Compliance in Indonesia
Table of contents BPJS (Social Security)Tax reportingInvestment reportingConnect with Emerhub to comply with local news and regulationsThere are various regulations that a company must follow in order to ensure that their compliance in Indonesia is done correctly. The key areas foreign owned businesses must follow in terms of compliance are tax reporting, investment reporting and […]
Table of contents
There are various regulations that a company must follow in order to ensure that their compliance in Indonesia is done correctly.
The key areas foreign owned businesses must follow in terms of compliance are tax reporting, investment reporting and BPJS programs.
In this article we will guide you through each of those and also show how working with Emerhub will make sure that your business complies with both current and upcoming laws and regulations.
BPJS (Social Security)
Indonesian government has introduced comprehensive social security schemes – BPJS Ketenagakerjaan and BPJS Kesehatan, which are applicable for Indonesian workers and expats who work for at least 6 months in Indonesia.
The establishment was based on Social Security Administrators Law No. 24 of 2011 to replace the following social security foundations:
- BPJS Ketenagakerjaan took over the role of PT Jamsostek (Persero) in administering work accident, old-age, pension and death benefit
- BPJS Kesehatan requisite the old healthcare scheme, PT Askes (Persero)
Companies that have been registered with PT Jamsostek and PT Askes will have their membership automatically transferred to the new programs.
The main benefits and how to ensure your employees are part of both programs will be shown below.
BPJS Ketenagakerjaan (National Manpower Security Agency)
Contributions payable to BPJS Ketenagakerjaan are currently the same with PT Jamsostek. Companies are required to pay the following contributions for each employee:
|Program Benefit||As a % of regular salaries|
|Borne by employees||Borne by employers|
|Work Related Accident||0||*** 0.24 – 1.74|
* Percentages shown on the table are calculated based on employee’s monthly salary
** Income tax at concessional rate of up to 5% will apply upon withdrawal
*** Amount of percentage depending on the risk level of working environment
Your company’s participation in provident fund program starts from the issuance of membership. Emerhub will give your membership card 7 days after the registration document is received in full and the first contribution is paid off.
Any data changes must be submitted to Emerhub no later than 7 days after the change.
If you failed to meet the deadline of your contribution period, you must pay 2% for each month of delay of contributions paid.
Work Related Accident
To make sure employees of the company receive the correct and right amount of compensation, companies must report manually or electronically over the scene of the accident to Emerhub no later than 48 hours after the accident happened.
After receiving the report from the company, Emerhub will help follow up on the submitted report by sending a form of occupational accidents, which has been equipped with supporting documents to BPJS Ketenagakerjaan.
Companies that don’t comply with the contribution payment requirement must pay a penalty of 2% per month of delay.
BPJS Kesehatan (National Healthcare Security Agency)
Starting mid- 2015, all companies are required to register their employees to the BPJS Kesehatan, and if you failed to register your company and your employees, your company will be penalized based on the prevailing law and regulations.
The mandatory monthly contributions for each employee are calculated based on the employee’s regular/fixed gross wages and includes contribution portion of 4% companies and 1% from the employee.
BPJS Kesehatan covers up to 5 family members of the employee, and is liable for an additional of 1% contribution per family member each month.
Any changes within your employee’s family structure must be reported to Emerhub no later than 14 days after the changes were made, or a fee of 2% from the contribution will be given by the BPJS Kesehatan.
BPJS Kesehatan has the right to terminate its service for your company or employees if the contribution has not yet been paid for more than 6 months.
More about the new Manpower regulation can be read in our article Indonesian Manpower Law: How To Hire in Indonesia.
Indonesia enforces a range of taxes on individuals and company taxpayers.
Companies must note any underpayment of tax must be completed before submission of the annual tax return.
The period of submission for the annual income tax return can be extended for a maximum of 2 months by submitting a report to the Directorate General of Taxation (DGT).
Monthly and annual tax compliance in Indonesia
|Type of Tax||Monthly Payment Deadline||Monthly Filling Deadline||Annual Filling Deadline|
|Corporate Income Tax||15th of the following month||20th of the following month||End of the 4th month after the tax years ends|
|Individual Income Tax||15th of the following month||20th of the following month||End of the 3rd month after the tax year ends|
|Employee Withholding Tax||10th of the following month||20th of the following month||N/A|
|Other Withholding Taxes||10th of the following month||20th of the following month||N/A|
|VAT & LGST||Before the VAT return filing deadline*||End of the following month||N/A|
* Except for self-assessed VAT on use of subtle taxable goods and/or taxable services from offshore and VAT collected by VAT Collector other than State Treasurer, which is due by the 15th of the following month
Foreign owned companies (PMA) or certain entities with foreign affiliations/ taxpayers that use their financial statements in US Dollar as the functional currency are allowed to maintain their administration and bookkeeping records in English language and US Dollar- subject to approval from the Minister of Finance.
If companies need to change the bookkeeping method and period, Emerhub will help them to get an approval from the Director General of Taxation.
Value Added Tax (VAT)
Companies that are not domiciled in a Free Trade Zone (Batam Island, Bintan Island and Karimun Island)and are exceeding certain annual sales of taxable goods or services are required to register as a VAT payer. The general VAT rate is 10%, and is subject to rate of 0% for export of taxable goods and services.
