Indonesia

Registrations and Establishing an Entity

• Foreign companies must form a PMA (foreign-owned) company
• In-principle approval from BKPM required
• 4–8 weeks to establish after approvals
• Required filings: articles of association, notarial deeds, licenses, tax registration

Banking

• Local bank account not required by law, but strongly advised for compliance and audit
• Bank hours: Mon–Fri, 8:00–15:00

Working Week

• 5 or 6-day weeks, capped at 40 hours/week
• Overtime max: 4 hours/day, 18 hours/week

Holiday Accrual

• 12 paid leave days after 1 year of service
• Additional personal leave (e.g. marriage, bereavement, religious events)

Maternity Leave

• 3 months total: 6 weeks pre- and 6 weeks post-birth
• Paid at full salary
• Miscarriage: 1.5 months
• Breastfeeding breaks allowed up to age 2

Paternity Leave

• 2 paid days

Sick Leave

• Full salary: first 4 months
• 75%: months 5–8
• 50%: months 9–12
• 25%: after 12 months
• Menstrual leave: 2 days/month

National Service

• No mandatory conscription; subject to activation only during national emergencies

Tax Year 

January 1 – December 31

Income Tax

• Tax residency triggered after 183 days in-country
• Effective Tax Rate (ETR) introduced in 2024 (monthly-based)
• Monthly ETR varies by marital status and income band

Social Security Contributions (BPJS) Employer:

• Death: 0.3%, Accident: 0.24–1.74%, Old age: 3.7%, Pension: 2%, Health: 4%

Employee:

• Old age: 2%, Pension: 1%, Health: 1%

Wage caps apply to each component

Payroll

• Paid monthly (last working day)
• 13th and 14th month bonuses (THR) required

Reports

• Monthly: Employee tax (by 10th), payment (by 20th)
• Annual: Income reporting, due 3 months post-year end
• Records must be retained for 5 years (10 years if pre-2009)

Leavers

• Permanent: Compensation varies by reason
• Contract: Paid prorated severance under PKWT formula

New Employees

• Registration with tax and social authorities required
• Must be declared on payroll

Leavers

• Permanent: Compensation varies by reason
• Contract: Paid prorated severance under PKWT formula

Employee Benefits

• THR (Religious Holiday Bonus): 1 month salary if >12 months service
• Pro-rated THR for 3–12 months tenure
• Minimum wage varies by province

Expenses

• Most benefits taxable under 2023 regulations
• Reimbursements need proper documentation to avoid tax

Permits Types:

• Business Visa (non-working)
• VITAS/KITAS (work and residency)
• Investor KITAS (for shareholders)
• IMTA: Mandatory work permit filed by employer

Requirements:

• Passport, medical/criminal checks, job contract, sponsor letter
• Processing time: 1+ week

• Benefits-in-kind heavily regulated for tax purposes
• Labor laws updated under Job Creation Law (2024 ruling)
• Social security participation mandatory for all employees
• Books must be kept in IDR and Indonesian (unless exempted)

Further Information For more information, or assistance with Indonesia tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.