Frequently Asked Questions

The investment plan is the multi-year cumulative capital commitment a PT PMA records at the point of NIB issuance through OSS. The figure starts above IDR 10,000,000,000 (ten billion Indonesian Rupiah) per Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia, or KBLI) per project location, excludes land and buildings, and represents the total capital the company intends to deploy over the realisation period under Appendix II to BKPM Regulation No. 5 of 2025. The realisation period sits between 4.5 (four and a half) and 15.5 (fifteen and a half) years depending on the sector.

The investment plan differs from share capital and authorised capital in four respects. The scope of the investment plan covers all capital sources, including paid-up equity, shareholder loans, retained earnings, and third-party debt, while share capital covers only equity. The investment plan is a multi-year cumulative commitment, while share capital is a point-in-time figure recorded in the deed of establishment. The investment plan is governed by Law No. 25 of 2007 on Capital Investment and BKPM Regulation No. 5 of 2025, read by BKPM through each quarterly LKPM, while share capital is governed by company law (Law No. 40 of 2007 on Limited Liability Companies as amended) and read by the Ministry of Law and the notary. A shortfall against the investment plan produces a BKPM sanction sequence under Article 286 of BKPM Regulation No. 5 of 2025, while a shortfall against share capital is a company-law issue requiring shareholder action to remedy.

Fixed capital covers tangible assets acquired by the company for long-term use in the licensed business activity. The categories include machinery and equipment, vehicles, office and operational furniture and fittings, computer hardware and IT infrastructure, and fit-out costs for leased premises. Each item is recorded on the company’s balance sheet as a fixed asset, depreciated over its useful life under the rates set in the Income Tax Law, and reflected in the LKPM’s fixed capital line in the period of acquisition.

Land and buildings are excluded from the IDR 10,000,000,000 investment plan figure under Article 25 of BKPM Regulation No. 5 of 2025. They are reported separately on the LKPM and are not counted toward the per-KBLI per-location threshold.

Working capital covers the operational running costs of the business. The categories include inventory and trade stock, rent paid on operational premises, salaries and the corresponding BPJS contributions, utilities and communication costs, marketing and sales expenditure, professional and consulting fees, software subscriptions, and the cash float supporting the operating cycle.

Both fixed capital and working capital count toward investment realisation in the LKPM and are reported separately in the quarterly submission. BKPM reads the deployment pattern between the two categories alongside the cumulative figure: a company that consistently shows no fixed capital investment in a sector where fixed assets are operationally typical (manufacturing, hospitality, retail) may attract a follow-up question at the next licensing review.

Yes. Inventory purchased for the licensed business activity counts as working capital realised at the date of purchase, when the funds flow from the company’s bank account to the supplier. The realisation is not deferred to the date of sale to the end customer.

The supporting documents required to evidence inventory realisation are the purchase invoice from the supplier, the bank statement showing the outbound payment, the inventory receipt confirming the goods have arrived at the company’s premises or warehouse, and the inventory record in the company’s accounting books showing the addition to stock on hand.

Where inventory is purchased on credit terms (the supplier invoices and the company pays 30, 60 or 90 days later), the realisation is recorded at the date the company actually pays the supplier, not at the invoice date. The LKPM measures realisation on a cash-out basis for working capital items.

The inventory remains on the balance sheet as an asset, and any write-downs for obsolete or damaged stock are reflected as expenses in the profit and loss account. Inventory write-downs do not reduce the cumulative realisation figure recorded in past LKPMs; the realisation is fixed at the point of payment and is not retrospectively adjusted.

Yes, where the rent is paid by the company under a written lease and the premises are used for the licensed business activity. Rent is reported as working capital realisation in the period the company actually pays the landlord, not on an accrued or straight-line basis. The standard pattern is to report the rent in the quarter the payment hits the company’s bank account.

Where the company prepays a multi-year lease at the outset (a common pattern for serviced offices and warehouse leases in Bali, where landlords typically request one to three years’ prepayment), the full prepayment is reported as working capital realisation in the quarter the payment is made. The realisation is not spread over the lease term for LKPM purposes.

The rent is then expensed in the profit and loss account on a periodic basis over the lease term following standard accounting treatment under Indonesian Financial Accounting Standards (PSAK 73 on Leases, equivalent to IFRS 16). The accounting treatment and the LKPM treatment diverge here: the accounting expense is spread, while the LKPM realisation is recognised at payment.

Where the lease is in the name of a director or shareholder personally and reimbursed by the company, the position changes. The reimbursement is the LKPM event, recorded at the date the company reimburses the individual. The arrangement should also be reviewed against the benefit-in-kind rules under PMK 66/PMK.03/2023, since a lease in a personal name with company reimbursement can carry BIK characteristics where the premises are also used personally.

Service-only companies show investment realisation almost entirely through working capital. The categories that drive realisation for a typical service PT PMA in Bali are rent paid on the company’s office or operational premises, salaries and BPJS contributions for the operational staff, professional and consulting fees procured for the business, marketing and sales expenditure including digital advertising and content production, software subscriptions and cloud infrastructure, and the operational cash float supporting working capital cycles.

