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Indonesia: Clearer tax residency criteria


On December 28 2011, the Indonesian Directorate General of Taxes (DGT) issued Regulation No. PER-43/PJ/2011 setting out the new criteria for determining tax residency.

This regulation has been long awaited since the previous criteria for tax residency were too general and was a constant source of conflict in interpretations between the taxpayers and the DGT.

For individual taxpayers

The income tax law sets out that an individual qualifies as a resident taxpayer if:

  • The individual has a place of residence in Indonesia. The term "place of residence" means a place that is being used by the individual for his/her permanent dwelling or to perform the ordinary course of life or habitual abode; or

  • The individual is present in Indonesia for more than 183 days within a period of 12 months; or

  • The individual is present in Indonesia and has the intention to have a place of residence in Indonesia. The intention is shown when the individual obtains a working visa, stay permit or a contract to carry on employment or activities in Indonesia for more than 183 days, or when the individual moves his/her place of residence to Indonesia.

The regulation also provides that an Indonesian citizen who leaves Indonesia for more than 183 days within a period of 12 months shall be considered as a non-resident taxpayer. However, the individual must have a proof that he/she has a place of residence outside of Indonesia in the form of ID/student card, certification of residence issued by the Indonesian embassy overseas or as explicitly stated in the passport. An Indonesian citizen who moves abroad may still be considered as a resident of Indonesia as long as the said individual is constantly moving from one place to another and is present in Indonesia for more than 183 days within a 12 months period.

For legal entities

The regulation also provides the following criteria in determining whether a legal entity qualifies as a tax resident through its establishment/registration or its place of domicile situated in Indonesia.

A legal entity is considered to be established/registered in Indonesia if its establishment/registration is based on the Indonesian laws or takes place in Indonesia.

A legal entity is considered to have its place of domicile in Indonesia if it meets any of the following criteria:

  • It is written in the act of establishment that the domicile of the said legal entity is in Indonesia;

  • It has a head office in Indonesia;

  • It has an administrative and/or financial headquarter in Indonesia;

  • It has a place available in Indonesia for management to control the company or to hold meeting in making strategic decisions; or

  • Its management members reside or are domiciled in Indonesia.

A foreign entity that carries on business or activities in Indonesia through a place of management in Indonesia is still considered as a permanent establishment provided that the place of management is used only to conduct routine or day-to-day activities and not to control all matters of the enterprise nor to make strategic decisions.

This regulation is important for multinational companies or foreign individuals conducting business or activities in Indonesia since the Indonesian tax law requires a resident taxpayer to register and to obtain a taxpayer identification number, to maintain bookkeeping, to prepare and submit tax returns, and to fulfill other administrative tax obligations. As Indonesia also applies the worldwide income concept, all resident taxpayers must report their worldwide income, which will be taxed accordingly in Indonesia.

Andy Kuswandi ( & Jul Seventa Tarigan (

PB Taxand


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