Indonesia Cross-Border Tax Guide

the Indonesia cross-border taxation for 2026. The guide covers: the 183-day rule for the tax residency; the worldwide income taxation for the tax residents; the source-only income taxation for the non-residents; the treaty network of 75+ countries — one of the most extensive in Southeast Asia; the unilateral foreign tax credit (FTC); the tax holiday facility for the PMA (Penanaman Modal Asing — foreign investment) companies; and the R&D incentives for the innovation activities.

183-Day Residency Rule

183-day test: The individual is considered the tax resident of Indonesia if present in Indonesia for 183 days or more within any 12-month period. The rule applies to both the Indonesian nationals and the foreign nationals.
Counting days: The day of arrival and the day of departure are both counted as the days of presence in Indonesia. The temporary absences (the holidays, the business trips) do not break the continuity of the presence for the purpose of the 183-day calculation.
Consequences: Once the individual qualifies as the tax resident, the worldwide income is subject to the Indonesia income tax (the PPh — the Pajak Penghasilan) at the progressive rates of 5-35%.

Worldwide Income for Residents

Principle: The Indonesia tax residents are taxed on the worldwide income (the "penghasilan dari seluruh dunia" — the "income from all over the world") — the income derived from both the Indonesian sources and the foreign sources.
Scope: The worldwide income includes the employment income, the business profits, the dividends, the interest, the royalties, the rental income, the capital gains, and the other income derived by the Indonesian resident individual or entity.
Foreign tax credit (unilateral): The Indonesia tax residents may claim the unilateral foreign tax credit (FTC) (the "kredit pajak luar negeri" — the "foreign tax credit") for the taxes paid on the foreign-source income. The credit is limited to the lower of: (a) the actual foreign tax paid, or (b) the Indonesia tax payable on the foreign-source income (per-country and per-income-type limitation).

Source-Only Taxation of Non-Residents

Non-residents — source-only: The non-residents (the "subjek pajak luar negeri" — the "foreign tax subjects") are taxed only on the Indonesian-source income. The non-residents do not file the annual tax return for the foreign income.
Withholding tax regime: The Indonesia-source income paid to the non-residents is subject to the withholding tax (PPh 26) at the rate of 20% on the gross amount, unless the lower rate applies under the applicable double tax treaty (the DTA). The PPh 26 applies to the dividends, the interest, the royalties, the rent, the services fees, and the capital gains.

Treaty Network — 75+ Countries

Extensive network: Indonesia has concluded the double tax agreements (DTAs) with 75+ countries — one of the most extensive treaty networks in the Southeast Asia region. The treaty partners include: Australia, China, France, Germany, Japan, Singapore, South Korea, the United Kingdom, the United States, and many others.
Treaty benefits: The DTAs typically provide: (a) the reduced withholding tax rates on the dividends (10-15%), the interest (10-15%), and the royalties (10-15%), (b) the permanent establishment (PE) threshold for the business profits, (c) the tiebreaker rules for the dual residency, (d) the exchange of information provisions.
Treaty relief procedure: To claim the treaty benefits, the non-resident must obtain the Certificate of Residence (CoR) (the "Surat Keterangan Domisili" — the "SKD") from the home country tax authority and submit the form DGT-1 or DGT-2 to the Indonesian tax authority (the DJP — the Direktorat Jenderal Pajak) through the withholding agent.

Foreign Tax Credit (FTC) — Unilateral

Unilateral credit: Indonesia provides the unilateral foreign tax credit (the "kredit pajak luar negeri") under the PMK No. 192/PMK.03/2018. The FTC is available even in the absence of the DTA with the source country.
Limitation: The credit is limited to the lower of: (a) the foreign tax actually paid, or (b) the Indonesia tax attributable to the foreign-source income. The per-country limitation applies, and the per-income-type limitation also applies. The unused foreign tax credit cannot be carried forward or backward.
Documentation: The taxpayer must provide the evidence of the foreign tax payment (the "Surat Pemberitahuan Pajak" — the "tax return" or the "withholding certificate" from the foreign country) to claim the FTC.

Tax Holiday Facility — PMA Companies

Tax holiday: The Indonesia government offers the tax holiday facility for the PMA (Penanaman Modal Asing — the "Foreign Investment") companies in the qualifying sectors — the "industri pionir" (the "pioneer industries"). The tax holiday provides the exemption from the corporate income tax (the PPh Badan) for the period of 10 to 20 years, depending on the investment value and the industry classification.
Eligibility: The qualifying sectors include: the renewable energy, the petrochemicals, the pharmaceuticals, the medical devices, the electronics, the digital economy, and the other high-tech industries. The minimum investment threshold applies (typically IDR 100 billion to IDR 500 billion).
Tax allowance: In addition to the tax holiday, the PMA companies may qualify for the tax allowance (the "pengurangan penghasilan neto" — the "net income reduction") — the reduction of the net income by up to 30% of the investment value spread over 6 years.

R&D Incentives

Super deduction: Indonesia offers the R&D super deduction — the additional deduction of up to 300% of the qualifying R&D expenditure for the corporate income tax purposes. The incentive is available under the PP No. 45/2019 and the PMK No. 153/PMK.010/2020.
Qualifying activities: The R&D activities must be conducted in Indonesia and relate to: the product development, the process improvement, the technology innovation, or the industrial research. The activities must be certified by the designated government agency.