BKPM evidences substantive activity through the operational expenditure recorded in the company’s books. The investment plan for a service PT PMA is typically set close to the IDR 10,000,000,000 floor, with the realisation built up over the first three to five years as the company hires staff, scales marketing, and grows its operational footprint. The LKPM is the vehicle through which BKPM tracks this trajectory.

A service PT PMA showing consistent quarterly working capital realisation aligned with audited financial statements satisfies the regulator without significant fixed asset deployment. The typical first-year LKPM pattern for a service company runs at IDR 1,000,000,000 to 2,500,000,000 (one to two and a half billion Indonesian Rupiah) per quarter, building cumulatively toward the IDR 10,000,000,000 mark by the end of the first or second year, with subsequent years extending the position as the company scales.

Where a service PT PMA has not deployed operational expenditure in the LKPM period (because the company is in pre-trading phase, or has paused operations), the LKPM is still filed, reporting nil realisation for the period and explaining the position in the obstacles section. A nil-realisation LKPM is acceptable for one or two quarters during a credible pre-trading phase; persistent nil realisation across four consecutive quarters triggers the automatic written warning under Article 286 of BKPM Regulation No. 5 of 2025.

The investment plan is the cumulative target a PT PMA records at NIB issuance and against which BKPM measures progress over the realisation period. The realised investment is the cumulative amount the company has actually deployed at the date of each quarterly LKPM, measured against the milestones the realisation schedule set at the outset.

The relationship is straightforward in concept. The investment plan is the target. The cumulative realised figure is the actual position. Each quarterly LKPM adds the period’s deployment to the running cumulative total. By the end of the realisation period (which sits between 4.5 and 15.5 years depending on the sector under Appendix II to BKPM Regulation No. 5 of 2025), the cumulative realised figure should reach or exceed the investment plan figure.

A persistent shortfall against the realisation schedule produces a BKPM sanction sequence under Article 286 of BKPM Regulation No. 5 of 2025: an initial written warning issued automatically through OSS, subsequent warnings on a quarter-by-quarter basis where the position is not remedied, temporary suspension of business activities through OSS access restriction, and ultimately revocation of the NIB. The sequence applies to both non-filing (where the LKPM is not submitted) and to persistent under-realisation (where the LKPM is filed but the cumulative figure remains significantly below the schedule).

The conservative position is to set the investment plan figure at a level the company can credibly reach within the realisation period, with a small headroom margin, instead of overstating the plan at the point of NIB issuance and creating a permanent under-realisation gap. Where the investment plan needs to be revised upward (for example, where the company is expanding into additional KBLI codes or additional project locations), the revision is processed through OSS and triggers an updated realisation schedule.

Authorised capital is the maximum value of shares the company is permitted to issue under its deed of establishment. Issued capital is the value of shares actually allocated to shareholders. Paid-up capital is the value of those issued shares that shareholders have actually paid in, transferred to the company’s bank account, and recorded in the corporate books.

Indonesian company law under Law No. 40 of 2007 originally set a minimum authorised capital figure. The Job Creation Law (Law No. 11 of 2020 and its successor Law No. 6 of 2023) removed that minimum, leaving the floor to be set sector by sector through the licensing regime. For a foreign-owned company, that floor sits at IDR 10,000,000,000 of paid-up capital per Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia, or KBLI) per project location under BKPM Regulation No. 5 of 2025.

BKPM does not measure the company by its authorised figure. It works from the paid-up figure, which is the only one tied to actual money in the company’s bank account. The deed will typically record an authorised capital figure above the paid-up, often at twice or four times the paid-up, to give the company headroom to issue further shares without a deed amendment. The authorised figure does not need to be paid in; the paid-up figure does.

Yes, the company can purchase a vehicle in its own name and record it as a corporate asset. The position then splits depending on how the vehicle is used.

A vehicle used substantively for company business (sales calls, deliveries to clients, operational logistics, transport of company personnel) is a company asset. The depreciation, fuel, maintenance, insurance, and the other running costs are deductible to the company against corporate income tax. The capital cost is recovered through depreciation under the standard fixed-asset rules at the rate set for the asset class, which sits at 25 (twenty-five) per cent declining balance for vehicles under Indonesian tax accounting.

A vehicle used substantively for the director’s private purposes is a benefit-in-kind. Under PMK 66/PMK.03/2023, the value of the private use is added to the director’s PPh Article 21 base and taxed at the recipient’s marginal rate. The vehicle remains a company asset on the corporate books; the depreciation and running costs remain deductible to the company.

A vehicle used for mixed business and private purposes (the typical pattern for a director’s car) requires the company to allocate the BIK portion proportionately. The conservative position is to add 50 (fifty) per cent of the running costs and the proportional depreciation to the BIK base. The more aggressive position uses a contemporaneously recorded usage log to support a lower private-use proportion. Either way, the company keeps the vehicle on its books and continues to claim the deductions, with the corresponding BIK addition to the director’s payroll.

A vehicle in the director’s personal name and reimbursed by the company on a per-kilometre basis is a separate position. The reimbursement is a non-taxable cost recovery to the director for the company-business portion; the private portion is not reimbursable. This route avoids the BIK calculation, although it requires the director to fund the asset and the company to operate a verified-distance reimbursement record.

