Annual Compliance Check in Indonesia: Why it Matters for your PT PMA

If you are running a PT PMA in Indonesia, annual compliance directly affects your company’s financial health and ability to operate. Each year, you need to manage your tax position with the Directorate General of Taxes (DGT) and fulfill your corporate governance requirements with the Ministry of Law and Human Rights (MOLHR). 

If the DGT identifies issues with your expense deductions or foreign payments, your tax liability can increase several times over what you originally budgeted. Similarly, if you miss your Annual GMS deadline, you will be unable to register corporate changes, appoint new directors, or maintain your banking relationships.

This article covers both areas: how fiscal corrections work and what triggers them, and what you need to prepare for your Annual General Meeting of Shareholders before the June deadline.

Preparing for Annual CIT and Fiscal Correction in Indonesia

The Indonesian tax system distinguishes between accounting profit and taxable profit. Your financial statements reflect accounting profit, but your tax liability is based on taxable profit. 

These two figures can differ significantly, particularly when the DGT reviews your tax filing and corrects specific items they find non-compliant. This process is called Fiscal Correction.

Fiscal Correction means the DGT reviews your reported expenses and decides which ones qualify as deductible. When they disallow an expense, it gets added back to your taxable income. This can happen even after you have closed your books and filed your return.

There are two main triggers for fiscal correction: unallowed deductions under Article 9, and failure to properly withhold or pay taxes on payments to third parties.

1. Unallowed Deductions

Article 9 of the Income Tax Law specifies which expenses cannot be deducted from gross income. Violations of these provisions are a primary trigger for fiscal correction.

• Benefits in kind (natura): Under Article 9(1)(e), benefits provided to employees or directors are generally non-deductible. This includes housing allowances, personal vehicles, and other benefits not strictly required for business operations.
• Company-paid employee income tax: Article 9(1)(h) explicitly states that income tax is non-deductible. If your company pays an employee’s tax rather than withholding it from their salary, that payment cannot be treated as a deductible expense.
• Personal expenses of shareholders: Article 9(1)(b) prohibits deductions for expenses incurred for the personal benefit of shareholders, partners, or members. This covers renovation of personal property, personal travel, and insurance premiums for shareholders or their families. Travel and entertainment expenses require proper documentation through a Nominative List. Expenses without valid documentation or that include personal travel for shareholders’ families are disallowed entirely.
• Excessive compensation to related parties: Under article 9(1)(f) any compensation paid to shareholders or related parties that exceeds market rates is not deductible. 

The law’s clarification provides a specific example: if an expert who is also a shareholder provides services for IDR 50 million, but the market rate is IDR 20 million, the IDR 30 million difference cannot be deducted and is deemed as dividend. 

In practice, if you pay a shareholder-director IDR 500 million per month for a role that typically pays IDR 50 million, the DGT will treat the IDR 450 million excess as a hidden dividend.

2. Third Party Payments Without Proper Tax

The second major trigger for fiscal correction is failure to properly withhold or pay taxes on payments to non-resident taxpayers. Two separate obligations apply in this case:

• PPh 26 (Withholding Tax): Under Article 26 of the Income Tax Law, payments to non-resident taxpayers are subject to 20% withholding tax on the gross amount. This applies to payments for services, royalties, rent, and other income paid to individuals or entities not domiciled in Indonesia. The rate can be reduced under a tax treaty, but only if the foreign provider supplies a valid DGT Form confirming their tax residency and treaty entitlement. Without this form, the full 20% applies regardless of any treaty provisions.
• PPN JLN (VAT on Foreign Services): This is an 11% VAT that applies when you use intangible goods or services from abroad inside Indonesia, including digital advertising, cloud services, SaaS subscriptions, and foreign consulting or marketing agencies. The tax applies regardless of whether your company is VAT-registered (PKP). If your company is VAT registered, you can claim PPN JLN as input VAT credit. However, non-PKP companies cannot do so, making the 11% a direct cost.

Example of How Fiscal Correction Affects Your Tax Liability

The following example illustrates how a company’s tax position can change significantly after DGT review.

Prepared	Corrected
Income: IDR 9,750,000,000	Income: IDR 9,750,000,000
Expenses: Marketing paid to Swiss Agency: IDR 2,500,000,000 Salary: IDR 5,000,000,000 Salary Income Tax: IDR 750,000,000 Travel:  IDR 555,000,000	Expenses: Marketing paid to Swiss Agency: IDR 3,000,000,000 Salary: IDR 5,000,000,000 Salary Income Tax: IDR 0 Travel: IDR 250,000,000
Net Income: IDR 945,000,000	Net Income: IDR 1,500,000,000
Taxable Income: IDR 207,900,000	Taxable Income: IDR 330,000,000

Based on the above, the company has concluded a IDR 207,900,000 Corporate Income Tax based on the financial statement that they have prepared. However, There is a fiscal correction due to:

1. Marketing Fee paid to Swiss Agency was not properly withheld with PPH 26 of 20% and PPN JLN (foreign VAT of 11%)
2. Salary Income Tax was initially included in the expenditures, this is corrected as it is a disallowed expense
3. Travel was initially booked for IDR 555,000,000 – corrected to IDR 250,000,000 as it was found that the expenses lacked a proper Nominative List and included personal travel costs for shareholders’ families. 

