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Monday, 13 June 2016

Income Tax Article 26

Any business entity in Indonesia conducting payment transactions (salaries, interest, dividends, royalties and the like) to the resident taxpayer, is required to withhold tax on such transactions Article 26. The general rate for income tax Article 26 is 20%. But if you follow the tax treaty / DTA (P3B), then the rates are subject to change.

Under Indonesian law, No. 36 of 2008, Income Tax Article 26 (Income Tax Article 26) is the income tax imposed on the income received Foreign Taxpayers of Indonesia in addition to the permanent establishment (BUT) in Indonesia.
Income Tax Article 26
Income Tax Article 26

Which determines an individual or company as a taxpayer abroad are:

  1. an individual who does not reside in Indonesia, people who lived in Indonesia for less than 183 days in a year / 12 months, and companies that are not established or are in Indonesia, which operates its business through a permanent establishment in Indonesia.
  2. an individual who does not reside in Indonesia, people who lived in Indonesia for not more than 183 days in a year / 12 months, and companies that are not established or are in Indonesia, which can receive or earn income from Indonesia not through doing business through a form permanent establishment in Indonesia.

Rates for Income Tax Article 26 (Income Tax Article 26)

Rate of 20% (final) on the gross amount of:

  1. Dividend
  2. Interest, including premiums, discounts, incentives associated with payment of the loan guarantee
  3. Royalties, rents and other income related to the use of assets
  4. Incentives related to services, employment, and activities
  5. Prizes and awards
  6. Pension and periodic payments
  7. Premiums swaps and other hedging transactions
  8. Gains from debt relief

Rate of 20% (final) of the net profit expected from:

  1. Revenue from the sale of assets in Indonesia
  2. Insurance premiums, reinsurance premiums paid directly or through brokers to insurance companies abroad.
  3. Rate of 20% (final) of the net profit is expected during the sale or transfer of shares of the company between media companies or company specific goals established or located in countries that provide tax shelters that have a special relationship to an entity or a permanent establishment (BUT) was established in Indonesia.
Rate of 20% is levied on taxable income after deducting taxes, a permanent establishment (BUT) in Indonesia, except where the income is reinvested in Indonesia.

The level is based on a tax treaty (tax treaties), known as the JGI Avoidance of Double taxation (P3B) between Indonesia and other countries that are in agreement, may differ from each other. Their rates are usually reduced rate from the usual fare of 20%, and some may have a tariff of 0%.

OnlinePajak is a tax application that provides step-by-step to prepare, pay and file taxes online companies, including income tax under Article 26 (Income Tax Article 26). For more information and updates pertaining to OnlinePajak, please register on our application for free.

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