Indonesia Corporate Tax Guide 2026

Overview — Corporate Tax in Indonesia (PPh Badan)

Indonesia's corporate income tax is governed by the Income Tax Law (UU PPh) as amended by the UU HPP (2022). Resident companies are taxed on worldwide income. Non-resident companies with a permanent establishment (PE, Bentuk Usaha Tetap) in Indonesia are taxed on Indonesian-source income attributable to the PE. Companies without a PE are taxed through withholding on Indonesian-source income. The corporate tax year follows the calendar year unless a different fiscal year is approved by the DGT.

A company is considered a tax resident if it is incorporated in Indonesia or has its place of effective management in Indonesia. Indonesia applies the place of effective management test under domestic law, consistent with OECD guidelines.

Corporate Tax Rate — 22%

The standard corporate income tax rate for 2026 is 22%, which applies to the taxable income (Penghasilan Kena Pajak, PKP) of resident companies and PEs. The rate was reduced from 25% (pre-2020) to 22% (2020–2021) and was scheduled to decrease further to 20% in 2022, but the reduction was cancelled. Key features:

• Flat 22% rate applies to all companies regardless of size (except for listed companies qualifying for the 20% rate)
• No surtax or alternative minimum tax for most companies
• Branch profit tax (PPh Pasal 26) of 20% on after-tax PE profits, unless reduced by tax treaty
• Withholding tax on dividends: 20% (or lower treaty rate) for non-residents; 0% for resident corporate shareholders if dividends are invested in Indonesia

Reduced Rate for Listed Companies — 20%

Companies that list at least 40% of their paid-up capital on the Indonesia Stock Exchange (IDX) and meet certain other conditions may qualify for a reduced corporate tax rate of 20% (a 3-percentage-point reduction from the standard 22%). The shares must be held by at least 300 public shareholders, each holding less than 5%, and the listing requirement must be maintained for the entire tax year.

SME Final Tax Regime — 0.5% on Gross Revenue

Micro, small, and medium enterprises (MSMEs) with annual gross turnover (peredaran bruto) up to Rp 4.8 billion may elect to use a final tax regime under PP 55/2022. Under this regime, tax is calculated at 0.5% of gross monthly revenue, in lieu of the standard progressive corporate tax calculation. Key rules:

• The 0.5% rate is final — no further tax is due on that income
• The regime is available for a maximum of 4 years for companies (7 years for individual taxpayers)
• After the period expires, the taxpayer must switch to the normal tax regime
• Companies with turnover above Rp 4.8 billion up to Rp 50 billion receive a 50% reduction on the standard rate (effectively 11%) for the portion of income attributable to the first Rp 4.8 billion

Dividend Withholding and Participation Exemption

Indonesia has partial participation exemption rules. Dividends received by a resident company from another Indonesian company are exempt from corporate income tax (0% rate) if the dividend is invested in Indonesia within a certain period. Dividends received from foreign subsidiaries may be subject to tax under controlled foreign company (CFC) rules. Withholding tax on dividends paid to non-residents is 20%, subject to reduction under applicable double tax treaties.

Tax Loss Carryforward

Tax losses can be carried forward for up to 5 years (extended to 10 years for companies in certain industries or special economic zones). There is no carryback of losses. The loss offset is limited to the taxable income of the relevant year. Companies undergoing business restructuring may have limitations on loss utilisation.

Transfer Pricing and BEPS

Indonesia has comprehensive transfer pricing rules aligned with OECD guidelines. All related-party transactions must meet the arm's length principle. Documentation requirements include a master file, local file, and country-by-country report (CbCR) for groups with consolidated revenue above IDR 11 trillion. Indonesia is a member of the Inclusive Framework on BEPS and has implemented the Multilateral Instrument (MLI). Penalties for transfer pricing adjustments can be up to 100% of the underpaid tax.

FAQs

What is the corporate tax rate for a foreign company without a PE in Indonesia?

Foreign companies without a PE in Indonesia are subject to withholding tax (PPh Pasal 26) at 20% on gross Indonesian-source income (dividends, interest, royalties, rent, service fees). Tax treaties may reduce these rates.

Can start-ups benefit from tax incentives?

Yes, Indonesia offers tax holidays (reduced rates for pioneer industries with significant investment), tax allowances (30% reduction of net income over 6 years), and super tax deductions for R&D and vocational training activities.

Is there a minimum corporate tax?

Indonesia does not have a formal alternative minimum tax (AMT) for most companies. However, certain provisions, such as the thin capitalisation rule and the deemed dividend rule for CFCs, effectively create minimum tax outcomes.

Disclaimer

This guide provides general information about Indonesian corporate tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Indonesian tax advisor (konsultan pajak) or the DGT directly for advice specific to your business. InvestmentKit does not provide tax advice.