Tax Updated for Foreigners in Bali : Personal – Company – Leasehold
Indonesia remains a key destination for foreign professionals, entrepreneurs, and property investors. However, tax regulations for foreigners in Indonesia continue to evolve, making it essential to stay informed and compliant. This article provides an updated overview of Indonesian taxes for foreigners, with a focus on salary income, dividends, and property income, including leasehold and freehold considerations.
Salary and Employment Tax for Foreigners in Indonesia
Foreign nationals working in Indonesia may be subject to Indonesian income tax (PPh 21) depending on their tax residency status. Individuals who stay in Indonesia for more than 183 days within a 12-month period, or who demonstrate intent to reside, are generally treated as Indonesian tax residents and taxed on their worldwide income. Non-residents are taxed only on Indonesia-sourced income, usually through withholding by the employer. Proper payroll structuring and employer compliance are critical to avoid penalties.
Dividend Tax for Foreign Shareholders
Dividends received by foreigners from Indonesian companies are generally subject to withholding tax, although applicable double taxation agreements (DTAs) may reduce the rate. Current regulations continue to support dividend reinvestment in Indonesia, which may allow for tax exemptions if specific conditions are met. Careful planning and documentation are required to benefit from these incentives.
Tax on Leasehold Property Income
Foreigners are permitted to hold property under leasehold rights (Hak Pakai or Hak Sewa). Rental income from leasehold property in Indonesia is typically subject to final income tax, often withheld at source. Additional tax obligations may apply for commercial properties or short-term rentals, particularly in popular areas such as Bali.
Freehold Property and Tax Risks
Freehold property ownership (Hak Milik) is legally restricted to Indonesian citizens. The use of nominee arrangements remains high-risk and is increasingly scrutinized by authorities, with potential consequences including asset invalidation and tax reassessment.
Conclusion
Understanding Indonesia’s tax system for foreigners requires careful evaluation of residency status, income type, property rights, and treaty protections. As regulations continue to change, seeking professional legal and tax advisory services in Indonesia is strongly recommended.
This article is provided for general informational purposes only and does not constitute legal or tax advice.