FRE.DM’s Indonesian Tax Guide For Australian Expats & Entrepreneurs
Navigating taxes in a foreign country can feel overwhelming, especially when you’re balancing the demands of running a business or managing property overseas. For Australian residents with ties to Indonesia, understanding the local tax system isn’t just about compliance — it’s about protecting your investments and optimising opportunities to save.
With Indonesia’s tax season wrapping up on December 31st, now is the time to get your affairs in order. Whether you’re renting out a villa in Bali, operating a business in Jakarta, or planning your next big venture, this guide simplifies everything you need to know into clear, actionable steps — even for those new to international finance.
Understanding Tax Residency in Indonesia
Your tax residency status determines where and how much of your income is taxed, impacting both Indonesian and global earnings. For Australians with businesses or property in Indonesia, getting this right is essential to avoid double taxation and stay compliant in both countries.
Who qualifies as a tax resident?
In Indonesia, you're classified as a tax resident if –
You spend 183+ days in Indonesia within a 12-month period (consecutive or not).
You intend to reside permanently, shown by holding a KITAS/KITAP (long-term visa) or maintaining a permanent address.
You have strong economic ties, such as owning businesses or property in Indonesia.
If you don’t meet the criteria above, you’re classified as a non-tax resident. This means –
Only income earned in Indonesia is taxable, such as rental income, capital gains, or business profits generated locally.
Tax is applied at flat withholding rates with no deductions for expenses.
If you are classified as a tax resident, you’re required to report and pay taxes on all your income, regardless of where in the world it’s earned.
This includes –
Australian wages or business income.
Dividends from shares in international companies.
Income from properties located outside Indonesia.
*When reporting income from Australian sources or other international earnings, use the official exchange rates published by Bank Indonesia. This ensures consistency and compliance when calculating your taxable income in Indonesian Rupiah.
So, if you plan on spending significant time in Indonesia and establish a business or property portfolio, you’ll need to –
Register as a tax resident by obtaining a Nomor Pokok Wajib Pajak (NPWP). Residents without an NPWP may face an additional surcharge of 20% on the standard withholding tax rates.
Familiarise yourself with deductions and credits available to residents to reduce your taxable income.
That being said, if you want to remain a non-resident for Indonesian tax purposes while earning local income, you’ll need to –
Limit your stays to fewer than 183 days in any twelve month period.
Avoid taking actions that indicate permanent residence, such as obtaining a KITAS or renting property long-term.
*Non-residents must file taxes on income earned within Indonesia, such as rental or business income, even if they don't have an NPWP.
For business owners, tax residency impacts –
Corporate Taxes: if you’re a tax resident and own a local business, your business profits and personal income may be subject to Indonesian taxation.
VAT registration: Tax residents running businesses with turnover above IDR 4.8 billion must register for VAT and comply with monthly reporting.
Profit Repatriation: Moving profits back to Australia can trigger additional tax obligations, depending on your residency status and the structure of your business.
The Role of a NPWP in Managing Your Taxes in Indonesia
If you’re classified as a tax resident in Indonesia, registering for a NPWP (Nomor Pokok Wajib Pajak) is a must. Think of it as Indonesia’s version of a tax file number — an essential tool for participating in the local economy and staying tax-compliant. Without it, you risk penalties, limited legal operations, and missed opportunities for tax savings.
So, Who Needs an NPWP?
Individuals: Required if you live in Indonesia for 183+ days, hold a KITAS/KITAP, or earn local income.
Business Owners: All businesses, foreign- or locally-owned, must have an NPWP. Sole proprietors often link personal and business NPWPs.
Property Owners: Renting out property in Indonesia? An NPWP is needed to report and pay rental income taxes.
Pro Tip: Non-residents can avoid a 20% penalty tax on income earned in Indonesia by obtaining an NPWP.
What Are The Benefits of Having a NPWP?
Reduced Tax Rates: Pay standard rates without that 20% non-NPWP surcharge.
Access to Deductions: Claim business expenses, property maintenance, and other costs.