The Sales Tax on Luxury Goods (Pajak Penjualan atas Barang Mewah, or PPnBM) position applies on the original acquisition of a luxury vehicle (typically above IDR 1,000,000,000 acquisition value), with the rate depending on the engine capacity. The luxury tax sits separately from the BIK question above.

Yes, where the director or foreign worker is employed by the company under a documented employment relationship and the immigration status is necessary for them to perform the licensed role. The company’s payment of visa fees, KITAS application and renewal fees, immigration agent fees, and the related government administration costs is treated as ordinary business expenditure deductible to the company.

The KITAS is the Limited Stay Permit Card (Kartu Izin Tinggal Terbatas, or KITAS) that a foreign worker requires to live and work in Indonesia. The application process involves a sequence of approvals: the Notification of Foreign Worker Use (Pemberitahuan Penggunaan Tenaga Kerja Asing, or PPTKA, formerly RPTKA) issued by the Ministry of Manpower, the Visa for Limited Stay (Visa Tinggal Terbatas, or VITAS) issued by Indonesian missions abroad, the KITAS itself issued by Immigration after entry, and the local civil-registration step with the relevant district office within 14 (fourteen) days of arrival.

The DPKK fee (Dana Pengembangan Keahlian dan Keterampilan, the manpower compensation fund) sits alongside at USD 100 (one hundred United States Dollars) per month per foreign worker, prepaid for the licence period.

Aggregate company spend on a single foreign director KITAS package typically falls in the USD 2,500 to USD 5,000 (two thousand five hundred to five thousand United States Dollars) range for initial issuance, depending on the agent and the urgency, plus the DPKK at USD 100 per month for 12 (twelve) months. All of these items are deductible to the company as ordinary business expense provided the foreign worker has a documented employment relationship with the PT PMA, the role aligns with the licensed business activity and is recorded in the company’s organisation chart, the payment runs through the company’s bank account or is reimbursed against documented invoices, and the PPh Article 21 return for the worker reflects the position correctly.

The position changes where the company pays for a KITAS for a person who is not employed by the company (for example, a director’s spouse or dependents). Spouse and dependent KITAS costs are a personal expense of the principal foreign worker. Where the company elects to pay these costs, they become a benefit-in-kind under PMK 66/PMK.03/2023, taxable to the recipient at the marginal PPh rate and (under the post-2023 rules) deductible to the company.

School fees paid for the director’s or shareholder’s children are a benefit-in-kind to the parent. Under the post-2023 natura rules in PMK 66/PMK.03/2023, the company’s payment of the fees is taxable to the parent at their marginal PPh rate (5 (five) to 35 (thirty-five) per cent) and deductible to the company at the corporate rate of 22 (twenty-two) per cent.

The figures involved are typically substantial. International schools in Bali charge between IDR 200,000,000 and IDR 400,000,000 (two hundred million to four hundred million Indonesian Rupiah) per child per year at the secondary level, depending on the school. A director with two children paying a combined IDR 600,000,000 in school fees through the company adds that figure to their monthly PPh Article 21 base, producing a personal tax liability typically in the IDR 150,000,000 to IDR 200,000,000 range per year (depending on the director’s other taxable income).

The net financial position for the director is mixed. The company saves IDR 132,000,000 in corporate income tax (22 per cent of IDR 600,000,000). The director pays additional personal tax of approximately IDR 165,000,000 (around 28 per cent average marginal rate on IDR 600,000,000). The net household position is approximately IDR 33,000,000 worse than if the director had paid the fees personally from after-tax income, ignoring cash-flow timing and the lost corporate liquidity.

The arithmetic shifts where the director’s marginal tax rate is lower than the company’s CIT rate (which applies for directors whose total taxable income falls below IDR 250,000,000 per year, sitting in the 5 to 15 per cent personal bands). In that scenario, the company-pays-school-fees structure produces a net household saving. For most foreign directors of a Bali-based PT PMA, the marginal personal rate sits above the corporate rate, and the structure produces a net loss.

The conservative position for most foreign directors is to draw an after-tax dividend or director’s fee large enough to fund the school fees personally, accept the personal tax on the distribution, and avoid the BIK complication entirely. The school’s contractual relationship with the parent (instead of the company) also avoids complications when the director leaves the role or transitions between companies.

A deductible business expense is a payment by the company that supports the licensed business activity and reduces the company’s taxable income at the 22 (twenty-two) per cent corporate income tax rate. The deductibility is governed by Article 6 of the Income Tax Law (Law No. 7 of 1983 as amended by Law No. 7 of 2021), which permits as deductible expenditure costs that are “incurred to obtain, collect, and maintain income”. Examples include rent on commercial premises, salaries of operational staff, equipment depreciation, utility bills, professional fees, marketing costs, and the other ordinary costs of running the business.

A benefit-in-kind is a payment by the company that confers a personal advantage on a director or related individual associated with the company. Under Article 4 paragraph (1) letter (a) of the Income Tax Law, supplemented by PMK 66/PMK.03/2023, BIKs are treated as additional taxable income to the recipient and added to the recipient’s personal income tax base. The recipient pays PPh on the value at their marginal rate (5 (five) to 35 (thirty-five) per cent under the progressive scale).

