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Tax Glossary
Corporate Income Tax (PPh Badan)
Corporate Income Tax (PPh Badan) is the tax on taxable income earned by corporate taxpayers in a tax year. Governed by Article 17 paragraph (1) (b) of the Income Tax Law (No. 36/2008). The standard corporate tax rate is 22% since tax year 2022 (previously 25%). Domestic public companies with at least 40% of shares traded on the Indonesia Stock Exchange qualify for a 3-percentage-point discount (19%). MSMEs with turnover below Rp 4.8 billion may apply a final tax rate of 0.5% under Government Regulation No. 55/2022.
Tax Glossary
Taxable Income (Corporate)
Corporate Taxable Income is the fiscal net income after loss compensation, multiplied by the corporate tax rate to compute tax due. Governed by Article 16 of the Income Tax Law. Calculation: Gross Income minus Allowable Expenses (Article 6 of the Income Tax Law) = Commercial Net Income; apply fiscal corrections (positive and negative) = Fiscal Net Income; deduct prior-year loss carry-forwards = Taxable Income.
Tax Glossary
Article 29 Income Tax (Balance Due)
PPh Article 29 is the remaining tax balance payable at year-end after deducting all tax credits paid or withheld throughout the year. Governed by Article 29 of Law No. 36/2008 on Income Tax (UU PPh). PPh 29 is calculated as: Annual Tax Liability (from annual return) MINUS Total Tax Credits (PPh 21, 25, 22, 23, 24, etc.). If the result is positive, it is PPh 29 (balance due), which must be paid. If the result is negative, it is PPh 28 (overpayment), which may be refunded or carried forward. PPh 29 must be settled before filing the annual return: by March 31 for individual taxpayers and April 30 for corporate taxpayers (Article 3 para. 3, UU KUP). Late payment incurs interest penalty of 2% per month (Article 9 para. 2b, UU KUP).
Tax Glossary
Dividend
A Dividend is a share of profits distributed to shareholders in proportion to their ownership. Under the Income Tax Law, dividends are taxable income unless specified conditions are met. Governed by Article 4 paragraph (1)(g) and Article 4 paragraph (3)(f) of the Income Tax Law, and Government Regulation No. 9/2021. Dividends received by individual residents from domestic companies are subject to 10% final tax. Dividends received by domestic corporate taxpayers from at least 25% ownership are excluded from taxable income. Foreign dividends are excluded if reinvested in Indonesia within the prescribed period.
Tax Glossary
Taxpayer
A Taxpayer (Wajib Pajak) is any individual or entity, including tax payers, withholding agents, and tax collectors, that holds tax rights and obligations under Indonesian tax law. Defined in Article 1 paragraph 2 of Law No. 28/2007 on General Tax Provisions and Procedures (UU KUP). Individual Taxpayers include any person with income above the non-taxable threshold (PTKP) from any source: employment, business, investments, or other sources. Citizenship is not a determining factor; both Indonesian residents and foreign nationals domiciled in Indonesia can be individual taxpayers. Corporate Taxpayers (Wajib Pajak Badan) include all legal entities established or domiciled in Indonesia, such as: Limited Liability Companies (PT), Partnerships (CV), Firms, Cooperatives, Foundations, and other legal entities. Corporations must pay income tax (PPh Badan) on net profits. Core taxpayer obligations: (1) Register and obtain NPWP, (2) Calculate tax liability, (3) Pay taxes on time, (4) File annual returns and supporting documents.
Tax Glossary
Annual Tax Return (SPT Tahunan)
The Annual Tax Return (SPT Tahunan) is the official form used by taxpayers to report all income, assets, liabilities, and tax calculations for a tax year to Indonesia's Directorate General of Taxes (DJP). Governed by Article 3 paragraph (1) of Law No. 28/2007 on General Tax Provisions and Procedures (UU KUP). Filing deadlines: March 31 for individual taxpayers and April 30 for corporate taxpayers (Article 3 para. 3, UU KUP). Filing is done through DJP Online using e-Filing or the official Coretax application. Late filing incurs penalties of Rp 100,000 for individuals and Rp 1,000,000 for entities (Article 7 para. 1, UU KUP). The return must be filed even if income is zero, below the non-taxable threshold, or resulting in a loss, provided the taxpayer is registered with DJP. Supporting documents include withholding certificates (Form 1721-A1), tax payment proof (monthly SPT), and income documentation.
Tax Glossary
Permanent Establishment (PE / BUT)
A Permanent Establishment (PE / BUT) is the form of business used by non-resident individuals or foreign entities to conduct business activities in Indonesia. Governed by Article 2 paragraph (5) of the Income Tax Law. Examples include: representative offices, management offices, foreign company branches, workshops, warehouses, and dependent agents. A BUT is treated as a domestic corporate taxpayer, subject to PPh Badan on Indonesia-source income.