Simplified Operations: Needed for opening bank accounts, registering for VAT, and obtaining import/export licenses.
Legal Compliance: Avoid penalties, interest, and audits by staying on the right side of tax laws.
How Does One Obtain a NPWP?
First Step – Prepare Your Documents
Individuals: Passport, KITAS/KITAP, proof of address, and employment/business proof.
Businesses: Business deed, licenses (NIB/SIUP), premises proof, and shareholder details.
Second Step – Register at Your Local Tax Office
Bring your documents to the tax office responsible for your residence or business area and complete the application.
Third Step – Apply Online
Some tax offices offer online registration through the Directorate General of Taxes (DJP) portal. You may still need an in-person visit for verification. Be prepared with originals and certified copies, especially for proof of address and business operations.
Fourth Step – Receive Your NPWP
After approval, you’ll receive a physical NPWP card, which you’ll need for tax returns, VAT registration, and other transactions.
What Are The Obligations Regarding a NPWP?
File Tax Returns: Individuals must file annually; businesses may have monthly VAT and corporate tax obligations.
Pay Taxes: Use tax slips (Surat Setoran Pajak) to pay via banks or online portals.
Keep Records: Maintain thorough documentation for income, expenses, and tax payments.
Update Your Details: Notify the tax office of address, residency, or business changes to avoid any complications.
Understanding Tax Rates for Individuals, Businesses, and Property Owners
Now that you’re clear on the NPWP, let’s dive into the tax rates that apply to individuals, property owners, and businesses.
Let’s start with going over Personal Income Tax (PPh 21) –
For individual residents, income tax is progressive, meaning the more you earn, the higher the tax rate. Here’s how it breaks down –
Up to IDR 60 million: taxed at 5%
IDR 60 million to IDR 250 million: taxed at 15%
IDR 250 million to IDR 500 million: taxed at 25%
Over IDR 500 million: taxed at 30%
Above IDR 5 billion: taxed at 35%
Non-residents, on the other hand, are subject to a flat 20% withholding tax on Indonesian-sourced income.
Then, we’ve got the Corporate Income Tax (PPh 25) to consider –
For businesses, the standard corporate income tax rate is 22% on net taxable income. However, there are exceptions:
Small businesses with annual revenue under IDR 4.8 billion enjoy a reduced tax rate of 0.5% on gross revenue for their first three years.
Companies located in Special Economic Zones (SEZs) may qualify for reduced tax rates or exemptions depending on their industry and investment size. Industries like manufacturing, logistics, and technology often receive these benefits.
Indonesia imposes an 11% Value-Added Tax (VAT) on goods and services. Businesses with revenue above IDR 4.8 billion must register for VAT collection, and comply with monthly VAT reporting.
What about if you own property in Indonesia?
Owning property in Indonesia brings upon its own set of tax obligations –
Annual Property Tax (PBB): This is based on the property’s taxable sale value (NJOP) and ranges from 0.1% to 0.3% depending on the property type and location.
Rental Income Tax: Rental income is subject to a 10% flat tax on gross income, with no deductions for expenses.
Capital Gains Tax: A 2.5% tax is levied on the sale of property, paid before the transaction is finalised.
Foreigners are typically restricted from direct property ownership and usually need to use long-term leases or nominee structures. Additionally, property buyers must pay a Land and Building Acquisition Duty (BPHTB) of 5% on the purchase value.
Key Indonesian Tax Deductions For Individuals, Business Owners, and Property Owners
Tax deductions and benefits are essential tools to lower your taxable income in Indonesia, letting you keep more of your earnings to reinvest in your business or property and build prosperity. However, to access these deductions, having an NPWP is crucial. Without one, you’ll miss out on most deductions and face higher tax rates.
Here are the main business expenses you can deduct –
Operational Expenses: Rent for office or retail spaces, utilities (electricity, water, internet), and employee salaries, including mandatory benefits like BPJS (social security).
Costs of Goods Sold (COGS): Costs directly associated with producing or purchasing goods sold, such as raw materials, manufacturing costs, and inventory-related expenses.
