Do foreigners pay tax on business in Indonesia?
Anonymous
Before I commit to setting up a company in Indonesia, I want to understand the tax side. As a foreigner, do I actually pay tax on business income here? And is it different for a foreign-owned company versus a local one, or do we get taxed the same way?
1 reply
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Kevin Tan · Foreign Client Director · 11 June 2026
Yes — and this is the right thing to get clear on early, because tax structure is harder to fix after the fact than before.
The key principle: once you set up a PT PMA, it's an Indonesian resident company and is taxed like any local company, regardless of who owns it. So "foreign-owned" doesn't mean tax-exempt — it means you're inside the Indonesian tax system. The main components:
- Corporate income tax (PPh Badan) on the company's profit — the headline rate is 22%.
- VAT (PPN) on taxable goods and services, once you're a registered VAT entity (PKP) above the threshold.
- Withholding taxes (PPh 21/23/26) on salaries, certain service payments, and payments abroad — the rate on payments to non-residents can be reduced by a tax treaty with your home country.
- Monthly and annual filings, plus your quarterly LKPM investment report (a reporting obligation, not a tax).
A few things foreigners often miss:
- You owe tax even while in the capital lock-up. The 12-month lock-up governs your capital, not your tax obligations.
- Bookkeeping quality drives your bill. Properly recorded expenses reduce taxable profit; sloppy books cost you twice — in tax and in audit risk.
- Treaties matter. How you pay dividends, royalties and service fees across borders should be planned around the relevant treaty.
The practical move is to set up the entity and the accounting together, so the structure is tax-efficient from the first invoice. We handle both — see PT PMA Company Setup and our LKPM & compliance retainer. Tell us your business model and we'll sketch the tax picture before you commit.