According to Article 2 paragraph (3) letter b of the Income Tax Law, a Limited Liability Company ("Perseroan Terbuka" or PT) established or domiciled in Indonesia is a domestic Corporate Taxpayer. Therefore, Limited Liability Company is required to deposit taxes on all income received or earned from Indonesia as well as income earned outside of Indonesia. Income tax payable is calculated by multiplying fiscal net income by the general rate.

The general corporate income tax rate is 22%. The legal basis for determining this rate is governed by Article 17 paragraph (2) of Income Tax Law. This rate has been in effect since 2022 fiscal year and is enforced nationally as of January 1, 2022.

Even though income tax rate reduction was canceled (corporate income tax rate was planned to be 20%), government still provides special privileges for Limited Liability Company that trade their shares on Indonesia Stock Exchange (IDX) or go public (“Terbuka” or Tbk.). In accordance with Article 17 paragraph (2b) of Income Tax Law, domestic corporate taxpayers in the form of Limited Liability Company can obtain a 3% lower rate if at least 40% of the total paid-up shares are traded on IDX. In addition, Limited Liability Company must meet certain requirements as regulated in government regulations.

Approximately one year after the 22% income tax rate went into effect, implementation regulations governing certain conditions for receiving lower income tax rates for Public Limited Liability Company were finally enacted. These provisions are governed by Articles 64-68 of Government Regulation Number 55 of 2022. To receive a lower 3% income tax rate, Public Limited Liability Liability must meet the following requirements:

1. The total number of paid-up shares traded on IDX is at least 40%;
2. Paid-up shares must be owned by at least 300 parties;
3. Each party may only own shares of less than 5% of the total issued and fully paid shares;
4. Share ownership referred to in this requirement does not include those owned by related parties in the form of controlling shareholders and/or major shareholders or shares owned by a Limited Liability Company with a share buyback scheme*;
5. Fulfillment of number of shares provisions, number of parties who own shares, and the amount of share ownership of each party must be fulfilled at least 183 calendar days in 1 fiscal year; And
6. Limited Liability Company submits a report to Directorate General of Taxes (DGT).

In certain cases, Limited Liability Company can carry out buyback scheme while still meeting the requirements for a 3% lower income tax rate (Article 66 of Government Regulation Number 55 of 2022). Therefore, taxpayer must include results of shares purchase traded on IDX report in the Annual Corporate Income Tax Return (CITR).

If all of the above requirements are met, Corporate Income Tax rate for Public Limited Liability Company is 19%, which is obtained from 22% - 3%. This rate is effective as of 2020 fiscal year. However, if one of the conditions is not met, Limited Liability Company, despite having gone public, must use 22% rate in calculating Corporate Income Tax.

The list of Limited Liability Company taxpayers who meet certain requirements is submitted by the Chairman of Board of Commissioners of the Financial Services Authority (“Otoritas Jasa Keuangan” or OJK) or an appointed official to the Minister through Director General of Taxes. This list along with the forms of reports submitted by Limited Liability Company to DGT is further regulated in a Minister of Finance Regulation.

In addition to the Annual Corporate Income Tax, there are several types of income tax for Limited Liability Company, include:

1. Income Tax Article 25 in relation to installments of underpayment of Corporate Income Tax for the previous fiscal year;
2. Income Tax Article 23 in relation to withholding tax of dividends, interest, royalties, gifts, awards, bonuses, rent and services;
3. Income Tax Article 22 in relation to imports or business activities in certain fields, as well as purchases of very luxury goods;
4. Income Tax Article 4 paragraph (2) in relation to income which is the final tax object;
5. Income Tax Article 26 in relation to income paid to foreign Taxpayers; and
6. Income Tax Article 21 in relation to the provision of salaries, wages, honorarium, benefits and other payments to employees or non-employees.

Income tax that has been withheld must be deposited and reported monthly in the Periodic Income Tax Return.

With the enactment of Article 64-68 of Government Regulation Number 55 of 2022, Limited Liability Company that have gone public and have fulfilled all the requirements by middle of 2022 fiscal year can receive a reduction in corporate income tax rate, allowing them to calculate, deposit and report the Annual Corporate Income Tax Return using 19% tax rate. Furthermore, it is hoped that Minister of Finance Regulation, which governs the list of Limited Liability Company that received lower tax rate as well as the form of reporting on receipt of lower tax rates, will be ratified soon to provide legal certainty to taxpayers especially public Limited Liability Companies.