ARTICLE 26 INCOME TAX
I. Definition
Article 26 Income Tax is income tax levied or withheld on income derived from Indonesia received or earned by non resident taxpayer other than a permanent establishment in Indonesia.
II. Withholding Agent of Article 26 Income Tax
1. A Government Body
2. A Resident Taxpayer
3. An Organiser of Activities
4. A Permanent Establishment
5. A Representative of Non Resident Taxpayer
III.Tax Rate and Object Of Article 26 Income Tax
1. 20% final of the gross amount received or earned by non resident taxpayer in form of :
a. dividend;
b. interest, including premiums, discounts and other remuneration in respect of debt claims;
c. royalties, rent and other remuneration in respect of the use of asset;
d. remuneration in respect of work, services and activities;
e. pensions and other regular payments.
2. 20% of the estimated net income in form of :
a. gain from the alienation of asset in Indonesia;
b. premium of insurance and re-insurance paid directly or through broker to insurance company outside Indonesia;
3. 20% of the net taxable income after tax of such permanent establishment in Indonesia.
4. Tax rate is based on the tax treaty between Republic of Indonesia and other Contracting State.
IV. Timing of Tax Due, Procedure of Withholding, Deposit and Reporting of Article 26 Income Tax
1. Timing of Article 26 Income Tax Due
Article 26 Income tax is due when income is paid or payable which ever is the first.
2. Attached 3 (three) receipts of withholding tax of Article 26 are as follows:
- the first copy is provided to non resident taxpayer
- the second copy is provided to the district tax office
- the third copy is filling
3. Deposit of Article 26 Income tax
Article 26 Income tax must be deposited to the designated bank or post and giro office by the use of tax payment slip not later than 10th day of the ensuing month.
Examples:
Article 26 Income tax is withheld on 24th May 1996, the deposit is carried out not later than 10th June 1996. If the above said date is on holiday so the deposit is carried out on the following day.
4. Reporting of Article 26 Income tax
Reporting of Article 26 income tax is carried out with the submit of income tax Article 26 return not later than 20th (twenty) day of the ensuing month.
The above said return shall be attached with 2 (two) copies of the tax payment slips, the second copy of withholding tax receipt and the list of withholding receipt.
Examples:
Withholding Article 26 income tax which is carried out on 24th May 1996, shall be reported not later than 20th June 1996. If the said date is on holiday, the report is carried out on the previous working day.
V. Exception
1. Especially for such permanent establishment is exempt from withholding tax if net taxable income after tax of the said permanent establishment is re-invested in Indonesia which is aimed to support the government policy in order to increase and distribute the capital investment with the following requirements:
a. the re-investment is carried out in the form of capital participation on such company established and domiciled in Indonesia as founder or members of founders;
b. the re-investment is carried out in the current year or not later than ensuing year;
c. it is not allowed to capital repatriation at least 2 (two) years after the investee company started business operation.
2. International bodies which are approved by Minister of Finance.
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