The position changed materially under Law No. 7 of 2021 on the Harmonisation of Tax Regulations. Prior to the 2023 implementation under PMK 66/2023, BIKs were non-deductible to the employer AND non-taxable to the recipient (under the old Article 9 paragraph (1) letter (e) of the Income Tax Law). The 2023 reform reversed both treatments. BIKs are now deductible to the employer AND taxable to the recipient, producing fiscal symmetry between the two sides of the transaction. The change altered the optimal structuring decision for foreign-owned companies; arrangements that were tax-efficient under the pre-2023 rules are not always efficient under the current regime.

The practical line is drawn at the substance of who benefits. A payment that primarily supports the licensed business activity is a deductible expense, with any side advantage to a director or employee treated as incidental. A payment that primarily supports the personal life of a director or shareholder is a benefit-in-kind, charged to the recipient at the marginal PPh rate.

The line is tested at four levels. The first is the documentation: does the company’s record of the transaction support the business purpose? The second is the substance: would a third party in the same role have received the benefit on commercial terms? The third is the proportion: where mixed use applies, is the allocation defensible? The fourth is the consistency: does the treatment match how the company has treated similar transactions in past years and how it has reported the position on the corresponding personal income tax returns?

Six categories of director expense fall clearly within the deductible business expense column and do not produce a benefit-in-kind charge under PMK 66/PMK.03/2023.

Business travel. Flights, accommodation, ground transport, and meals incurred by the director while travelling for company business are deductible to the company and not added to the director’s BIK base, provided the travel is documented with the business purpose. Travel that combines business and personal segments requires allocation; the personal segment is BIK.

Communication infrastructure. Mobile phone packages, internet subscriptions, laptops, tablets, and other equipment in the company’s name and used by the director for company communications are deductible without a BIK charge. Where the equipment is also used personally, the company position is to issue the equipment in the company’s name as an asset and not as personal property of the director.

Professional development. Training, conferences, seminars, certification fees, and professional body membership directly related to the director’s role and the licensed business activity are deductible without producing a BIK charge. The connection between the training and the role must be clear.

Professional advice. Legal, accounting, tax, immigration, and consulting fees procured by the company to support the director in their company role are deductible. Where the same advisers also handle the director’s personal affairs, the personal portion is a BIK to the director.

Workplace safety and statutory health. Workplace health screenings, occupational safety equipment, statutory BPJS Kesehatan contributions, and BPJS Ketenagakerjaan contributions covering work accident and old-age benefits sit within specific exclusions in PMK 66/PMK.03/2023 and are deductible without BIK treatment.

In-workplace food and drink. Food and drink provided at the company’s workplace to all employees on equivalent terms is excluded from BIK treatment under Article 4 of PMK 66/PMK.03/2023. The exclusion covers office snacks, lunch provided onsite, communal coffee and tea services, and similar group-level provision available to all staff.

Two BPJS schemes apply. BPJS Kesehatan covers health social security and is governed by Law No. 24 of 2011 on the BPJS, supplemented by Presidential Regulation No. 82 of 2018 on Health Insurance. BPJS Ketenagakerjaan covers employment social security and is governed by Government Regulation No. 44 of 2015 and the subsequent implementing regulations.

BPJS Ketenagakerjaan splits into four programmes. Work accident benefit (Jaminan Kecelakaan Kerja, or JKK) covers medical treatment, rehabilitation, and compensation for work-related accidents. Old-age benefit (Jaminan Hari Tua, or JHT) builds a lump-sum savings entitlement payable on retirement or after a long-term separation from the workforce. Pension benefit (Jaminan Pensiun, or JP) provides a monthly pension on retirement based on accumulated contributions. Death benefit (Jaminan Kematian, or JKM) provides a lump-sum payment to the dependents of an employee who dies during their working years.

Every PT PMA must register all employees in BPJS Kesehatan and in the JKK, JHT, and JKM programmes of BPJS Ketenagakerjaan. The JP programme has separate rules: it is mandatory for employees in companies above certain thresholds and optional below.

The registration is processed through the BPJS portal and updates the employee record at the moment of hire. New employees should be registered within seven days of starting work; late registration produces an administrative penalty on the company.

PPh Article 21 is calculated on the employee’s monthly gross compensation, after deduction of the personal allowance (Penghasilan Tidak Kena Pajak, or PTKP), applying the progressive marginal tax rates set in Article 17 of the Income Tax Law.

The PTKP allowance is IDR 54,000,000 (fifty-four million Indonesian Rupiah) per year for a single individual, with additional allowances of IDR 4,500,000 (four million five hundred thousand Indonesian Rupiah) for a spouse and IDR 4,500,000 for each dependent up to three dependents. A married employee with three children therefore receives a PTKP of IDR 72,000,000 per year (single allowance IDR 54,000,000 plus spouse IDR 4,500,000 plus three dependents at IDR 4,500,000 each).

The progressive bands under Article 17 are set out below.

The company withholds the calculated PPh Article 21 from the monthly net pay, remits the withheld amount to the State Treasury through the Core Tax Administration System (Sistem Inti Administrasi Perpajakan, or Coretax) by the 10th of the following month, and files the monthly PPh Article 21 return by the 20th. The employee receives a year-end withholding receipt (Form 1721-A1) for use in their annual personal income tax return.

