owned limited liability company, and the most common choice for international investors. It requires a minimum of two shareholders, one director, and one commissioner.
• Representative Office: A structure suitable for foreign firms conducting market research or promotion. It cannot earn local revenue, but provides a gateway to test market entry.
• Partnerships (Firma and CV): Typically used by small businesses. Liability is not limited, which makes these less favorable for foreign investors.

Foreign investors usually opt for a PT PMA. It offers limited liability protection, the ability to trade in Indonesia, and access to a fast-growing consumer base. Some companies may also engage a corporate tax solicitor to ensure compliance with tax law and minimize risks linked to corporate tax evasion.

International corporate tax best practices

Here are some of the best strategies to ensure compliance with local tax laws, save more money, and reduce tax burdens.

Stay compliant with local and international tax laws

Complete the legal registration process in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay up to date with local tax laws to remain fully compliant.

Companies should also understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). With frameworks like Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax, companies can ensure transparency, prevent tax avoidance, and avoid legal risks.

Leverage double taxation treaties (DTTs)

DTTs are essential in making sure that you're not taxed on the same income twice. Therefore, CFOs and Directors need to have a clear understanding of these treaties between the countries in which your business operates and how they can potentially relieve your tax burden. Indonesia has signed double taxation agreements with over 60 countries to prevent double taxation and encourage international trade.

Maintain up-to-date and transparent financial records

Maintaining clear and up-to-date financial records helps companies prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, having organised financial records simplifies the process during tax audits and helps demonstrate compliance with Indonesian tax regulations.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Indonesia efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Indonesia

Who is liable for corporate tax in Indonesia?

All resident companies in Indonesia are liable for corporate income tax on their worldwide income. A company is considered resident if it is incorporated in Indonesia or has its place of effective management in Indonesia. Non-resident companies are only liable for Indonesian corporate tax on income sourced from Indonesia, typically subject to withholding tax rates ranging from 10% to 20% depending on the type of income and applicable tax treaties.¹⁴

Are there any tax incentives for businesses in Indonesia?

Yes, Indonesia offers various tax incentives to encourage investment and business development. These include tax holidays for certain industries (ranging from 5 to 30 years), investment allowances, accelerated depreciation, and reduced corporate tax rates for specific sectors such as manufacturing, tourism, and technology. Companies investing in certain regions or priority sectors may qualify for additional incentives, including exemptions from import duties and luxury sales tax.

What is the process for registering for corporate tax in Indonesia?

Companies must first obtain a Tax Identification Number (NPWP) from the local tax office or through the online system. This requires submitting the company's deed of establishment, business licence, and other supporting documents. Once registered, companies must also register for VAT if their annual turnover exceeds IDR 4.8 billion. The registration process typically takes 1-3 business days when completed online through the official DJP portal.

What are the common pitfalls to avoid regarding corporate tax in Indonesia?

Common mistakes include failing to register for tax obligations promptly, missing monthly advance payment deadlines, inadequate transfer pricing documentation, and not maintaining proper supporting documents for tax deductions. Companies should also be careful about related-party transactions, ensure compliance with thin capitalisation rules, and maintain accurate records of all business expenses. Additionally, businesses should stay updated on frequent changes to Indonesian tax regulations and ensure proper classification of income types to avoid incorrect tax treatment.

Sources used in this article:

1. SAS Bali: A Guide to Corporate Income Tax in 2025
2. ASEAN Briefing: Corporate Income Tax in Indonesia
3. LMI Consultancy: Corporate NPWP Registration
4. Indonesia Sentinel: Guide to Indonesia's Core Tax System
5. PwC Tax Summaries: Indonesia Corporate Tax Administration
6. MUC: Ministry of Finance Releases Tax Sanction and Interest Rates
7. ASEAN Briefing: Why Indonesia
8. BPS: Indonesia's Economic Growth 2024
9. World Bank: Indonesia's Economy
10. Hawksford: Starting a Business in Indonesia
11. Multiplier: Indonesia Company Registration
12. ASEAN Briefing: Company Establishment Requirements
13. KPMG: Business Structures and Establishment
14. PwC Tax Summaries: Indonesia Withholding Taxes

Sources last checked 04/09/2025