Marketing and Advertising: Expenses for digital ads, traditional media campaigns, and promotional events.
Depreciation of Fixed Assets: Deductions for the depreciation of business equipment, vehicles, and buildings, in line with Indonesian tax regulations.
Professional Service: Payments to consultants, legal advisors, or accountants assisting with business operations.
Taxes and Fees: Certain taxes paid during business operations, such as local business taxes (PBB) and import/export duties, may be deductible.
These are the main tax deductions you can expect to utilise as a property owner –
If you own property in Indonesia and generate rental income, you may be eligible for:
Maintenance and Repairs: Costs for upkeep, like plumbing or painting, are deductible as long as they preserve the property’s earning potential (major renovations are excluded).
Property Management Fees: Fees paid to property managers for handling tenants, rent collection, or maintenance can be deducted.
Insurance Premiums: Property insurance premiums for risks like fire or flooding are deductible.
Interest on Loans: Interest on loans used to purchase or improve the property is deductible, provided you have supporting documentation - such as loan agreements, bank statements, and receipts for interest payments. These must be submitted during tax filing.
Depreciation: Just like businesses, property owners can claim depreciation on the property’s structure.
And, if you’re an individual taxpayer, your deductions include —
Work-Related Costs: Business travel expenses (flights, accommodation, meals) and tools or equipment required for your job, like laptops and software.
Educational Expenses: Costs for professional training or certifications related to your field.
Social Security Contributions: Payments to BPJS Kesehatan (health insurance) and BPJS Ketenagakerjaan (employment benefits) are deductible.
Charitable Donations: Contributions to approved Indonesian charitable organisations may qualify as deductions.
What is the Double Taxation Agreement (DTA)?
If you're worried about filing taxes in both Australia and Indonesia, the Double Taxation Agreement (DTA) has you covered.
The DTA between Australia and Indonesia is designed to prevent individuals and businesses from being taxed twice on the same income. By understanding how to use this agreement, you can save on taxes while staying compliant in both countries
So, what is the Australian-Indonesia DTA?
The DTA is a bilateral treaty that –
Prevents double taxation on the same income.
Specifies which country has the right to tax specific income types (like employment income, business profits, and dividends).
Ensures fair treatment for taxpayers under both countries’ tax laws.
For Australians living, working, or investing in Indonesia, the DTA clarifies your tax obligations and helps manage the overlap between the Australian Taxation Office (ATO) and the Indonesian Directorate General of Taxes (DGT).
Recent Changes or Amendments
Indonesia’s latest tax amendments include provisions for taxing income from digital platforms and e-commerce. Verify whether these changes affect your income, especially if you earn through online services or rentals marketed digitally.
Value-Added Tax (VAT) on Digital Goods and Services:
Since July 1, 2020, Indonesia imposes an 11% VAT on digital goods and services provided by foreign suppliers to Indonesian consumers. This rate is set to increase to 12% starting January 1, 2025.
Foreign digital businesses meeting certain thresholds are required to register for VAT in Indonesia and appoint VAT collectors. These requirements include:
annual transactions exceeding IDR 600 million, or
over 12,000 Indonesian users access their platform yearly.
How does the DTA work?
Tax Credits: If you pay taxes in Indonesia on income sourced there (like rental income or business profits), you can claim a foreign income tax offset (FITO) on your Australian tax return. This prevents double taxation.
Tax Residency Tie-Breaker: If you're considered a tax resident of both countries, the DTA helps determine your residency status using factors such as –
Permanent home
Personal and economic ties
Location of habitual residence
Nationality
This is useful if your residency status is unclear or if you divide your time between both countries.
Withholding Tax Reductions: The DTA lowers withholding tax rates on certain income types. For example –
Dividends: reduced from 20% to 15% for Australian residents
Interest: reduced to 10%
Royalties: capped at 10%
Exempt Income: Certain income types may be exempt from tax in one country, depending on the source and nature. For example, pensions or superannuation contributions may qualify for exemptions under specific conditions.
