Tax Return Reporting for Foreign Citizens in Indonesia

by Bayu Septiawan, a Directorate General of Taxes Officer

Tax subjects in Indonesia are classified into domestic tax subjects and foreign tax subjects. One of the domestic tax subjects is a Foreign Citizen ("WNA") who resides in Indonesia, stays in Indonesia for more than 183 (one hundred and eighty-three) days within a period of 12 (twelve) months; or within a tax year stays in Indonesia and has the intention to reside in Indonesia.

The definition of presence in Indonesia for more than 183 (one hundred and eighty-three) days does not have to be consecutive, but is determined by the total number of days the person is present in Indonesia within a period of 12 (twelve) months since their arrival in Indonesia.

Taxation Obligations for Foreign Citizens

For foreign citizens working or residing in Indonesia, tax obligations cannot be disregarded. Tax regulations in Indonesia stipulate that the status of Domestic Tax Subject (SPDN) does not only apply to Indonesian citizens, but also includes foreign citizens who meet certain criteria.

The Ministry of Finance through Regulation of the Minister of Finance (PMK) Number 18/2021 explains in detail the requirements for foreign citizens to be categorized as Domestic Tax Subjects. The main requirements are presence in Indonesia for more than 183 days within a period of 12 months and having the intention to reside.

As an individual or party who derives income from work or business conducted in Indonesia, foreign citizens have the same obligations as Indonesian citizens (WNI), namely to make payment and reporting of taxes from the income they obtain. This is regulated in Law Number 36 of 2008 regarding Income Tax (PPh) which has been amended four times since the policy of Law Number 7 of 1983. The obligation to make payment and reporting of Income Tax obtained in Indonesia applies because the foreign citizen has fulfilled the qualifications/requirements to become a domestic tax subject.

Furthermore, in relation to domestic tax subjects, individual domestic tax subjects become taxpayers if they have received or earned income exceeding the Non-Taxable Income (PTKP). The same is also affirmed in Article 3 paragraph (3) of the Director General of Taxes Regulation 43/2011, namely individuals who are domestic tax subjects become domestic Taxpayers if they have received or earned income originating from Indonesia or from outside Indonesia and the amount of income exceeds PTKP.

Meanwhile, foreign tax subjects, both individuals and entities, simultaneously become Taxpayers because they receive and/or derive income sourced from Indonesia or receive and/or derive income sourced from Indonesia through a permanent establishment in Indonesia.

Therefore, when the relevant foreign citizen has met the above criteria, they become a domestic tax subject, and automatically the foreign citizen will be subject to Income Tax article 21 (PPh 21) as a domestic individual taxpayer. While foreign citizens who are foreign taxpayers are subject to Income Tax article 26 (PPh 26) and are taxed at 20% of the gross amount.

Documentation Requirements

Documentation becomes the main key in determining tax status. Five key documents can prove the intention to reside, including Permanent Stay Permit Card (KITAP), Limited Stay Visa (VITAS) with a validity period of more than 183 days, Limited Stay Permit, employment contracts lasting more than 183 days, and residence rental contracts. Each document serves as concrete evidence of a foreign citizen's commitment to reside in Indonesia.

The tax reporting process is now easier with an electronic reporting system. Foreign citizens are required to obtain an Electronic Filing Identification Number (EFIN) from the Directorate General of Taxes (DJP). The EFIN activation process is relatively simple by downloading the form, completing documents such as KITAS and NPWP, and activating at the nearest tax office.

In general, the online tax return reporting stages for foreign citizens begin with opening the DJPOnline website. Next, you need to enter your NPWP number and enter the password that was created during EFIN activation. Don't forget to enter the Security Code displayed on the screen. After that, click 'Login' and verify the user. The next step is to fill out the tax return form through e-Filing or e-Form by following the instructions for reporting your annual tax return. At the end of the session, verify and send the electronic file to complete the reporting process.

Referring to Law Number 36 of 2008 concerning Income Tax, tax obligations for foreign citizens who are domestic tax subjects are not at all different from Indonesian citizens. All income earned in Indonesia and worldwide income must be reported and taxed in accordance with applicable regulations.

Considering that there are national holidays and collective leave coinciding with the deadline period for submitting Annual Tax Returns for Individual Taxpayers for the 2024 Tax Year, the Government through the Directorate General of Taxes encourages taxpayers to submit their Annual Tax Returns earlier before the reporting deadline of March 31, 2025. Nevertheless, the submission of Annual Tax Returns can still be carried out until the deadline through electronic channels on the DJP Online website.*

*)This article is the author's personal opinion and does not reflect the attitude of the agency where the author works.

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