The contribution rates by programme are set out below. The rates are applied to the employee’s monthly gross salary, with caps applying to specific programmes as noted.

The cumulative employer cost for BPJS contributions on a typical employee earning above the JP and Kesehatan caps sits at approximately 10 (ten) to 11 (eleven) per cent of monthly gross salary. The employee bears an additional 3 (three) per cent through the JHT, JP, and Kesehatan employee portions combined. The total social security cost on a fully-loaded employee therefore runs at 13 (thirteen) to 14 (fourteen) per cent of gross monthly compensation across both sides.

The BPJS Kesehatan ceiling of IDR 12,000,000 per month means that for employees earning above that figure, the employer contribution is capped at IDR 480,000 (four hundred and eighty thousand Indonesian Rupiah) per month and the employee contribution at IDR 120,000.

Foreign workers employed by an Indonesian company for 6 (six) months or longer must be enrolled in both BPJS schemes. The position is set in Article 14 paragraph (1) of Presidential Regulation No. 109 of 2013 on BPJS Ketenagakerjaan participation and in the parallel regulation on BPJS Kesehatan. The contribution rates are the same as for Indonesian workers, applied to the foreign worker’s gross monthly salary on the same scale.

Where the foreign worker’s home country has a social security totalisation arrangement with Indonesia (Australia is the leading example under a partial agreement), the foreign worker may apply for exemption from specific Indonesian programmes where they are continuing to contribute to their home country scheme. The exemption is processed through BPJS Ketenagakerjaan on application by the employer and the employee jointly. The application requires evidence of the home country contribution and the duration of the assignment.

Where no totalisation arrangement is in place, the foreign worker contributes to the Indonesian schemes in the same way as a local worker. The employee portion is withheld from the foreign worker’s monthly salary alongside PPh Article 21 or PPh Article 26 withholding. The contributions build a JHT lump-sum and (where applicable) a JP pension benefit that the foreign worker can withdraw on permanent departure from Indonesia under specific procedures.

Foreign workers on assignments under 6 (six) months are exempt from the mandatory BPJS enrolment, and the company is not required to register them. The company may still elect to enrol them voluntarily for the protection of work-accident coverage during the assignment, which is a sensible position for site-based or hazardous work.

PPh Article 26 of the Income Tax Law applies to non-resident foreign workers at 20 (twenty) per cent on gross monthly compensation, reducible under an applicable double tax treaty.

The non-resident status applies to a foreign worker who has been in Indonesia for less than 183 (one hundred and eighty-three) days in any rolling 12 (twelve) month period and who does not have a domicile or strong personal ties in Indonesia under the residency test in Article 2 of the Income Tax Law. The 183-day test is the most common trigger, although a foreign worker who establishes domicile in Indonesia (intent to reside, family resident in Indonesia, property ownership) can qualify as resident before the 183-day threshold.

The PPh Article 26 calculation is straightforward: 20 per cent of the gross salary is withheld monthly and remitted through Coretax. The PTKP personal allowance and the progressive rates that apply to residents do not apply to non-residents. A non-resident foreign worker earning IDR 50,000,000 per month therefore pays PPh Article 26 of IDR 10,000,000 per month, regardless of their family circumstances.

Once a foreign worker crosses the 183-day threshold and qualifies as Indonesian tax resident, the position changes mid-year. From the date of residency, PPh Article 21 applies with the personal allowance and the progressive rates. The company recalculates the year-to-date position at the change-over point and adjusts the cumulative withholding so that the worker’s full-year liability matches the resident calculation. The bukti potong issued at year-end reflects the consolidated position.

The DGT form requirement for treaty rate application does not apply to PPh Article 26 on employment income; treaty relief is claimed by the foreign worker in their home jurisdiction through the foreign tax credit mechanism, supported by the Indonesian bukti potong.

Indonesian law sets a ten-year retention period for both company records and tax records.

Yes. The religious holiday allowance (Tunjangan Hari Raya, or THR) is mandatory under Minister of Manpower Regulation No. 6 of 2016 on Religious Holiday Allowance for Employees in Companies.

The amount is one month’s salary for employees with at least one year of continuous service. Employees with one to twelve months of service receive a pro-rata amount based on completed months. An employee with six months of continuous service therefore receives six-twelfths of one month’s salary as THR.

The THR is paid before the religious holiday observed by the employee. The mapping is: Idul Fitri for Muslim employees, Christmas for Christian employees, Nyepi for Hindu employees, Waisak for Buddhist employees, and Imlek for Confucian employees. The payment must reach the employee no later than 7 (seven) days before the relevant religious holiday under Article 5 of the Regulation. For most PT PMAs in Bali employing predominantly Muslim and Hindu Indonesian staff, the practical pattern is to pay THR in March or April (Idul Fitri) and February or March (Nyepi) depending on the lunar and Saka calendar dates for the year.

Late payment carries an administrative fine of 5 (five) per cent of the THR amount under Article 10 of the Regulation. Non-payment carries the right of the employee to claim the entitlement through the industrial relations dispute settlement procedure under Law No. 2 of 2004.

