The 183-Day Rule: When You Become a Tax Resident in Indonesia

Many foreigners living in Indonesia for an extended period are unaware that their stay can not only open up new opportunities but also lead to significant tax obligations. Under Indonesian tax law, one of the key criteria for being recognized as a tax resident is the so-called 183-day rule.

Let’s explore what this rule means, when it applies, and what consequences it may have.

Who Can Be Considered a Tax Resident of Indonesia

Staying More Than 183 Days Within a 12-Month Period

According to Article 2 of the Indonesian Income Tax Law (Undang-Undang Pajak Penghasilan), an individual is considered a tax resident of Indonesia if any one of the following conditions is met:

The person has been physically present in Indonesia for more than 183 days during any 12-month period (not necessarily a calendar year);
Or they have the intention to reside in Indonesia permanently, which can be demonstrated by holding a long-term visa or a Stay Permit/Permanent Residency (such as KITAS or KITAP).

It’s important to note: staying over 183 days may automatically qualify you as a tax resident. However, in some cases, the tax authorities also assess additional factors — such as center of vital interests, family and property ties in the country.

How the 12-Month Period is Calculated

Unlike many countries, Indonesia considers any rolling 12-month period — not just the calendar year — when evaluating the 183-day threshold. This means that even if you arrive in September and stay until the following July, the tax office may still consider you a resident.

Short trips abroad (such as visa runs or holidays) do not usually interrupt the count, provided your total stay in Indonesia exceeds 183 days.

Tax Responsibilities of Indonesian Tax Residents

Once recognized as a tax resident in Indonesia, you are subject to a range of tax obligations. The key ones include:

Obtaining a Tax Identification Number (NPWP) — similar to a taxpayer ID, it's mandatory for any formal transactions with the tax office;
Filing an annual tax return (SPT Tahunan) — reporting income earned in Indonesia, and in some cases, from abroad as well;
Paying Individual Income Tax (PPh) — Indonesia has a progressive tax rate system ranging from 5% to 35% depending on annual income.

Is Global Income Taxable?

As of 2024, Indonesia introduced relaxations for foreign nationals recognized as tax residents. Notably:

If a foreign tax resident earns income outside Indonesia and does not remit it to Indonesia, it is not subject to tax in Indonesia for the first four years of tax residency.
However, if you transfer foreign income into Indonesia, it may be taxed.
If a Double Tax Agreement (DTA) exists between Indonesia and your home country, you may apply for a relief under specific provisions of the agreement.

Therefore, becoming a tax resident does not always mean global taxation, but you must follow certain procedures.

What to Do If You Become a Tax Resident in Indonesia

If you’ve already been in Indonesia for 4–5 months or are planning a long-term stay, it’s wise to prepare in advance:

Apply for your NPWP — it simplifies dealing with employers, banks, and ensures you can pay taxes officially;
Start keeping track of your income — both local and foreign sources;
Find out whether you need to declare your foreign income — it’s best to consult a tax professional;
Check if you can benefit from tax reliefs or Double Tax Agreements between Indonesia and your country of residence.

How to Officially Exit the Indonesian Tax System

If you are leaving Indonesia with no plans to return in the near future, it’s crucial to take steps to end your residency status and avoid future complications with the tax authorities.

What You Need When Leaving

EPO (Exit Permit Only) — issued by immigration for KITAS/KITAP holders leaving the country;
SKPKP — Tax Clearance Certificate (Surat Keterangan Pemenuhan Kewajiban Perpajakan) — obtained from the tax office based on your filed returns.

Leaving Indonesia without this documentation can cause issues ranging from visa delays to fines or blocking your NPWP upon reentry.

Tax Status of Indonesian Citizens Living Abroad

Indonesian tax regulations also apply to its own citizens. If an Indonesian citizen resides overseas for more than 183 days a year, the following may apply:

They may be classified as a non-resident of Indonesia for tax purposes;
They may still need to file a tax return for foreign-source income if their center of vital interests remains in Indonesia;
They may be eligible for Double Tax Agreements — depending on their country of residence.

Each case is reviewed individually and Indonesian citizens are advised to consult tax professionals when living abroad long term.

FAQ: When Should You Apply for an NPWP?

Getting a Tax Identification Number is not mandatory from day one in Indonesia. However, if you:

stay in the country for more than four consecutive months,
plan to open a bank account,
work officially or start a business,
or want to avoid penalties for late registration,

you should apply for your NPWP as early as possible. It removes bureaucratic hurdles and demonstrates good faith to the tax authorities.

Risks of Ignoring Your Tax Status

Violating Indonesian tax laws can lead to consequences such as:

Fines for failing to file returns or pay taxes — up to 100% of the owed amount;
NPWP suspension and rejection of visas or KITAS extensions;
Travel bans — the tax office may notify immigration authorities;
Criminal liability in cases of substantial undeclared income.

Lack of tax knowledge is not a valid excuse. It’s better to seek clarity now than deal with Indonesian tax audits later.

Key Takeaways

If you spend more than 183 days in any 12-month period in Indonesia, you may be deemed a tax resident;
Tax residents must obtain an NPWP, file tax returns, and pay income tax in Indonesia;
Foreign income may be taxed under certain conditions — particularly under the 2024 legal changes;
When leaving Indonesia, it’s important to officially terminate your tax residency;
Ignoring tax compliance may result in penalties, travel restrictions, and visa issues.

Our Recommendation: If you plan to stay in Indonesia for more than six months, consult a tax advisor or legal expert. They can help you navigate local regulations and avoid unpleasant surprises.