{"id":57158,"date":"2012-08-14T21:54:10","date_gmt":"2012-08-14T14:54:10","guid":{"rendered":"https:\/\/bahtera.jp\/indonesia-tax-system\/"},"modified":"2025-03-20T14:14:08","modified_gmt":"2025-03-20T07:14:08","slug":"indonesia-tax-system","status":"publish","type":"post","link":"https:\/\/bahtera.jp\/en\/indonesia-tax-system\/","title":{"rendered":"Essential Tax Knowledge to Understand When Implementing an Accounting System in Indonesia"},"content":{"rendered":"

Recharging in Japan during the final week of Lebaran. Freed from the blaring loudspeaker sounds of the mosque, I\u2019ve fully recovered both physically and mentally. Why is Japan so quiet?
\nIn Japan, the consumption tax increase law has been passed by the Diet, preparing to raise the consumption tax from 5% to 8%. It seems that pre-tax-hike panic buying has led to condominiums selling like hotcakes.
\n\"Indonesian
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Accounting System in Indonesia<\/p>\r\n\t\t\t\t\t\t\t\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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The cloudification of accounting systems is advancing in Indonesia, with the three major local cloud systemsAccurate, Zahir, and Jurnalleading the market. However, in reality, it is said that fewer than 8% of domestic companies have implemented accounting systems. This is why new cloud-based accounting systems continue to be launched in what might seem like an already saturated Indonesian market. It suggests that both domestic and international IT startups see significant potential for cloud accounting systems to expand their market share locally. In Indonesia, automated journal entries due to the widespread use of accounting systems have become commonplace, and over the … <\/p>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

\u7d9a\u304d\u3092\u898b\u308b<\/p>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/dd>\r\n\t\t\t\t\t<\/dl>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<\/a>\r\n\t\t\t\t<\/p>\n

Value-Added Tax PPN (Pajak Penambahan Nilai)<\/h2>\n

In Indonesia, the equivalent of Japan\u2019s consumption tax is PPN (VAT = Value-Added Tax). However, unlike Japan\u2019s ledger method (determining tax amounts based on accounting records, as with consumption tax), Indonesia uses the invoice method (determining tax amounts based on Tax Invoices). Thus, PPN payments or refund amounts are calculated based on Faktur Pajak (Tax Invoice).
\nThe PPN imposed on sales (Output) is offset against the PPN imposed on purchases (Input). If the sales PPN exceeds the purchase PPN, tax is paid by the end of the following month. If the purchase PPN exceeds the sales PPN, a refund is claimed at year-end (refund = returning to the original owner) or carried over to the next fiscal year\u2014a \u201cgive-and-take\u201d tax.
\n\"PPN
\nNon-residents are exempt from paying above a certain amount. In Jakarta, about 20 souvenir shops in shopping malls are designated as PPN refundable stores (for purchases over Rp.500,000 at the same store).
\nHowever, this falls far short of countries like Singapore, where GST (Goods and Services Tax) refunds (for purchases over S$100 at the same store) are well-established. In Japan, consumption tax refunds at 8% are now possible not just at airports but even at drugstores.
\nDuring our annual temporary return to Japan, we go on a shopping spree at Bic Camera and Matsumoto Kiyoshi, and the refund amount alone adds up to quite a sum.<\/p>\n

Income Tax PPh (Pajak Penghasilan)<\/h2>\n

While PPN corresponds to Japan\u2019s consumption tax (though consumption tax applies only to consumer goods, whereas PPN, as a value-added tax, applies to services and production goods like land), what complicates Indonesian tax law is income tax (PPh).<\/p>\n

Goods and services produced are broadly classified into consumer goods and production goods based on their economic use. Goods and services demanded by households (or consumers) for consumption are called consumer goods. In contrast, goods and services demanded by companies (or producers) for production are called production goods. The same good, like kerosene, is considered a consumer good when used for household heating but a production good when used commercially in factories or shops. (From \u201cKotobank\u201d)<\/p><\/blockquote>\n

Personal income tax withheld from salaries is PPh21 (Article 21 = Pasal 21 of Tax Law No.10\/1994). Corporate income tax includes PPh25 (Bulanan), a monthly estimated tax based on the previous year\u2019s income, and PPh29 (Tahunan), paid annually after deducting withholdings to settle the difference.
\nThese align with Japan\u2019s tax system and are easy to remember. Beyond these, there\u2019s PPh23, a withholding tax on service income earned by Indonesian residents; PPh4(2), applied to office rent and similar; and PPh26, a withholding tax on service income (e.g., dividends) earned by non-residents. For Japanese managers, knowing these is more than sufficient.<\/p>\n