The THR is taxable as employment income under PPh Article 21 in the month of payment and BPJS contributions apply on the THR component in the same way as on regular monthly salary. The company budgets for the THR throughout the year as a deferred payroll cost, typically reserving one twelfth of monthly payroll each month against the year-end obligation. The cumulative reserve sits on the balance sheet as a current liability and is released against actual payment in the relevant month.

Yes. A PT PMA can invoice foreign clients in any currency the parties agree, with United States Dollars and Euros the typical choices for Bali-based service exporters. The invoicing currency is a commercial decision between the parties and does not require regulatory approval.

The accounting books, by contrast, must be maintained in Indonesian Rupiah unless the company has obtained approval from the Ministry of Finance under Minister of Finance Regulation No. 1/PMK.03/2015 to keep accounts in English and in United States Dollars. Without that approval, foreign-currency revenue is translated to IDR at the daily exchange rate at the date of invoice issue for entry into the books and the resulting IDR figure flows through to the corporate income tax computation.

The revenue is taxed as ordinary income to the PT PMA at the 22 (twenty-two) per cent corporate income tax rate under Article 17 of the Income Tax Law (Law No. 7 of 1983 as amended by Law No. 7 of 2021), regardless of whether the client is Indonesian or foreign and regardless of whether the work is performed in Indonesia or remotely. The geographical location of the client and of the work delivery does not affect the Indonesian corporate income tax position: the PT PMA is taxed on its worldwide income as an Indonesian tax resident.

The PPN treatment is different and is addressed in the next question.

The exchange differences arising between the invoice date and the payment date are recognised as foreign exchange gains or losses in the profit and loss account and follow the standard accounting treatment under PSAK 10 (equivalent to IAS 21). Foreign exchange gains are taxable; foreign exchange losses are deductible. Companies invoicing in stable foreign currencies typically see exchange differences sit within a 2 (two) to 5 (five) per cent band over a single quarter.

Qualifying service exports are zero-rated for PPN purposes under Minister of Finance Regulation No. 32/PMK.010/2019 on Value Added Tax Treatment for Exports of Taxable Services.

The distinction between exempt and zero-rated is operationally significant. An exempt service falls outside the PPN system: the supplier does not charge PPN on the invoice and cannot claim back the PPN it has paid on its own inputs (rent, software subscriptions, professional fees paid to other Indonesian PKP suppliers). A zero-rated service falls within the PPN system at a zero per cent rate: the supplier does not charge PPN on the invoice and can recover the PPN it has paid on inputs through the standard input tax credit mechanism. The zero-rated position is therefore more favourable than exempt because it preserves the recoverability of input PPN.

PMK 32/PMK.010/2019 lists the qualifying service categories. The list covers research and development, rental of movable property (excluding aircraft, ships, and similar), management consulting, business consulting, legal consulting, accounting consulting, engineering consulting, marketing services, software services, IT consulting, technical services, training services, and the other defined categories.

Services not on the list are treated as supplied within Indonesia and attract the standard 11 (eleven) per cent PPN even where invoiced to a foreign client. This is a frequent error among new service exporters: assuming that any offshore invoice qualifies for zero-rating, without checking whether the service category sits within the PMK 32/2019 list.

The zero-rated treatment also has a cash-flow benefit. Input PPN paid by the PT PMA on its Indonesian costs (Coretax-registered PKP suppliers charging 11 per cent PPN) can be claimed back through a quarterly refund process, producing a net cash inflow to the company that offsets some of the operational cost of running the entity. A service-export PT PMA with substantial Indonesian input costs (office rent, local staff, Indonesian professional fees) can run a structural PPN refund position quarter on quarter.

The documentation set comprises five items the company assembles for each zero-rated export transaction.

A written agreement between the PT PMA and the foreign client setting out the scope of the services, the deliverables, the place of consumption (outside Indonesia), the fee, and the payment terms. The agreement may be a master services agreement covering multiple deliveries or a single-project contract.

The invoice issued in the agreed currency, marked as a zero-rated export tax invoice (faktur pajak ekspor) generated through the Coretax system with the specific document code for service exports. The faktur pajak ekspor differs from a standard Indonesian domestic faktur pajak in its document code and its line-item treatment; it is generated from the Coretax interface specifically for the export transaction type.

Evidence that the client is based outside Indonesia, typically the client’s certificate of incorporation, registered office details, or equivalent corporate documentation showing the foreign address. For individual foreign clients, the equivalent is a passport copy and proof of foreign residency.

Evidence of payment from offshore through the banking channel: the inbound transfer from the foreign client’s bank to the PT PMA’s Indonesian bank, with the LLD inbound report filed by the receiving bank as part of the foreign-exchange transaction reporting under Bank Indonesia Regulation No. 22/22/PBI/2020.

Evidence that the service is consumed outside Indonesia: delivery confirmation, the location of the recipient’s use of the deliverable, correspondence trail showing the service was performed for an offshore purpose, and where applicable, evidence that the deliverable was sent to a foreign address or accessed from outside Indonesia. This is the documentary aspect that tends to attract scrutiny in a PPN audit: the tax office reads the correspondence trail and the deliverable file metadata to assess whether the consumption occurred offshore in substance.