How can the DTA benefit you?
For business owners – If you run a business in Indonesia and pay corporate taxes there, the DTA prevents you from being taxed again in Australia on the same profits. It ensures that Indonesia has the primary taxing right on income generated there.
For property owners – Rental income from Indonesian properties is taxed locally at 10% (or 20% for non-residents). Under the DTA, you can claim a tax credit in Australia for the amount paid in Indonesia, ensuring you’re not taxed twice.
For freelancers or contractors – Australians earning freelance income in Indonesia are subject to local taxes. The DTA allows you to offset these taxes against any Australian tax liability on the same income.
Regarding dividends, interest, and royalties – The DTA reduces withholding tax rates, helping you retain more of your passive income by lowering tax deductions on dividends, interest, and royalties.
Here are the steps in leveraging the DTA for a successful tax season –
Step One: Determine Your Residency Status
Identify whether you're an Australian resident, Indonesian resident, or dual resident. This status influences how the DTA applies to you.
Step Two: Keep Records of Foreign Taxes Paid
To claim a foreign tax offset in Australia, maintain proof of taxes paid in Indonesia. Useful documents include:
Tax assessment notices
Receipts for payments made to Indonesian tax authorities
Official withholding tax documentation
Step Three: Apply for Reduced Withholding Rates
If you receive dividends, interest, or royalties from Indonesia, consult a tax advisor or the Indonesian tax office to ensure you benefit from the DTA's reduced rates. Proof of Australian residency may be required.
Step Four: Seek Professional Tax Advice
Navigating the DTA can be tricky, especially for business owners or property holders. A tax advisor familiar with both Australian and Indonesian tax laws can help optimise your tax situation (this is where FRE.DM Wealth can assist — scroll to the bottom for more info)
Step Five: Report Foreign Income Accurately
In your Australian tax return, report all Indonesian-sourced income and claim the corresponding foreign income tax offset. Inaccurate reporting may lead to audits or unnecessary taxes.
The Important Tax Deadlines In Indonesia You Should Know
The Indonesian tax season operates on a different timeline than Australia’s. While Australia wraps up its tax season on June 30th, Indonesia’s fiscal year aligns with the calendar year, ending on December 31st.
For individual taxpayers, the deadline to file your tax return is March 31st of the following year. Even non-residents must adhere to the March 31st deadline for filing income earned in Indonesia. Filing late or inaccurately could result in penalties or challenges in claiming foreign tax credits in Australia.
For businesses, the timeline depends on the end of your fiscal year. Tax returns are typically due by the last day of the fourth month after your fiscal year closes. For example, if your company’s fiscal year concludes on December 31st, 2024, your corporate tax return must be filed by April 30th, 2025.
To stay on track, you’ll need to gather:
Proof of income (e.g., pay slips, rental agreements).
Documentation for deductions and tax credits.
Tax payment receipts.
The good news? Indonesia’s tax system is modernised, allowing most taxpayers to file returns online through the DJP Online Portal. Just ensure your NPWP is active and linked to your account.
By staying ahead of these deadlines and organizing your paperwork, you can navigate Indonesia’s tax system with ease and confidence.
Straddling two continents financially is no small feat, and navigating the complexities of international taxes can feel overwhelming. That’s why we’re here — to make your tax experience approachable and easy to understand, even if international tax laws aren’t your strong suit.
To simplify things, we’ve curated a bespoke tax checklist tailored specifically for Australian residents with businesses or properties in Indonesia. This guide will help you manage the intricacies of filing taxes between the two countries. Simply visit our website to download the PDF, which you can either print or use digitally, to ensure you’re more than prepared for this Indonesian tax season.
If your situation requires deeper expertise or you feel as though you need that human connection to help you get through it all, FRE.DM Wealth is here to help you. With years of experience in the Australian-Indonesian tax landscape, Michaela Rankin can provide you with tailored guidance to address even the most complex scenarios.
Book a consultation today and head into tax season, confident, compliant, and ready to make the most out of every opportunity.
