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Corporate Income Tax (CIT) in Indonesia

October 7, 2022

Corporate Income Tax

In Indonesia, taxes for corporations follow a similar approach than other countries around the world. However, in order to incentivize and support entrepreneurs and the creation of new businesses, the Indonesian government provides with significant advantages and benefits to newly established companies, as well as for small and medium companies.

As such, Corporate Income Tax (CIT) in Indonesia has 2 modalities that all companies can choose from. By default, all companies start under the 1st regime, which provides important tax benefits.

  • 1st Regime: If a company is less than 3 years old and its annual gross revenue is of less than IDR 4.8 B, a Corporate Income Tax of 0.5% will be imposed on the company’s gross revenue. Profits will not be taxed under this regime, but only revenue.
    Under this regime however, expenses cannot be credited for, and losses cannot be carried forward to following years.
  • 2nd Regime: If a company is more than 3 years old and/or its annual gross revenue is higher than IDR 4.8 B, a Corporate Income Tax of 22% (2022) will be imposed on the company’s annual profit.
    However, a second tax benefit will apply in this case, because small and medium enterprises (With an annual turnover of less than IDR 50 B), will receive a 50% tax discount on the standard rate.
    As such, these companies will be applied an 11% tax rate (22% x 50%).

Although the 1st Regime is attractive, there are companies that might choose to start directly under the 2nd module. The main reason for this is if the company is expected to undergo huge investments, and as a result, big loses at the beginning of its operations. This way, the company will be able to carry the loss of the first years forward for a maximum of 5 years and set them against future profit taxes.

Additionally, the tax year in Indonesia follows the calendar year, from 1st January to 31st December.

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