Japan\u3000\u3000\u3000\u3000<\/strong>Indonesia\u3000\u3000\u3000\u3000<\/strong>Characteristics\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>ERP
\nCorporate Income Tax\u3000\u3000\u3000\u3000<\/strong>PPh25, 29\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>
\nPersonal Income Tax\u3000\u3000\u3000\u3000<\/strong>PPh 21\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>Withholding Tax on Salaries\u3000\u3000<\/strong>Automatically calculated in Payroll system
\nService Income Tax\u3000\u3000<\/strong>PPh 23\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>Withholding Tax (Residents)\u3000\u3000<\/strong>Automatically calculated at settlement
\nService Income Tax\u3000\u3000<\/strong>PPh 26\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>Withholding Tax (Non-Residents)<\/div>\n

Transaction Examples (Sales and Purchases)<\/h2>\n

When a system company sells a PC for Rp.1,000,000 plus an installation fee of Rp.500,000, the total is Rp.1,500,000, but with 11% PPN included, the invoice amount becomes Rp.1,665,000.
\nHowever, the customer deducts Rp.10,000 (2% PPh23 on the Rp.500,000 installation fee) and pays Rp.1,655,000, incurring an obligation (Payable) to pay Rp.10,000 to the tax office (Kantor Pajak) by the 10th of the following month.
\nThe seller effectively prepays income tax (Prepaid) through this withholding.
\nThe customer issues a withholding certificate (Bukti potong PPh pasal 23) to the system company, which can deduct this amount at year-end\u2014a \u201cgive-and-take\u201d mechanism similar to PPN.
\nTaxation like PPh23, where income taxes are combined and offset, is called comprehensive taxation (PPh Non-Final Tax), representing a prepayment of undetermined income tax.
\nIn contrast, taxation like PPh4(2), where the tax amount is finalized by withholding at payment, is called separate taxation (PPh Final Tax).<\/p>\n

System Company\u2019s Entries<\/h3>\n
At Invoice Issuance: Tax payable – PPN out is a liability (obligation to record Output)<\/p>\n
\n
    \n
  • (Debit) A\/R 1,650,000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Sales \u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>1,500,000<\/li>\n
  • \u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Tax payable – PPN out\u3000\u3000<\/strong> 150,000<\/li>\n<\/ul>\n<\/div>\n<\/div>\n
    At Settlement: Tax payable – PPh23 is an asset (prepaid income tax)<\/p>\n
    \n
      \n
    • (Debit) Bank 1,640,000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/R 1,650,000<\/li>\n
    • (Debit) Prepaid tax – PPh ART23 10,000<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

      Customer\u2019s Entries<\/h3>\n
      At Invoice Receipt: Prepaid tax – PPN in is an asset (right to deduct from Output)<\/p>\n
      \n
        \n
      • (Debit) Purchase 1,500,000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P 1,650,000<\/li>\n
      • (Debit) Prepaid tax – PPN input 150,000<\/li>\n<\/ul>\n<\/div>\n<\/div>\n
        At Settlement: Tax payable – PPh23 is a liability (obligation to withhold and pay the system company\u2019s income tax)<\/p>\n
        \n
          \n
        • (Debit) A\/P 1,650,000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Bank \u3000\u3000\u30001,640,000<\/li>\n
        • \u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) Tax payable – PPh ART23 \u300010,000<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

          Other Income Taxes<\/h2>\n

          Fiscal tax was referred to as \u201cexit tax\u201d or \u201cincome tax prepayment,\u201d but it was also considered an outdated tax aimed at curbing residents\u2019 overseas travel to reduce foreign currency outflows.
          \nInitially, it was \u201c1 million rupiah for all residents exiting abroad, no exceptions,\u201d but it changed to \u201cno fee for NPWP holders, 2.5 million rupiah for non-holders.\u201d This was nominally to encourage tax awareness and unearth non-NPWP holders, positioned as a \u201cprovisional income tax payment,\u201d but it has since been abolished.
          \nThe foreigner tax involves paying US$1,200 to the Skills Development Fund (DPKK = Dana Pengembangan Keahilan Keterampilan) at a designated state bank to obtain an IKTA (Ijin Kerja Tenaga Asing), followed by processing a work permit with the payment certificate.
          \n(IKTA is the predecessor of the current IMTA (Izin Mempekerjakan Tenaga Asing).)<\/span>
          \nA side note on IKTA:
          \nTo obtain an IKTA, you first need a KITAS (Kartu Ijin Tinggal Terbatas) temporary residence permit. With this, you become an Indonesian resident, requiring an Immigration Card (Kartu Imigrasi) obtained at the airline check-in counter during departure, submitted to Immigration upon exit.
          \nThe exit card is collected at departure, but you must retain the entry card stub and present it upon re-entry, ensuring it isn\u2019t lost.
          \n(The Immigration Card was discontinued in March 2015.)<\/span>
          \nIn the past, extending a KITAS with the same company five times upgraded it to a KITAP (Kartu Ijin Tinggal Tetap = permanent residence permit). I wonder what the rule is now?
          \nResidents have three exit options from Indonesia. KITAS holders exiting with intent to re-enter as KITAS holders must obtain a MERP (Multiple Exit\/Re-entry Permit) or Single Re-entry Permit in advance. To abandon a KITAS, an EPO (Exit Permit Only) is required beforehand.
          \n(As of September 2015, only Multiple permits are available.)<\/span>
          \nAfter an EPO is issued, you must leave Indonesia within two weeks. Both entry and exit cards are taken, so don\u2019t panic in Singapore thinking, \u201cI lost my card stub!\u201d
          \nRe-entry occurs via VOA (Visa On Arrival), requiring completion of the entry\/exit card and preparation of an onward ticket (for exiting after obtaining a Telex Visa for a new KITAS). Otherwise, you\u2019d need to buy and discard a ticket to Singapore just for immigration.
          \nWhile awaiting Telex Visa approval from Immigration until the next departure, losing the exit card stub complicates departure. During this period, remember you\u2019re still a tourist.
          \n(Again, Immigration Cards were discontinued in March 2015, so they\u2019re no longer needed. Left as a \u201cmemory heritage lol\u201d of past systems.)<\/span><\/p>\n