To facilitate the Director General of Taxation’s (DGT’s) tax collection, companies are subject to a number of obligations to withhold taxes on various payments to Indonesian and non-Indonesian citizens who they employed. To safeguard VAT revenues, Emerhub is assigned to act as VAT withholding agents.
The tax issues in Indonesia are often complicated for companies.
The difficulty surrounds the complexity of the tax system and here Emerhub, help is at hand for our highly trained and experienced tax and legal specialists to unravel Indonesia’s complicated web of taxation rules and laws.
Once we registered your company as a taxpayer/ tax resident, you are required to settle your tax liabilities through our service.
As an owner of a company, you are required to submit all documents and data within 1 month from the requested time.
If certain deadline and formalities are not fulfilled, the Director General of Taxation may issue a tax assessment as a result of the tax audit, which could results in a nil, underpayment, or overpayment tax assessment.
Tax penalties and sanctions
|Late reporting||IDR500,000 (USD$385) for monthly VAT return
IDR100, 000,000 (USD$7,692) for other monthly and annual tax return
IDR1, 000,000 (USD$77) for annual corporate tax return
|VAT invoice- not issued, incomplete, late or not in accordance with the period of issuance||2% of the taxable base|
|Tax return- fails, incorrect or incomplete information in submission||1 to 2 times the tax underpaid or imprisonment of 3 to 12 months|
|NPWP (Tax Card)- Company improperly use of/ not register NPWP, provides false or falsified bookkeeping records and refuses a tax audit||2 to 4 times the tax underpaid and imprisonment of 6 to 72 months. The sentence will be doubled if another criminal act’s made in the taxation field within 12 months after the first sentenced period has ended.|
|Issuing a tax documents that are not based on actual transaction/ issuer is not yet confirmed as a taxable entrepreneur||2 to 6 times the tax amount and imprisonment of 24 to 72 months.|
Companies don’t need to worry with how much, when and how they pay their taxes. For companies outsourcing their tax compliance with Emerhub, we will do your company’s tax calculations for you.
Investment Activity Report or broadly known as LKPM, is the regular reports of your company’s progress and constraints.
As part of our corporate compliance services, Emerhub will help taking care of your company’s Investment Activity Reports to ensure you don’t need to worry about missing deadlines.
Govern by the Law No. 17 of 2015 concerning the latest Guidelines and Procedures for the Control of Capital Investment Implementation (BKPM Regulation 17/2015), any reports must be submitted with deadlines given as below.
|#||Periodical Report||License Holder||Submission Date|
|1.||LKPM (Investment Realization Activity Report)||PMA company or PMDN Company in a construction stage (without Business License)||Quarterly (4 times a year)
Deadlines: 10 April, 10 July, 10 October, and 10 January per year
|2.||LKPM (Investment Realization Activity Report)||PMA company or PMDN Company with Business License||Semi- Annually (Twice a year)
Deadlines: 10 July and 10 January per year
|3.||Laporan Kantor Perwakilan Perusahaan Asing (Periodical Activity Report)||Kantor Perwakilan Perusahaan Asing/ KPPA (Foreign Representative Office)||Annually (Once a year)|
|4.||Laporan Kantor Perwakilan Perusahaan Perdagangan Asing (Periodical Activity Report)||Kantor Perwakilan Perdagangan Asing/ KP3A (Foreign Trade Representative Office)||Semi-Annually (Twice a year)|
|5.||Laporan Realisasi Impor (Import Duty Facility Realization Report)||PMA Company or PMDN Company with Import Duty Facilities||Deadline: 7 days after the date of the Surat Persetujuan Pengeluaran Barang (Customs Clearance Approval)|
|6.||Laporan Kegiatan Realisasi Impor (Periodical Import Realization Report)||Angka Pengenal Importir/ API (PMA Company or PMDN Company with Import License)||Quarterly (4 times a year)
Deadlines: 10 April, 10 July, 10 October and 10 January per year
Failure to submit LKPM and/or report by the deadline will lead to the administrative sanctions by BKPM or other relevant Investment Boards.
Other than failure to submit reports, sanctions also apply to PMAs and PMDN Companies that have conducted any businesses without a Business License or have deviated from the requirements of their investment approvals.
Emerhub has extensive experience in aiding Companies to submit contributions to BPJS, preparing financial statement, recapitulation and reporting monthly and annual tax to Director General of Taxation, and doing Investment Realization Report for PT PMA and Representative Offices to the BKPM.
What needs to be provided to Emerhub?
||Manpower Scheme: No later than 15th date of the following month.
Health Scheme: No later than 20th date of the following month.
For VAT, company must also provide an additional document- VAT Invoices
|No later than 10th date of the following month. You will pay Emerhub the total tax amount every 7th of the following month.
Every 15th of the following month
Investment Activity Report- PMA
||If you don’t have IUT (Permanent Business License), deadlines will fall on every 10 April, 10 July, 10 October, and 10 January per year (Quarterly ((4 times a year))
If you have IUT, deadlines will be every 10 July and 10 January per year (Semi- Annually ((Twice a year))
Investment Activity Report- Representative Office
||Every 10th of January per year (Annually)|
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