What you need to know about Indonesia's tax system when implementing an accounting system

VAT（PPN=Pajak Penambahan Nilai）

In the case of Indonesia, PPN (Value Added Tax) is the equivalent of Japanese consumption tax, but Indonesia uses invoice method (tax invoice) instead of book method (tax invoice), so the amount of PPN payment or refund is calculated based on Ftakur Pajak (Tax Invoice).

If more PPNs are purchased, the tax is refunded at the end of the fiscal year (refund = return to the original owner) or carried over to the next fiscal year.

Non-residents don't have to pay if they exceed a certain amount, and in Jakarta, about 20 shops such as souvenir shops in shopping malls are designated as PPN refundable shops (more than Rp.500,000 for the same shop).

In Japan, 8% consumption tax is refundable even at drugstores instead of airports, but not as far as Singapore, where GST (Goods and Services Tax) refunds (more than S$100 for the same store) have been established.

When I go back to Japan once a year, I buy a lot of things at Big Camera and Matsumoto Kiyoshi, so my refund is quite a bit of money.

Personal Income Tax（PPH=Pajak Penghasilan）

PPN is equivalent to Japanese consumption tax (however, consumption tax is only applied to consumption goods, while PPN is value-added tax, so it is also applied to productive goods such as services and land), but the complicated tax law in Indonesia is income tax (PPH).

Goods and services produced are broadly classified into consumer goods and production goods according to their economic uses. Goods and services demanded by households (or consumers) for the purpose of consumption are called consumer goods. On the other hand, goods and services demanded by firms (or producers) for the purpose of production are called production goods. Kerosene is a consumer good when it is used for domestic heating, but it is a production good when it is used for business in factories and shops, even though it is the same good. (From "Kotobank.")

Personal income tax withheld from salaries is PPH21 (Article 21 of Law No.10/1994, which is an income tax law), while corporate income tax is PPH25 (Bulanan) which is paid monthly with the deemed tax calculated from the previous year's income and PPH29 (Tahunan) which is deducted at the end of the year and the difference is collected at the source.

However, there are also PPH23, which is withholding tax on service income acquired by Indonesian residents, PPH4(2) on office rent, and PPH26, which is withholding tax on service income (such as dividends) acquired by non-residents of Indonesia.

Trading Examples (Sell and Buy)

If the system company sells the PC at Rp.1,000,000 + installation fee Rp.500,000, the total amount is Rp.1,500,000, but they charge Rp.1,650,000 as the invoice amount, including 10% PPN.

However, the customer is obliged to pay Rp.1,640,000 for the installation fee of Rp.500,000 minus Rp.10,000 (2% of PPH23) and pay the Rp.10,000 to Kantor Pajak by the 10th day of the following month (Payable).

The sold side will have prepaid income tax in the form of a source.

The customer issues a withholding statement (Bukti potong pph pasal 23) to the system company and the system company can deduct the amount at the end of the year, which is the same as PPN.

PPH Non-Final Tax (PPH Non-Final Tax) is a tax that is added or subtracted from other income taxes, such as PPH23, and is an advance payment of income tax that has not yet been determined.

On the other hand, PPH Final Tax (PPH FinalTax) is a tax that is determined by withholding at the payer's side, such as PPH 4(2).

System company journalization

Customer journalization.

Other income taxes.

Fiscal was called an "exit tax" or "prepayment of income tax," but in the end it was said to be an outdated tax system whose purpose was to reduce foreign currency outflows by discouraging residents from traveling abroad.

Initially, it was 1,000,000 rupiah for all residents going abroad with or without permission, but it has been changed to 2,500,000 rupiah only for those who have not yet obtained the NPWP.

This was intended to raise awareness of the need to pay taxes and to encourage those who have not yet obtained the NPWP to obtain it. The system was called "provisional payment of income tax", but it has finally been abolished.

In order to obtain IKTA (Injin Kerja Tenaga Asing), the foreigner tax is to transfer US $1,200 to the National Skill Development Fund (DPKK = Dana Pengembangan Keahilan Keterampilan) to the designated bank and then apply for a work permit with proof of payment.

(IKTA is the predecessor of the current IMTA (Izin Mempekerjakan Tenaga Asing).)

As an aside, IKTA...
You will need to obtain a residence permit for KITAS (Kartu Ijin Tinggal Terbatas) before you can obtain IKTA. If you obtain this card, you will become a resident of Indonesia, so you will need to obtain a Kartu Imigrasi (immigration card) at the airline's check-in counter at the time of check-in and submit it to the immigration office at the time of departure.

At this point, your departure card will be collected, but you will need to return the stub of your entry card at immigration at the time of your return.

(The imigre card was discontinued in March 2015.)

By the way, it used to be possible to upgrade to KITAP (Kartu Ijin Tinggal Tetap = Permanent Residence Permit) by extending KITAS 5 times at the same company, but what about now?

There are three ways for residents to leave Indonesia. KITAS holders who wish to re-enter the country as a KITAS holder must obtain a Multiple Exit/Re-entry Permit (MERP) or Single Re-entry Permit (Single Re-entry Permit), and those who wish to abandon KITAS must obtain an Exit Permit Only (EPO) in advance.

(Only Multiple is available as of September 2015.)

You need to go out of Indonesia within 2 weeks after the EPO is issued, but at this time, both of your entry and exit cards will be taken, so don't panic if you lose your card stub when you arrive in Singapore.

Since you will be entering the country by VOA (Visa On Arrival) when you re-enter the country, it is best to fill out your entry and exit card and prepare a ticket for your next departure (after your new Telex Visa for KITAS) in advance. Otherwise, you will have to buy and throw away your departure ticket to Singapore just for immigration purposes.

Also, don't lose the stub of your departure card until the next time you leave the country after your Telex Visa is approved by the immigration office, otherwise it will be a hassle. During this period, remember that you are only a traveler.

(Again, the imigre card has been discontinued since March 2015, so you don't need it anymore. (I'm putting it as is as a memory legacy WW of "there used to be a system like this.")

Foreign Currency Transactions and Tax Journals

Since the tax rate is officially determined by the tax office so that the taxable amount of a foreign currency transaction is not manipulated by the company to be lower at will, the tax rate does not appear in rupiah-denominated transactions.

As a rule, the transaction journal should be written in the original currency of the transaction.

For example, if a transaction occurs where the functional currency (Base Currency) is US$ and the repair cost A/P invoice is Rp.900,000 denominated in Rupiah, the transaction rate is Rp9,500/$ and the tax rate is Rp.10,000/$...

Since the transaction is denominated in rupiah, the amount payable to the tax office is fixed in rupiah, so the tax rate does not appear.

Bank Indonesia's BI (Bank Indonesia) rate is used as the transaction rate to convert to functional currency for accounting purposes.

Next, if the A/P invoice for the repair cost is $90 in dollars, the PPN journalization will be done in IDR. However, in this case, even if the currency of the transaction is dollar, the A/P of rupiah will be recorded in the tax calculation, but this is apparently unavoidable.

However, as a limitation of the accounting system, if multiple rates (BI rate and Tax rate) in the exchange rate master cannot be referred to from the trading screen, the conversion method to the functional currency can be changed.

Since both of them are high operational load, when foreign currency transactions occur during the month, both the transaction part and the tax part can be automatically calculated at the BI rate of the exchange rate master, and the PPN 10% can be aggregated in the temporary account and offset (reclassified) at the end of the month by PPN Payable denominated in rupiah, which is calculated separately at the tax rate.

Faktur Pajak amounts are aggregated and lumped off on a monthly basis.