Residence
Since the company is incorporated in Indonesia or has a registered office in Indonesia, it is treated as a resident of Indonesia for tax purposes. Foreign companies operating through a permanent establishment (PE) in Indonesia generally have the same tax liability as resident taxpayers.
What is Corporate ?
Corporate is a group of persons and/or capitals which is a unity whether doing business or not doing business including limited liability company, commanditaire company, other companies, state-owned company or local government-owned company in any name and form, firm, syndicate, cooperative, pension fund, partnership, association, foundation, mass organization, socio-political organization, or other organizations, institution and other forms of corporate including collective investment contracts and permanent establishments.
State-owned companies and local government-wned companies are tax subject regardless their name and form, thus, each of certain units of the Government agency, such as, institutions, agencies, etc., owned by the Central Government and Local Governments that carry on business or carry out activities to earn income are tax subjects.
By definition, association also includes associations, unions, unions, or society of parties who have the same interest.
What the difference between Resident and Non- Resident ?
Important difference between the Resident and the non-Resident lies on the fulfillment of their tax obligations, including:
- A resident Taxpayer is subject to tax on income either received or earned from Indonesia or from outside Indonesia (world wide income) , whereas a non-resident Taxpayer is subject to tax only on the income derived from income sources in Indonesia ;
- A resident Taxpayer is taxed based on net income at the general rate, whereas a non-resident Taxpayer is taxed based on gross income at equivalent tax rate; and
- Resident Taxpayers shall be obliged to submit an Annual Income Tax Return as a means to determine the tax payable in a fiscal year, whereas the non-resident Taxpayers are not obliged to submit the Annual Income Tax Return because their tax obligations are fulfilled through final withholding tax.
For non-resident Taxpayers who carry on business or carry out activities through a permanent establishment in Indonesia, the fulfillment of their tax obligations is equated with fulfillment of tax obligations of resident corporate Taxpayers as specified in the Income Tax Law and the Laws that govern the general provisions and procedures of taxation.
