Indonesia tax rule from the point of view of accounting system
When implementing accounting system in Indonesia, we need some knowledge about Indonesian tax rule.
- Personal income tax (PPH21) related to payroll system.
- VAT (PPN) related to issuing invoice to customer or receiving invoice from supplier .
- Withholding service income tax (PPH23) related A/P entry (Indonesia) or A/P settlement (Thailand).
- Custom dutty (Bea Masuk) and withholding import tax (PPH22) journalized from payment voucher.
- Others (PPH25, PPH24, PPH4(2), PPH26, PPH29) journalized from payment voucher
Corporate income tax (PPH25)
As long as Indonesia is under liberal economy, the main tax revenue of the nation is income tax (Pajak Penghasilan), which will be uniformly 25% against taxable income.
Taxable income amount must be estimated based on the previous year profit, because final taxable profit will be fixed after audit adjustment in the next March.
- Temporary tax amount of current year=
- + Previous year taxable income
- – Prepaid PPH 22 for the previous term(Pre-pay tax at the time of sales when importing)
- – PPH 23 originated from the previous year(Amount based on withholding slip collected from customers when selling domestic services)
- – PPH 24 originated from the previous year(Amount based on withholding slip based on income originated in Japan)
Temporary tax amount of current year divided by 12 is temporary payable tax per month of this year, which must be paid as PPH25(bulanan).
At the end of month of fiscal year, pay the difference below as PPH29(tahunan).
- Difference below as PPH 29(tahunan)
- + Confirmed corporate tax amount calculated based on current taxable income
- – Temporary tax amount of current year
- – Prepaid PPH 22 for the current term
- – PPH 23 originated from the current year
- – PPH 24 originated from the current year
The monthly PPH25 amount for current year is fixed after tax adjustments of the previous year’s taxable income, so the monthly temporary payment amount of PPH25 is updated from every April based on fixed taxable income of previous year.
Withholding income tax（PPH23, PPH4(2), PPH26)
Regarding PPH23 that withholding tax for domestic service of 2 % on the purchaser side at the time of A/P entry(Indonesia) or A/P settlement(Thailand) must be paid until 10th day of the next month.
Conversely seller ask purchaser to be issued a withholding slip as evidence that PPH23 has already been paid by purchaser. Seller will deduct this amount (deduct 12 months accumulated amount of PPH25 as well as PPH22 and PPH24) from 25% of the final taxable income at the end of the fiscal year, and pay the remaining difference as PPH29.
When input PPH23 in ERP system, need to specify which item is a withholding object in the detail of invoice at the time of invoice settlement, so need identification flag in the item master.
- Sales settlement
- Dr. Bank 98 Cr. A/R 100
- Dr. Prepaid PPH23 2
- Purchase settlement
- Dr. A/P 100 Cr. Bank 98
- Cr. W/H PPH23 2
When renting office space, being withheld 10% of PPH4 (2) when rent is paid, but the PPH 23 is a comprehensive tax (Non-Final) paid collectively, PPH 4 (2) is source separation tax (Final) taxed on each transaction.
Bank interest is also Final of PPH 4 (2), and 20% is withhold from the bank side when it is deposited into an account.
When you make time deposit of 1 billion Rupiah (about 10 million yen) at BCA Bank with an annual interest rate of 6.25%.
- Rp.1,000,000,000ｘ0.0625×0.8÷12=Rp. 4,666,000
Although it is a dreamlike story as compared with Japan’s ultra low interest rate, the exchange risk of inflation and rupiah is large enough to cancel the interest on time deposit, I think that it is better not to change yen to rupiah easily but to maintain the balance of the yen and rupiah and diversify the risk.
Although the above was a case for domestic services, the case for overseas services is the source of payment at PPH 26, and we will issue a withholding slip so that overseas service providers will not be double taxed in their own country.
Actually, this PPH 26 is a royalty payment from Indonesian subsidiary to Japan head office, that is, withholding tax on the source of investment collection of the parent company in Japan, Indonesian corporation side must be exactly 20% source, tax payment in Indonesia.
Prepaid corporation tax at the time of import（PPH22）
In addition to custom duty (Bea Masuk) at the time of import, there is PPH 22 “Prepay corporate tax at the time of future sales”.Of course PPN (Pajak Pertambahan Nilai) will also be collected, so at the time of importing it will cost three taxes: BM, PPH 22 and PPN.
I will write down below, custom duty, PPH22 and PPN have different purpose and burden.
For example, BM, PPN, PPH 22 when shipping cost 200 and insurance 10 are applied for FOB price 1,000 can be calculated as follows.
PPN : (1,000+200+10+181)x10%=139
PPH22 : (1,000+200+10+181)x2.5%=347
The journal of import in this case is as follows.
Dr.Prepaid PPN 139
Dr.Prepaid PPH22 347
PPH 22 is accounted for in progress account (asset) and re-classes with tax amount of taxable income x 25% at the end of the fiscal year.
Income tax on foreign income（PPH24）
Indonesian resident who fulfills the annual 183-day rule in Indonesia incurs income tax not only for Indonesia but also for Japanese revenue if there is salary or other income from Japan.
In order to prevent double taxation in that case you will be deducted in Indonesia with a withholding slip when it was originated in Japan.
However, if you live in Indonesia with a 319 visa called a retirement visa, we assume that there are pension income in Japan, so I think that it is necessary to take this PPH24 deduction procedure.
Personal income tax（PPH21 bulanan）
Individual income tax PPH 21 is excessive progressive taxation like Japan.
Taxable income is deducted deduction (Potongan / Subsidi pajak) from the sum of base salary (Gaji Pokok) and allowance (Tunjangan).
- Up to 50juta : 5％
- Between 50juta and 250juta : 15％
- Between 250juta and 500juta : 25％
- More than 500juta : 30％
The annual taxable income of the person whose monthly Gross salary is 10 juta/month is 120 juta, the total annual amount of PPH 21 will be 50 juta x 0.05 + 70 jutax 0.15 = 13 juta.
The monthly income tax becomes 13 juta ÷ 12 months = 1.083 juta, the take-home pay becomes 10 juta – 1.083 juta = 8.917 juta, 1.083 juta is taxed as PPH 21 by the company.
If salary amount is take-home pay, Net salary 10 juta/month is added by income tax allowance (Tunjangan PPH 21) 1 juta, that is, 11 juta is Gross salary.
The annual taxable income in this case is 132juta, the total annual amount of PPH21 will be “50 juta x 0.05 + 82 jutax 0.15 = 14.8 juta”, So the monthly income tax will be “14.8 juta ÷ 12 months = 1.233 juta”, the take-home pay will remain 10 juta, 1.233 juta will be taxed as PPH 21 by the company.
The reverse calculation like this is called the Gross-up method.
PPN（Pajak Pertambahan Nilai）
PPN Out 10% is charged at the time of issuing invoice to purchaser, PPN In 10% is charged at the time of receipt invoice from seller. If OUT minus IN is plus, the difference must be paid by the end of next month. If minus, request refund at the end of fiscal year or carry forward in the next business year.
There are five sheets of monthly SPT (Surat Pemberitahuan), PPN, PPH21, PPH23, PPH25, PPH4(2), and pay them through the bank at once. PPH23 for sales will be deducted from corporate tax calculated based on current year taxable income.