The four threshold conditions for zero-rating under PMK 32/PMK.010/2019 are that the service falls within the listed categories, the recipient is based outside Indonesia, the service is consumed outside Indonesia, and the payment is received through the banking channel from outside Indonesia. The absence of any one condition disqualifies the transaction from zero-rating, and the standard 11 (eleven) per cent PPN applies. The PT PMA cannot retroactively recharacterise a non-qualifying transaction; the PPN classification is fixed at the point of invoice issue.

Operating revenue, whether invoiced to Indonesian or foreign clients, is not the same as investment realisation. The two figures are tracked separately in the quarterly LKPM (Laporan Kegiatan Penanaman Modal).

Investment realisation measures capital deployed by the company: purchases of fixed assets and operational expenditure on working capital. Revenue measures the income the company earns from its operating activity.

The LKPM has separate sections for both. The investment realisation section reports cumulative capital deployment against the investment plan recorded at NIB issuance. The production or service output section reports the company’s operating activity in the period, expressed in service revenue, transaction counts, or units of production depending on the sector.

For a service-only PT PMA exporting to foreign clients, the operating output section is typically populated with the service revenue figure in IDR (translated from the invoicing currency at the relevant exchange rate for the quarter). The revenue figure provides BKPM with a parallel measure of operational substance alongside the financial deployment data. Higher revenue indicates a substantively active company, although BKPM measures realisation primarily against the capital deployment figure and applies sanctions against under-realisation of the investment plan, not against low revenue.

The offshore-revenue position has a separate implication for the company’s overall classification. A PT PMA with substantial offshore revenue earned through service exports may qualify for specific export-oriented incentives under sector-specific schemes (the export of services category under BKPM Regulation No. 5 of 2025 includes incentives for high-value service exporters). The standard PT PMA regime applies unless the company opts into and qualifies for a designated export-incentive structure, which requires a separate licensing application.

The reconciliation between the LKPM revenue figure, the audited financial statements, and the corporate income tax return should align quarter on quarter and year on year. Material divergences between the three sources trigger follow-up at the annual licensing review with BKPM and at the corporate tax audit with the tax office, so the practical position is to use a single revenue recognition methodology across all three reports.

The standard corporate income tax rate is 22 (twenty-two) per cent of taxable income, set by Article 17 paragraph (1) letter (b) of the Income Tax Law (Law No. 7 of 1983 as amended by Law No. 7 of 2021 on the Harmonisation of Tax Regulations, or UU HPP). The 22 per cent rate has applied from the 2020 tax year onwards, reduced from the previous 25 per cent rate under the UU HPP reform.

Two reliefs apply to smaller companies.

Article 31E of the Income Tax Law allows a 50 (fifty) per cent reduction of the standard rate on the first IDR 4,800,000,000 (four billion eight hundred million Indonesian Rupiah) of taxable income for companies with annual gross turnover up to IDR 50,000,000,000 (fifty billion Indonesian Rupiah). The effective rate on the first IDR 4,800,000,000 of taxable income is therefore 11 (eleven) per cent for qualifying smaller companies, with the standard 22 per cent rate applying to the balance of taxable income above that threshold. The Article 31E relief is automatic and does not require an election; it is applied by the company in preparing its corporate income tax return.

Government Regulation No. 55 of 2022 sets an optional final tax regime for companies with annual gross turnover up to IDR 4,800,000,000: a 0.5 (zero point five) per cent final tax on gross turnover, in lieu of the standard CIT calculation. The final tax regime is elective and applies for the first three years of operation. The tax is calculated on cash receipts (turnover) and not on accounting profit, which simplifies the compliance for very small companies at the cost of foregoing deductions and depreciation.

The choice between the standard CIT regime with Article 31E relief and the PP 55/2022 final tax regime depends on the company’s expected margin and the timing of profits. A high-margin micro company with low overheads typically benefits from the 0.5 per cent final tax route. A low-margin or loss-making early-stage company typically benefits from the standard CIT regime, which allows losses to be carried forward against future profits under Article 6 paragraph (2) of the Income Tax Law for up to five years.

Statutory audit is required under Article 68 of Law No. 40 of 2007 on Limited Liability Companies. The audit triggers are set out below.

The company’s business activities involve raising or managing public funds (banks, investment managers, deposit-taking institutions). The company has issued debt securities to the public. The company is a public company (Perseroan Terbuka) listed on the Indonesia Stock Exchange. The company’s assets or annual turnover are at or above IDR 50,000,000,000 (fifty billion Indonesian Rupiah). The company is required by another law or regulation to be audited (sector-specific overlays).

The asset/turnover threshold applies on either limb. A company exceeding the threshold on assets alone, on turnover alone, or on both, must be audited. For most foreign-owned PT PMAs in Bali, the trigger is reached on the asset side first because the IDR 10,000,000,000 paid-up capital floor and the multi-year accumulation of working capital and fixed asset deployment carry the balance sheet over the IDR 50,000,000,000 mark within a few years of trading.

The audit must be performed by a Public Accountant (Akuntan Publik) registered with the Ministry of Finance and licensed under Law No. 5 of 2011 on Public Accountants. The auditor must be independent of the company under the independence rules in the Indonesian Public Accountant Code of Ethics, and the audit must follow Indonesian Auditing Standards (Standar Audit, equivalent to International Standards on Auditing).

