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Payroll & Tax in Indonesia

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Indonesia payroll & taxation

There are specific rules for payroll and taxation in Indonesia, depending upon whether your company employs foreign nationals or local Indonesian employees. The primary concerns for a foreign company that needs to comply with tax laws in Indonesia are: Individual income tax (IIT) for employees in Indonesia, social security costs, capital gains tax, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns. Most Indonesian taxes are largely similar to that of other jurisdictions.

Your Payroll Options in Indonesia

Remote Payroll

A remote payroll in Indonesia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Indonesia. The best option for a non-resident company to payroll its employees (local and foreign) in Indonesia is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Indonesia under one of the forms available, but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Indonesia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Indonesian payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Indonesian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Indonesia to a GEO, like Shield GEO. This is possible for both foreign workers and Indonesian nationals. This is the easiest, fastest and safest way to payroll staff in Indonesia.

Shield GEO manages all aspects of payroll for workers in Indonesia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Indonesia

Information Explanation
Currency ? Indonesian Rupiah (IDR)
Social Security Registration ?
Jamsostek is mandatory for every employment in Indonesia, especially for local employees. Depending on
the type of business, the rate ranges from 6.24% to 7.74% of the fix income, from which 2.00% is employee
contribution.
 
The breakdown of the rate is as follows:
• Work Accident Insurance, ranging from 0.24% to 1.74%, depending on type of business.
• Life Insurance, 0.30%
• Pension Fund, 3.70% employer contribution and 2.00% employee contribution.
 
In addition to the above, the company can insure its employees with Jamsostek Health Insurance (3.00% for
single employee, 6.00% for married employee). This insurance is not mandatory, provided that the company
has offered a better health insurance choice than what Jamsostek offers.
Corporate Income Tax Rate

The flat rate is 25%.

Payroll Tax

N/A

Sales Tax

VAT is taxed at 10%.

Withholding Tax
  • Dividends: 15%
  • Interest: 15%
  • Royalties: 15%

Payments

Information Explanation
Frequency of Salary Payment ?

Monthly

Invoice / Payslips required ?

Monthly pay slips available on web-site, pdf or paper

Minimum Wage ?

Annual (US$)1,087

Payroll Reporting Requirements ?

Monthly Filing Requirement:

  • Payroll, Tax (payment on 10th,
  • filing on 20th)
  • Jamsostek (filing on 15th)
 
Annual filing deadline:
  • Employers to file income tax return by 30st April of the year.
  • Employees to file income tax return by 31st March of the year.
  • Employee Income Tax Receipt Form 1721-A1, Final Employee Withholding Tax Report.
Holiday Allowance ?

Full-time employees are paid for public holidays.

Employee Entitlements

Information Explanation
Working on Sundays ?

No

Time Off Work ?

An employee is entitled to paid 12 days annual leave.

Medical Leave ?

Every female employee is entitled to 3 months of maternity leave.

Indonesia

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