Every entity established in Indonesia or individual domiciled in Indonesia receive a Taxpayer Identification Number (NPWP) and are determined to be domestic taxpayer. Taxpayers (both individual or corporation) are responsible for calculating, depositing, and reporting income tax in accordance with applicable tax regulations.
As we reach the month of March, the deadline for annual reporting for individual taxpayers is approaching, which is March 31 every year. There are several types of taxes that must be reported by an individual taxpayer as follows:
1. Income Tax Article 21
Income Tax Article 21 is a withholding tax on income from work, services, or activities under the name and in every form received or accrued by an individual taxpayer and it must be paid every month. This type of tax relates to salaries, wages, honoraria, allowances, and other payments received by employees, non-employees, and so forth. Companies usually deduct employees’ income directly and deposit it into the state treasury through a perception bank (a bank designated to make payments related to government financial transactions), then will provide individuals with withholding tax certificate (Form 1721-A1 or 1721-A2) after the year ended.
2. Income Tax Article 29
Income Tax Article 29 is underpayment of income tax listed in the Annual Income Tax Return prepared by individuals, namely the remainder of the income tax payable in the relevant tax year minus the tax credit (Income Tax Articles 21, 23, 24, and 25). This income tax must be paid before the annual income tax return is reported by individuals.
3. Income Tax Article 25
Income Tax Article 25 represents tax installments derived from the amount of income tax payable according to the Annual Income Tax Return of previous year, less tax withheld/collected and income tax paid or payable abroad which may be credited, then divided in to 12 months.
The Directorate General of Taxes (DJP) of the Ministry of Finance of the Republic of Indonesia provides 3 types of tax forms for individual taxpayers, namely:
- SPT 1770 SS => This form is used by taxpayers who are employees with an annual income of less than IDR 60 million.
- SPT 1770 S => This form is used by taxpayers who are employees with an annual income of more than IDR 60 million.
- SPT 1770 => This form is used by individual taxpayers who have the status of business owners or casual workers, or receive other income outside of work.
Before completing the tax form, individual needs to prepare following supporting documents:
- Proof of deduction 1721 A1 for private employees, or 1721 A2 for Civil Servants (PNS)
- Proof of withholding 1721 VII for final withholding Income Tax Article 21
- Proof of withholding Income Tax Article 23 for income from rent other than land and buildings
- Proof of withholding Income Tax Article 4 Paragraph (2) for leasing land and buildings
- List of income statement
- List of assets (savings books, land or building certificates) and debts (debt account)
- List of family dependents
- Proof of zakat or another donation payment
- Recapitulation of monthly gross circulation and expenses
- Calculation sheet of income tax payable
- Other supporting documents
Tax e-Filing Procedure
Further, given the current state of the spread of the Coronavirus outbreak, the Government suggest reporting the Personal Income Tax Return via e-Filing to avoid crowd and maintain the safety. By reporting via online, the reporting can be done anywhere and anytime, and taxpayers no longer need to visit the Tax Service Office. The online individual/Personal Income Tax Return (“PITR”) through DGT Online has 3 mechanisms:
- E-Filing : Direct filling on website.
- E-Filing : Upload a formal CSV file.
- E-Form : Namely an electronic SPT form that can be filled in offline and uploaded online when submitting the tax return or “SPT”.
Individual taxpayers who want to access e-Filing must have at least the following:
1. Have an EFIN number
Here is how to activate EFIN for individual taxpayers:
- Visit the nearest tax office (KPP/KP2KP). This process must be done by the individual himself and cannot be delegated to other parties.
- Taxpayer must fill out, sign, and submit the EFIN activation application form.
- Show original and submit a photocopy of KTP (for Indonesian citizens) or passport and KITAS/KITAP (for foreigners), and also Taxpayer Identification Number (NPWP).
2. Have an DJP Online account
Here is how to register your account on DJP Online:
- Go to www.pajak.go.id
- Click “LOGIN” to go to DJP online, then click “Registrasi”
- Fill the NPWP, EFIN, and the security code
- Click “Submit”
The system will then send the credentials (NPWP and password), and an activation link via email registered by the individual. Then you can click the activation link.
Following are the steps for filing online personal tax return on tax e-Filing:
- Go to www.pajak.go.id, then log in with your DJP Online account
- Click the e-Filing service on the ‘Report’ menu
- Create SPT, then follow the guidelines provided. If the SPT has been created, the system will display a summary of the SPT.
- To send the SPT, you will be given the verification code via email. Enter the verification code and click ‘Send SPT’
- The electronic receipt will be sent to the email.
SPT Reporting for Foreigners
Based on the Income Tax Law, foreigners who are categorized as Domestic Tax Subjects are individuals who meet the following criteria:
- Residing in Indonesia
- Stay in Indonesia for more than 183 days in a 12-months period
- Have the intention of living in Indonesia
Foreigners who have become a Domestic Tax Subject will have the responsibility to pay tax and report their Personal Income Tax Return. Those who leave Indonesia permanently are also required to submit their Annual Income Tax Return at the latest when they leave Indonesia.
To be able to report PITR, foreigners should have their NPWP first. Requirements for registering NPWP for foreigners are to have passport and KITAS/KITAP. If the foreigner’s job is independent work/own business, then a business activity permit document or a certificate of the place of the business/independent work is also required from an official local government.
Following are the steps to register NPWP:
- Create an account on the Ereg website (https://ereg.pajak.go.id)
- Click the activation link that was sent to your email to activate your Ereg account
- Complete the required documents
- Verify by copying the token sent to the registered email
- Submit the required files via online on the application
After the application for a Taxpayer Identification Number (NPWP) is approved, your NPWP card will be delivered to the address you registered.
World-Wide Income and Territoriality Concepts
Indonesia applies the concept of world-wide income to tax income of individual taxpayers, i.e. all income whether originated from Indonesia or from outside Indonesia must be reported in the PITR by Indonesian tax residents, including foreigners, and subject to tax in Indonesia (save the application of prevailing tax treaty). The Omnibus Law enacted in November 2020 has introduced the concept of territoriality for foreigners who are Indonesian tax residents. Foreigners are now taxed only on their income originated from Indonesia. The territorial basis is applicable for the first 4 years upon being Indonesian tax resident for foreigner. Beyond 4 years, the concept of world-wide income applies again.
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