Foreign Investment Taxpayer Registration

Jakarta, Ideatax -- The Investment Coordinating Board (BKPM), stated that in 2019 there were 25,919 companies that invested in Indonesia (CNBC, 2020).  According to BKPM data, there were 148,441 foreign investment projects in Indonesia with an investment value of around 148.41 billion US dollars from 2018 to 2022.

The BKPM report also shows that Singapore has the largest number of investments with a total investment project realization of 41,948; while Japan ranked second as the country with the largest number of investment projects in Indonesia with 23,662 projects.

In terms of investment value, Singapore still ranked first as the country with the largest investment value in Indonesia with an investment value of 48.13 billion USD. The second largest investment value is China with an investment value of 23.35 billion USD. Below are the details of investment realization in Indonesia:

In terms of tax regulations, foreign direct investment in Indonesia in the form of projects and cooperation certainly has tax consequences. Article 2 Paragraph (2) of Law Number 7 Year 1983 on Income Tax as amended by Law Number 7 Year 2021 on Harmonization of Tax Regulations stipulates that tax subjects consist of two main groups, namely domestic and foreign tax subjects.

The determination whether a foreign investment project can be a domestic or a foreign tax subject depends on the substance of its establishment.  If the foreign investment project is conducted by establishing a business entity in Indonesia, it is considered as a Domestic Tax Subject.  Vice versa, if the foreign investment project is performed through a business entity that is not established nor domiciled in Indonesia, then it is classified as a Permanent Establishment.

Regarding the place of registration, Regulation of the Directorate General of Taxes Number 7 of 2020 stipulates that the Directorate General of Taxes is the one to determine the place of registration for large taxpayers, special taxpayers and medium taxpayers. The criteria for taxpayers determined to be registered at the Special Tax Office are as follows:

• Foreign Investment Taxpayers that are not listed on the stock exchange and conduct business activities in the chemical industry and non-metal excavation, registered at Foreign Investment Tax Office One (KPP Penanaman Modal Asing Satu).

• Foreign Investment Taxpayers that are not listed on the stock exchange and conduct business in the metal and machinery industry are registered at Foreign Investment Tax Office Two (KPP Penanaman Modal Asing Dua).

• Foreign Investment Taxpayers that are not listed on the stock exchange and conduct business activities in the mining and trading sector are registered at Foreign Investment Tax Office Three (KPP Penanaman Modal Asing Tiga).

• Foreign Investment Taxpayers that do not list their shares on the stock exchange and conduct business activities in the textile, food and wood industry sectors, they are registered at Foreign Investment Tax Office Four (KPP Penanaman Modal Asing Empat).

• Foreign Investment Taxpayers that do not list their shares on the stock exchange and conduct business activities in the agribusiness and certain services sectors, they are registered at Foreign Investment Tax Office Five (KPP Penanaman Modal Asing Lima).

• Foreign Investment Taxpayers that do not list their shares on the stock exchange and conduct business activities in the field of services and certain trade, they are registered at Foreign Investment Tax Office Six (KPP Penanaman Modal Asing Enam).

• For taxpayers who list their shares on the stock exchange in accordance with the Law regulating the capital market, they are registered at the Stock Exchange Taxpayers (KPP Masuk Bursa).

• For permanent establishment taxpayers residing in the Jakarta Special Capital Region, foreigners residing in the Jakarta Special Capital Region, permanent establishments that are PPMSEs, corporate taxpayers that are domestic PPMSEs, foreign traders, foreign service providers, foreign PPMSEs, and international organizations that are Income Tax Subjects, are registered at the Foreign Corporate and Individual Tax Office (KPP Badan dan Orang Asing).

Furthermore, the Regulation of the Directorate General stipulates that for Taxpayers who have met the criteria as special Taxpayers but have not determined their place of registration, the Taxpayers may register themselves at the KPP Pratama where the working area covers the residence or domicile of the Taxpayers concerned.

Based on the earlier statement, it is clear that the place of registration for Foreign Investment Taxpayers is determined at KPP Pratama Jakarta Khusus. This is to provide legal certainty, administrative convenience, and improve supervision in the exercise of rights and/ or fulfillment of tax obligations for certain Taxpayers.

As for the tax obligations, Directorate General of Taxes Regulation Number PER-7/PJ/2020 jo PER-05/PJ/2021 stipulates that taxpayers registered at Large Tax Office, Special Tax Office, and Medium Tax Office have obligations for income tax, VAT and STLG, withholding and collection of income tax, PBB, and stamp duty.

If you need more information about where Foreign Investment Taxpayers and other taxpayers are registered, you can contact Ideatax.

 

Related Regulations

• Law number 6 of 1983 concerning general provisions and tax procedures as amended by law number 7 of 2021 concerning harmonization of tax regulations.

• Law number 7 of 1983 concerning income tax as amended by law number 7 of 2021 concerning harmonization of tax regulations.

• Regulation of the Directorate General of Taxes Number PER-07/PJ/2020 concerning the Place for Registration of Taxpayers and Business Actors Through Electronic Systems and/or the Place for Business Reporting of Taxable Entrepreneurs at the Tax Service Office within the Regional Office of the Directorate General of Taxes for Large Taxpayers, the Tax Service Office within the Regional Office of the Directorate General of Taxes for Special Jakarta, and the Tax Counseling and Consultation Tax Service Office as amended by Regulation of the Directorate General of Taxes Number PER-05/PJ/2021.

 

References

BKPM. (2023). FDI Investment Realization Ranking by Country from 2018 to 2022. Jakarta: BKPM.

CNBC. (2020, January 28). In RI There Are 25,919 Foreign Companies, BKPM: Push 2% for IPO. Retrieved from CNBC Indonesia: https://www.cnbcindonesia.com/market/20200128103948-17-133272/di-ri-ada-25919-perusahaan-asing-bkpm-dorong-2-untuk-ipo