          Foreign Currency Transactions and Tax Entries<\/h2>\n

          The Tax Rate is officially set by the tax office to prevent companies from arbitrarily lowering taxable amounts in foreign currency transactions, so it doesn\u2019t apply to rupiah-based transactions.
          \nTransaction entries are, in principle, recorded in the transaction currency (Original Currency).
          \nFor example, if the functional currency (Base Currency) is US$, and an A\/P invoice for repair fees is Rp.900,000, with a transaction rate of Rp.9,500\/$ and a Tax Rate of Rp.10,000\/$:<\/p>\n

          Transaction Entry<\/p>\n
          \n
            \n
          • (Debit) Repair fee Rp. 900,000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P Rp. 900,000
            \n(Base Rp.900,000 \u00f7 9,500 = $94.74)<\/li>\n<\/ul>\n<\/div>\n<\/div>\n
            Tax Entry<\/p>\n
            \n
              \n
            • (Debit) Prepaid PPN input Rp. 90,000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P Rp. 90,000
              \n(Base 90,000 \u00f7 9,500 = $9.47)<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

              Since it\u2019s a rupiah-based transaction, the amount payable to the tax office is fixed in rupiah, and the Tax Rate doesn\u2019t appear.
              \nFor accounting, the BI (Bank Indonesia) Rate is used to convert to the functional currency.
              \nNow, if the A\/P invoice for repair fees is $90, the PPN entry is in IDR. Although the transaction currency is dollars, the tax calculation records A\/P in rupiah, which is apparently unavoidable.<\/p>\n

              Transaction Entry<\/p>\n
              \n
                \n
              • (Debit) Purchase $90\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P $90<\/li>\n<\/ul>\n<\/div>\n<\/div>\n
                Tax Entry<\/p>\n
                \n
                  \n
                • (Debit) Prepaid PPN input Rp.99,000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P Rp.99,000
                  \n($90 \u00d7 11% \u00d7 10,000 = 99,000)<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

                  However, if the accounting system cannot reference multiple rates (BI Rate and Tax Rate) from the exchange rate master on the transaction screen, functional currency conversion options are:<\/p>\n

                  \n
                  \n
                    \n
                  1. Retrieve the transaction portion from the exchange rate master and manually correct the PPN portion.<\/li>\n
                  2. Input the transaction and tax portions on separate screens.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

                    Both impose high operational burdens. Alternatively, during mid-month foreign currency transactions, both transaction and tax portions can be auto-calculated using the BI Rate from the exchange rate master, with the 11% PPN aggregated in a Temporary account, offset (Re-class) at month-end with a rupiah-based PPN Payable calculated using the Tax Rate.<\/p>\n

                    Transaction Entry<\/p>\n
                    \n
                      \n
                    • (Debit) Purchase $90\u3000\u3000\u3000\u3000\u3000\u3000\u3000\u3000<\/strong>(Credit) A\/P $99.9<\/li>\n
                    • (Debit) PPN clearing $9.9<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

                      Aggregate Faktur Pajak amounts monthly and offset in bulk:<\/p>\n

                      Month-End Offset<\/p>\n
                      \n
                        \n
                      • (Debit) Prepaid PPN input Rp.90,000\u3000\u3000\u3000\u3000<\/strong>(Credit) PPN clearing $9<\/li>\n<\/ul>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

                        In the case of Indonesia, PPN (Pajak Penambahan Nilai = VAT = Value Added Tax) is the equivalent of Japan’s consumption tax, but Indonesia uses the invoice method (tax invoice is used to determine the tax amount) instead of the book method (which determines the tax amount based on the book, just like the calculation of consumption tax), so the amount of PPN payment or refund is calculated based on the tax invoice.<\/p>\n","protected":false},"author":2,"featured_media":81287,"parent":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[683],"tags":[],"class_list":["post-57158","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indonesia-accounting-tax-rule"],"_links":{"self":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/57158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/comments?post=57158"}],"version-history":[{"count":0,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/57158\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media\/81287"}],"wp:attachment":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media?parent=57158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/categories?post=57158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/tags?post=57158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}