Sector-specific audit requirements apply on top of the company-law trigger. Banks and non-bank financial institutions are audited annually under the Financial Services Authority (Otoritas Jasa Keuangan, or OJK) regulations regardless of size. Insurance companies and pension funds carry their own audit requirements. PT PMAs in the upstream oil and gas sector are audited as part of their cost-recovery audit cycle with the upstream regulator SKK Migas.

Many foreign-owned PT PMAs voluntarily commission an annual audit even below the statutory threshold. The audited financial statements are required by foreign shareholders for group consolidation purposes, by banks for credit facility renewals, by BKPM at major licensing reviews, and by potential investors in any subsequent equity transaction. The cost of an annual audit for a small to mid-sized PT PMA in Bali typically falls in the IDR 80,000,000 to IDR 250,000,000 (eighty million to two hundred and fifty million Indonesian Rupiah) range depending on the audit firm and the complexity of the assignment.

The default position under the General Tax Provisions Law (Law No. 6 of 1983 as amended by Law No. 7 of 2021) is that accounting books must be kept in Indonesian language and in Indonesian Rupiah, under Article 28 paragraph (4).

A PT PMA can apply to the Ministry of Finance for approval to keep its accounting records in English and in United States Dollars under Minister of Finance Regulation No. 1/PMK.03/2015 on the Issuance of Approval for the Use of English Language and United States Dollar Currency in Bookkeeping. The application is filed at least three months before the start of the tax year in which the company wants to apply the approved bookkeeping basis. The approval, once granted, applies for a minimum of five consecutive tax years and cannot be reversed within the period except in specified circumstances such as a change in the company’s functional currency.

The qualifying conditions include the following. The company is a PT PMA or another foreign-currency-denominated entity. The company’s functional currency under PSAK 10 (equivalent to IAS 21) is United States Dollars. The company has a substantive economic basis for the foreign-currency reporting (predominantly USD-denominated revenue or financing). The company keeps an IDR conversion record for tax filing purposes alongside the USD primary books.

Annual financial statements, the corporate income tax return, monthly PPh and PPN returns, and statutory reports continue to be filed in IDR through the Core Tax Administration System (Sistem Inti Administrasi Perpajakan, or Coretax), with the USD figures translated at the prescribed exchange rates set by the Ministry of Finance. The approval therefore simplifies group consolidation for foreign-parent reporting and removes some of the foreign exchange volatility from the primary accounts, and does not change the underlying Indonesian tax position or the IDR-based filing obligations.

Languages other than English (Mandarin, Japanese, Korean, and similar) are not covered by PMK 1/PMK.03/2015. Currencies other than USD (EUR, SGD, JPY) require a separate approval process and are rarely granted in practice.

Indonesian law sets a ten-year retention period for both company records and tax records.

Article 11 of Law No. 8 of 1997 on Company Documents requires every company in Indonesia to retain its accounting records, supporting documents, and financial reports for 10 (ten) years from the end of the financial year to which they relate. Article 28 paragraph (11) of the General Tax Provisions Law (Law No. 6 of 1983 as amended by Law No. 7 of 2021) imposes the same ten-year retention on tax-related records, aligned with the statute of limitations for tax reassessment under Article 13 of the same Law.

The records covered fall into six categories.

The company’s accounting books, comprising the general ledger, sub-ledgers, journals, trial balances, and any supporting working papers used in preparing the financial statements.

Supporting source documents, including sales and purchase invoices, bank statements, payment vouchers, receipts, contracts and agreements, and bukti potong withholding receipts received from and issued to counterparties.

Statutory reports filed with regulators, including the annual financial statements, the corporate income tax return, the monthly PPh and PPN returns filed through Coretax, the quarterly LKPMs filed through OSS, and the BPJS contribution submissions.

Corporate governance documents, including the deed of establishment and subsequent amendments, shareholders’ resolutions and meeting minutes, board resolutions and meeting minutes, the share register, and the company’s standing legal documentation.

Employment records, including employment contracts, payroll registers, BPJS enrolment records, KITAS and PPTKA documentation for foreign workers, and the bukti potong issued to employees at year-end.

Correspondence with regulators and tax authorities, including all letters, emails, formal notifications, and informal correspondence received from and sent to the tax office, BKPM, the Ministry of Law, BPJS, and the other regulatory bodies the company engages with.

The records may be kept in physical or electronic form. Electronic storage is permitted under Law No. 11 of 2008 on Electronic Information and Transactions and is the standard pattern for newer PT PMAs, provided the records remain accessible and verifiable for the full retention period. The company should keep encrypted backups and migration plans for any change of accounting software during the retention window.

The records must be available in Indonesia. Storage on offshore cloud servers is permitted only where a copy is also kept onshore and is accessible to the Indonesian tax office on request, under Minister of Finance Regulation No. 213/PMK.03/2016 on the Storage of Records by Taxpayers. Companies using foreign cloud providers (typically the major US-based providers) satisfy the onshore requirement through the provider’s Indonesian data centres where available, or through a separate onshore backup arrangement where the provider does not maintain Indonesian infrastructure.