Declaring an interim dividend allows you to distribute profits to your shareholders before the fiscal year ends.
This guide will help you manage interim dividends, benefiting both your shareholders and your company in Indonesia.
Applicable Tax Rates on Dividends in Indonesia
In Indonesia, dividends are subject to income tax called "Pajak Penghasilan" (PPh). The tax rate depends on whether the shareholders are residents of Indonesia or not.
Below are the specific tax rates and regulations for different types of shareholders: Indonesian tax residents, companies based in Indonesia, and foreign resident taxpayers.
Indonesian Tax Resident
If your shareholders are Indonesian tax residents, they pay PPh 4.2 at a 10% rate on dividends. This tax is final, meaning you have no further tax obligations on this income. For example, if you receive IDR 1,000,000 in dividends, you pay IDR 100,000 in tax.
Companies based in Indonesia
If your shareholder is a company based in Indonesia, you pay PPh 23 at a 15% rate on dividend income, usually withheld by the distributing company. For example, if your company receives IDR 1,000,000 in dividends, IDR 150,000 is withheld for tax.
Foreign Resident Tax Payer
If your shareholders are foreign resident taxpayers, they pay PPh 26 at a 20% rate on dividends. This rate can be lower if there is a Tax Treaty Agreement between Indonesia and your country. Check these treaties to see if a lower rate applies.
| Residency Status of Taxpayer | Tax Rate | Applicable Regulation |
|---|---|---|
| Indonesian Tax Resident | 10% (PPh4.2) | Final tax |
| Companies Based in Indonesia | 15% (PPh 23) | Withholding Tax |
| Foreign Resident Tax Payer | 20% (PPh 26) | Tax Treaty Agreement |
How to Get a Non-Taxable Dividend in Indonesia
Shareholders can reinvest their dividends into two main types of investments: financial instruments and non-financial instruments.
Financial instruments include options such as capital market shares, mutual funds, and term deposits. Non-financial instruments allow you to invest in tangible assets like land and buildings, Indonesian private companies, or high-purity gold.
For example, if Shareholder B receives IDR 2,000,000 in dividends, they can reinvest IDR 1,000,000 in purchasing land and IDR 1,000,000 in high-purity gold. Shareholder B must hold these investments for at least 3 years and report them annually on the DJP online platform as reinvested dividends.
Financial Instruments
- Capital Market Shares: Buying stocks and shares in the stock market.
- Mutual Funds: Investing in funds that pool money from many investors to purchase securities.
- Term Deposits: Placing money in a bank for a fixed term with a guaranteed interest rate.
Non-financial Instruments
- Land and Buildings: Purchasing real estate such as land or commercial/residential buildings.
- Investment in Indonesian PT/PT PMA: Investing in Indonesian private companies or foreign-owned companies in Indonesia.
- Gold (99.9% purity): Buying high-purity gold bars or coins.
How to Report Non-Taxable Dividends in Indonesia
Shareholders must declare these reinvested dividends in their annual tax report (SPT Tahunan) under the section for non-taxable income. The dividends reinvested are recognized for tax purposes. So reinvesting dividends can significantly reduce or eliminate tax payable.
For example, Corporation A (Singaporian) receives IDR 3.5 billion in dividends and reinvests part of it in bonds. Due to a tax treaty with Indonesia, the tax rate is reduced from 10% to a lower rate, resulting in a tax payable of IDR 0.35 billion after applying the reinvestment benefits.
Corporation B (Indonesian) receives IDR 1.5 billion in dividends and reinvests in land and gold. Indonesian tax regulations provide a complete tax exemption for such reinvestments, resulting in no tax payable.
Tax Payable for Corporation A (Singaporian) and Corporation B (Indonesian)
Corporation A (Singaporean) benefits from a tax treaty and partial tax benefits from reinvestment, leading to reduced but not zero tax. In contrast, Corporation B (Indonesian) benefits from local tax regulations that provide a complete tax exemption on specific reinvestments, resulting in zero tax payable.
Get Assistance with Indonesia's Interim Dividends with Emerhub
Emerhub is here to help you navigate declaring and distributing interim dividends in Indonesia.
We ensure full compliance with OJK regulations and guide you through tax exemptions and reinvestment processes.
Reach out to us for expert guidance via the link below.