NPWP (Tax Identification Number)
NPWP (Nomor Pokok Wajib Pajak), or Tax Identification Number in English, is a unique 16-digit identifier issued by Indonesia's Directorate General of Taxes (DJP) to every taxpayer for tax administration purposes. Governed by Article 2 of Law No. 28/2007 on General Tax Provisions and Procedures (UU KUP). Since January 1, 2024, per Ministry of Finance Regulation No. 112/PMK.03/2022, NPWP integrates the National Identification Number (NIK) for individual resident taxpayers. Without an active NPWP, taxpayers face income tax withholding at 120% of the normal rate (Article 21 paragraph 5a of Law No. 36/2008 on Income Tax). NPWP is mandatory for: (1) Individuals with income above the non-taxable threshold (PTKP), (2) Entrepreneurs conducting business in Indonesia, (3) Recipients of various income sources. An NPWP is required to file tax returns, claim refunds, transact with government agencies, and open bank accounts.
This article is for education, not tax advice.
Example
Sari, an office employee, earns Rp 8 million/month. Upon recruitment, her employer requests NPWP for tax purposes. After registering at the local tax office (KPP) and receiving her 16-digit NPWP, income tax withholding (PPh 21) is applied at the standard rate. Without NPWP, the withholding rate would be 120% of standard, reducing her take-home pay by approximately 2%.
Source: Article 2 UU KUP (Law No. 28/2007); Article 21 para. 5a Law No. 36/2008; PMK No. 112/PMK.03/2022
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