Taxation of PT PMA in Indonesia: VAT (PPN), Corporate Income Tax, and Dividends

Planning to establish a foreign-owned business in Indonesia? The most common and officially permitted company structure for this is the PT PMA (Perseroan Terbatas Penanaman Modal Asing) — a limited liability company with foreign investment.

Taxation is a key aspect of running a PT PMA. This article covers the primary taxes that apply to such companies: Value-Added Tax (PPN), Corporate Income Tax, and Dividend Tax.

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1. Value-Added Tax (PPN)

PPN (Pajak Pertambahan Nilai) is Indonesia’s equivalent of VAT. It applies to most goods and services, including rentals, property sales, imports, and construction services.

Current and Upcoming Rates

• 11% — in effect since April 1, 2022
• 12% — effective from January 1, 2025

When PT PMA is Required to Pay PPN

Your company must register as a PKP (Pengusaha Kena Pajak) — VAT liable entrepreneur if:

• Annual turnover exceeds IDR 4.8 billion
• The company trades goods or provides services subject to PPN

Once registered as a PKP, a PT PMA is obligated to:

• Issue electronic tax invoices (e-Faktur)
• Submit monthly VAT returns
• Pay VAT monthly to the tax authorities

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2. Corporate Income Tax (PPh Badan)

All PT PMAs must pay corporate income tax on their profits. Indonesia’s tax regime provides both standard and (in limited cases) simplified schemes.

Standard Corporate Tax Rate

• 22% — applied to taxable income (effective since 2023)

Taxable income is calculated based on all company revenues minus properly documented expenses, which may include:

• Salaries, rent, depreciation, procurement
• Marketing, travel expenses, bank fees

Deadlines and Obligations

Companies are required to:

• Make monthly preliminary tax installments
• File an annual income tax return (SPT Tahunan) by the end of the fourth month following the end of the fiscal year

Simplified Scheme for Micro Businesses

Indonesian tax law allows a simplified regime (taxed at 0.5% of gross revenue), but this is mainly available to locally owned companies.

In practice, foreign-owned companies (including PT PMA) rarely qualify due to stricter criteria. Therefore, using this regime requires individual tax advice.

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3. Dividend Tax

PT PMAs have the right to distribute dividends to their shareholders. These distributions are subject to taxation at the time they are paid out.

Dividend Tax Rates

• 10% — for Indonesian residents
• 20% — standard rate for non-residents
• 5–15% — reduced rate under a Double Taxation Agreement (if applicable)

To access the reduced rate under a DTA (Double Taxation Agreement), foreign shareholders must submit a Certificate of Domicile (Form DGT 1) to the Indonesian tax authorities prior to receiving dividends.

Withholding and Remittance

Dividend tax in Indonesia is withheld at source by the distributing company (PT PMA).

• The tax must be withheld at the time of payment
• Remittance must occur within 1 month from the withholding date

Note: Drawing funds without formally distributing dividends may be deemed as “deemed dividends” by the tax office, which would also trigger tax liability.

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Tax Incentives for PT PMA

Indonesia offers tax incentives for PT PMAs in certain sectors and regions:

• Corporate income tax exemption for up to 10 years (Tax Holiday)
• 50% corporate tax rate reduction (Tax Allowance)
• Simplified export/import regime in Special Economic Zones (SEZ)

Check eligibility based on sector and the PT PMA’s registration location.

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Summary Table: Key Taxes for PT PMA

Tax Type	Rate	When Applicable	Remarks
PPN	11% (12% from 2025)	On sale/purchase of taxable goods and services	PKP registration mandatory if turnover > IDR 4.8 billion
Corporate Tax	22%	On taxable profit	Profit = revenue – expenses. Monthly installments + annual filing
Dividend Tax	10% – 20% (or 5–15% under DTA)	At the time of dividend distribution	Withheld at source. Risk of “deemed dividends” if not declared

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Conclusion

Indonesia’s tax framework for PT PMAs is relatively transparent but includes several mandatory compliance requirements. To avoid penalties:

• Register as PKP once revenue exceeds the legal threshold
• Keep detailed records of all expenses
• Submit tax filings on time
• Properly structure dividend payments according to international treaties

Pro Tip: Always consult with a qualified tax advisor familiar with both Indonesian regulations and international taxation before establishing a PT PMA.

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Frequently Asked Questions

Can a PT PMA operate without PKP registration?

Yes, if annual turnover is below IDR 4.8 billion and no taxable goods or services are supplied. But once revenue grows, registration becomes mandatory.

Is tax reporting required even with zero profit?

Yes. A PT PMA is obligated to file zero returns even when it has no income or profit.

Can non-residents avoid double taxation on dividends?

Yes, if a DTA exists between Indonesia and the shareholder’s country of residence, and a valid Form DGT 1 is submitted.

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See Also

• How to Register a PT PMA in Indonesia
• Doing Business in Bali: Taxes and Licenses
• Taxes for Freelancers and Solopreneurs in Indonesia

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Tags

Tags: PT PMA, business in Indonesia, dividend tax, PPN, PPh, corporate tax, foreign investment, Indonesian taxation

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