Every individual is bound to declare and pay taxes in their country of residency. However, tax obligations may also arise in other jurisdictions if you generate income abroad. This means that even if you are a tax resident of Indonesia, you may still be liable to declare and pay tax on overseas income in Indonesia.
Most countries require income generated within their borders to be taxed locally. For individuals and businesses operating across borders, this can create situations where more than one country imposes tax on the same income. This is known as double taxation.
Double taxation often becomes a barrier for global trade, investment, and for individuals who live and work internationally. To prevent this, countries establish Double Taxation Avoidance Agreements (DTAAs), known in Indonesia as Perjanjian Penghindaran Pajak Berganda (P3B).
These treaties, signed between Indonesia and many other nations, are designed to reduce or eliminate the tax burden on the same income being taxed twice. They play a key role in facilitating international business, investment, and cross-border employment.
You can view the official list of tax treaties on the Directorate General of Taxes website: Tax Treaty Rates | Directorate Jenderal Pajak
Depending on the country and type of income involved, Indonesian tax residents may benefit from:
This ensures that income earned abroad, such as salaries, dividends, royalties, or rental income, does not face unfair double taxation.
Indonesian Tax Residents (see our article on Tax Residency in Indonesia) are required to declare their worldwide income, including foreign income. This applies even if tax has already been paid in the country of origin.
When declaring overseas income in Indonesia, you may request a tax credit or deduction. To do this, you will need to provide proof of tax paid abroad. The relief can take different forms, including tax deduction, credit, or exclusion, depending on the treaty in place.
Imagine you are a French citizen who has become a tax resident in Indonesia. You earn a salary from your Indonesian company but also receive rental income from a property in France.
Thanks to the Indonesia–France tax treaty, you can apply for a tax credit in Indonesia. If the French tax rate is 20% and Indonesia’s rate is 25%, you will only pay the 5% difference in Indonesia.
This system ensures fairness while maintaining compliance with Indonesian tax laws.
(Note: This example is for illustration purposes only and may not reflect your specific case.)
Failure to declare overseas income in Indonesia can result in penalties and back taxes. With Indonesia’s recent tax reforms and closer international cooperation under frameworks such as the Automatic Exchange of Information (AEOI), undeclared foreign income is more likely to be detected.
By correctly declaring overseas income, you not only stay compliant but may also benefit from available tax relief under Indonesia’s tax treaties.
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Learn how overseas income in Indonesia is taxed, how double taxation treaties work, and how to claim relief as an Indonesian tax resident.
