Corporate Taxes in Bali
Published on: January 02th, 2023 Author: Karolis
As a business owner in Bali, it’s important to be aware that your company may be subject to various corporate taxes based on your business activities and financial performance.
Taxes can be a controversial topic, and some foreign entrepreneurs may not take them seriously until they encounter issues with local tax authorities. Others may be so concerned about tax complexities that they avoid starting a company altogether. However, with proper planning and practices, corporate taxes in Bali can be manageable and not overly complicated or time-consuming. In this article, we will discuss the main types of corporate taxes In Bali that may apply to companies.
Planning Your Taxes In Advance
Set up good accounting practises for Corporate Taxes in Bali
There are several universal bookkeeping practices that can make recording and paying taxes much easier in the long run. These include:
- Keeping personal and company expenses separate
- Using accounting software
- Classifying revenue and expenses in a way that allows for informed management decisions (such as through a chart of accounts)
- Tracking accounts payable and receivable
- Consistently recording transactions
If the idea of implementing these practices doesn’t sound enjoyable, don’t worry. Professional tax planners can assist with setting up good practices for your company from the start of your operations. In fact, a well-organized chart of accounts can be a valuable tool for managing your business, as it enables you to track the profitability of different activities.
Which expenses can you record as a shareholder in Bali?
As a shareholder of a company in Bali, you may be able to record various expenses as investments in the company. For example, you might purchase tools or equipment for conducting business. It’s important to make these expenses from an account that belongs to you and then report them in the quarterly investment report.
If you pay for company goods out of your own pocket but expect to be reimbursed, be sure to get a receipt for the purchase. With a receipt, the item can be recorded as a reimbursement. Without a receipt, it becomes an allowance and you will need to pay personal income tax on it.
Common Pitt-falls of Corporate Taxes in Bali
There are two common misconceptions about tax planning in Bali: that it’s not necessary for small businesses or that it’s very expensive. In reality, tax planning can be fairly inexpensive and can save you money in the long run if done early. Additionally, well-organized bookkeeping and tax reporting allows you to spend less time worrying about taxes and more time focusing on your core business.
Some common issues that our tax team assists clients with include:
- Transactions not being recorded consistently, resulting in incorrect financial reports and potentially triggering a tax audit
- Incorrect calculation of income tax
- Missing reporting deadlines
- Losing receipts
- Data scattered across spreadsheets, making it difficult to track paid invoices and outstanding payments
Now that you have a general understanding of what to prepare for, let’s examine the two most significant taxes that companies must pay in Bali: the income tax and the withholding tax.
Corporate income tax in Bali
Any company domiciled in Bali is subject to paying corporate taxes in Bali. Your company is a tax resident regardless of where it generates its income.
Reduced corporate taxes In Bali for new companies.
New companies in Bali may be eligible to pay a flat 0.5% income tax (also known as the Final tax) on their gross annual revenue if they meet the following criteria:
- The company was registered no more than three years ago
- The gross annual revenue is below Rp. 4,8 billion
If your company meets these requirements, the income tax calculation is straightforward. Simply take your gross annual revenue and pay 0.5% of it as income tax. It’s worth noting that the tax is calculated based on revenue, regardless of whether the company made a profit.
Standard corporate income tax
In 2020, the Indonesian government announced a reduction in corporate income tax rates. Previously, the income tax was 25% of net profit, but it was lowered to 22% for the fiscal year of 2021 and to 20% for the fiscal year of 2022.
The corporate income tax is calculated based on a company’s net income (profit).
Reduced Corporate Taxes in Bali for companies with less than Rp. 50 billion revenue
Most companies in Bali have an annual turnover of less than Rp. 50 billion. These companies may be eligible for a 50% deduction of the income tax rate for revenue that does not exceed Rp. 4.8 billion.
| Annual Gross Revenue | Standard Tax Rate | Tax Facility (50% Discount) | Rate for Revenue not Subject to the Tax Facility |
| Rp. 0-4.8 billion | 22 % | 11% on the taxable income | n/a |
| Rp. 4.8-50 billion | 22% | 11% to the proportion subject to the facility | 22% to the portion that is not subject to the facility |
| Rp. 50 billion or more | 22% | n/a | 22% on the taxable income |
Withholding tax payments in Bali
Withholding tax is a key method used by the Indonesian government to collect income taxes. There are two main sources of withholding tax: the personal withholding tax (PPH21) that is withheld when paying salaries, and the tax on goods and services (PPH22) that is withheld when paying for goods and services. In both cases, the withholding tax is calculated as a percentage of the payment amount and is paid by the company on behalf of the recipient. It is important for companies to accurately calculate and pay the appropriate amount of withholding tax to avoid penalties and fines.
Who pays withholding tax in Bali?
As a general rule, whenever you make a payment, you are expected to withhold tax on it. In effect, you are collecting the income tax on behalf of the payment recipient. This is a common mistake that companies can make, which can lead to significant tax liability later on. For example, when making rent payments to a landlord, you must deduct 10% for the withholding tax. It is your responsibility to pay the withholding tax, not the landlord’s, and failure to do so means that you are essentially paying an additional 10% in rent. It is important to accurately calculate and pay the appropriate amount of withholding tax to avoid these types of issues.
Withholding tax rates
Withholding tax rates are based on the type of service being provided. The full table of tax rates is quite extensive, and your tax advisor will be able to identify the specific rates that apply to your business. It’s important to accurately calculate and pay the appropriate amount of withholding tax to ensure compliance with local tax laws and avoid penalties and fines. Your tax advisor will be able to provide more detailed information about the applicable rates for your business.
Here are some common examples of withholding tax rates in Indonesia:
| Tax Object | Tax Rate |
| Land and Building Lease | 10% |
| Transfer of Land and Building Rights | 2.5% |
| Construction: | |
| Construction Work Planning | 4% / 6% |
| Construction Work Performance | 2% / 3% / 4% |
| Construction Work Supervision | 4% / 6% |
| Salaries and Wages | 5% – 30% |
| Import of Goods | 7.5% – 10% |
| Services and Lease/Rent of non Land and Building | 2% / 15% |
| Services | 0% – 20% |
Sending money abroad from Bali
As previously mentioned, payments made to overseas companies are taxed at 20%, unless the recipient is a non-Indonesian resident from a country that has a double tax treaty with Indonesia. In that case, the recipient will need to fill out a DGT form and provide a certificate of domicile. The withholding tax rate will then be determined by the agreement between Indonesia and the relevant country. It is important to accurately calculate and pay the appropriate amount of withholding tax to ensure compliance with local tax laws and avoid penalties and fines. Your tax advisor will be able to provide more detailed information about the applicable rates for your business.
Value added tax
For smaller businesses, the value added tax (VAT) registration is usually not required unless the company’s gross annual revenue exceeds 4,8 billion Indonesian Rupiah. However, it is possible for a company with a lower annual income to choose to register for VAT.
Companies that may benefit from VAT registration include retail businesses and those that receive many tax invoices for the purchase of goods or services. In these cases, VAT registration can provide benefits such as refunds or compensation on VAT paid on purchases or the difference between VAT collected through sales and VAT paid on purchases. It is important to consider the specific needs and circumstances of your business when deciding whether to register for VAT. Ream more here: VAT
If you need more info about corporate taxes In Bali, please contact us here: Contact
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