Here’s how the tax position looks like after corrections:

Tax	Amount (IDR)
CIT	330,000,000
Withholding Tax (20% x 3,000,000,000)	500,000,000
PPN JLN (11% x 3,000,000,000)	330,000,000
Total Taxed Owed	1,160,000,000

After fiscal correction, the total liability increased from IDR 207,900,000 to IDR 1,260,000,000. This does not include penalties for late payment and late reporting on the PPh 26 and PPN JLN.

Annual General Meeting of Shareholders

Holding an Annual General Meeting of Shareholders (Annual GMS / RUPS Tahunan) is a mandatory governance milestone for many companies. The Annual Report must be presented to the GMS within six (6) months after the financial year ends, after review by the Board of Commissioners (if applicable). 

It is strongly recommended to prepare for this early as it helps you avoid unexpected delays, audit bottlenecks, and last-minute document chaos.

Step 1: Confirm Your Timeline

Start by setting a realistic target date for the Annual GMS. Account for the time needed to close books and the availability of foreign shareholders who may need to provide Proxies or Power of Attorney (POA). Always consider the following:

• Year-end closing timeline
• Audit requirements (if any)
• Availability of shareholders, directors, and commissioners

Step 2: Prepare the Annual Report Package (Draft)

Your Annual Report should be compiled and structured early, typically covering:

• Financial statements (prepared under applicable standards)
• Company activity report (business overview + key achievements)
• CSR / Social & Environmental Responsibility report (if relevant)
• Key issues during the year affecting operations
• Board of Commissioners supervision report (if applicable)
• Details of Directors & Commissioners
• Directors/Commissioners remuneration disclosure

Step 3: Finalize Year-end Accounts and Audit Readiness

Companies with annual turnover or total assets exceeding IDR 50 billion are required to have their financial statements audited by a registered Public Accountant (Kantor Akuntan Publik) under Article 68 of Law No. 40 of 2007. If your company requires audited financial statements:

• Prepare the closing entries and supporting schedules
• Ensure clean documentation (bank, AR/AP, contracts, tax positions)
• Align management and auditor expectations early

Audit bottlenecks are one of the most common reasons companies miss their GMS deadline. Therefore, it is advisable to coordinate with your auditor as early as possible. If you need assistance, you can consult Emerhub’s local experts for that. 

Step 4: Draft GMS Agenda and Resolutions

Ensures that all legal and corporate requirements are met during the meeting. Primary items that must be resolved include:

• Approval of Annual Report and financial statements
• Approval of Board of Commissioners supervisory report (if applicable)
• Granting acquit et de charge (release and discharge) to Directors/Commissioners
• Appointment of auditor (if relevant)
• Determination of remuneration (if required by the Articles or shareholder practice)
• Other shareholder resolutions (as needed)

At this stage, the acquit et de charge resolution is particularly important. It releases Directors and Commissioners from personal liability for decisions made during the financial year, provided those decisions were made in good faith and in accordance with the company’s interests.

Step 5: Prepare the Formal GMS Documents

This is where many companies get delayed if they start late. Here are the official documents you must prepare for a GMS:

• Notice / invitation to GMS (as required by Articles/law)
• Attendance list and shareholding confirmation
• Power of attorney (if shareholders cannot attend)
• Meeting materials pack (Annual Report + financials + supporting notes)
• Draft minutes / deed-ready notary format
• Identity documents of attendees and corporate signatories (KTP/passport, company docs)

Foreign shareholders who cannot attend must provide a Power of Attorney (Surat Kuasa). This document needs to be notarized in the shareholder’s jurisdiction and may require apostille or legalization depending on the country. 

Corporate shareholders must also provide company documents proving the authority of the person signing the Power of Attorney.

Step 6: Conduct the Annual GMS Before the Notary

It is standard practice for a PT PMA to have the GMS recorded in a Notarial Deed (Akta Notaris) to ensure legal validity for future filings. A Notarial Deed acts as an authentic public document required to update the MOLHR database. 

Together with the Notary, the following takes place in an AGM:

• Shareholders (or their proxies) attend
• Directors/Commissioners present the report (as applicable)
• Resolutions are passed
• The notary prepares the GMS deed/minutes for execution

Step 7: Post-GMS signing and Administrative Wrap-up

After the meeting, the following actions must be taken to complete corporate governance requirements:

• Final notarial deed/minutes (Minuta Akta) are issued.  It must be promptly signed by the Chairman of the meeting and the Secretary or participating shareholders to ensure its validity and enforceability.
• Corporate registers and internal governance files are updated. The Board of Directors must update the company’s internal Shareholder Register (Daftar Pemegang Saham) to reflect current ownership and the Special Register (Daftar Khusus).
• If any resolutions require notification/filing to authorities, filings are prepared and submitted (if applicable)

How Emerhub Supports PT PMA Compliance

Emerhub provides end-to-end administration for PT PMA compliance, covering both tax review and Annual GMS coordination before the notary.

For tax position review, we analyze your financial statements against the provisions of Law Number 36 of 2008 to identify fiscal correction risks before you file. 

This includes reviewing foreign payments for PPh 26 and PPN JLN obligations, assessing related-party transactions and compensation structures, and verifying expense documentation.

For Annual GMS administration, we manage the complete process from timeline planning through post-meeting filings. This includes compiling the Annual Report package, drafting all GMS documents, coordinating shareholders and directors across time zones, liaising with the Notary, providing meeting-day support, and handling register updates and SABH filings.

If you need support with your annual compliance obligations, contact our team to discuss your company’s specific requirements.