Company Formation & Tax in Indonesia
Southeast Asia's largest economy and a 280-million-person market — 22% corporate tax, an effectively 11% VAT, and a PT PMA regime with a real capital bar to entry.
Indonesia is the region's demographic heavyweight, and since the Omnibus Law reforms the majority of sectors are open to 100% foreign ownership through the PT PMA — the foreign-investment limited company. The trade-off is a genuine capital threshold: an investment plan above IDR 10 billion per business line. Tax settings are moderate — 22% corporate tax, and a statutory 12% VAT applied so that most goods and services bear an effective 11%.
The headline numbers
| Tax | Rate |
|---|---|
| Corporate income tax (standard) | 22% |
| Listed companies (40%+ free float) | 19% |
| Micro-enterprise final tax (turnover ≤ IDR 4.8bn) | 0.5% of turnover |
| VAT — statutory rate | 12% |
| VAT — effective rate on most goods/services | 11% |
When the VAT rise to 12% took effect in January 2025, the government limited the full rate to luxury goods; for everything else, an adjusted tax base keeps the effective rate at 11%. Small companies with turnover up to IDR 50 billion get a 50% CIT discount on the first IDR 4.8 billion slice of taxable income, and exports of goods are zero-rated. A 20% branch profits tax applies to foreign branches remitting profits abroad, reducible by treaty.
The PT PMA — what it takes
- Investment plan above IDR 10 billion (~US$620,000) per business line, excluding land and buildings — this is the defining entry condition.
- Paid-up capital of at least IDR 2.5 billion, with at least two shareholders.
- OSS risk-based licensing — registration, the business identification number (NIB) and sector licences all run through the Online Single Submission system.
- Positive investment list — most sectors are fully open; a shorter list carries caps, partnership requirements or closure.
Forming the company
Setup runs: deed of establishment before a notary, Ministry of Law approval, then NIB and licences via OSS, tax registration on Coretax and a local bank account — typically four to eight weeks in total. The company needs at least one director and one commissioner (the two-board structure is mandatory); directors need not be resident, but a tax-registered local presence and registered office are required, and expatriate positions require work-permit sponsorship. Annual obligations include the corporate tax return, monthly withholding and VAT filings, and LKPM investment-activity reports to the investment ministry.
Frequently asked questions
What is Indonesia's corporate tax rate in 2026?
22% standard. Listed companies with at least 40% free float pay 19%, small companies get a 50% discount on the first slice of income, and micro-businesses pay a 0.5% final tax on turnover.
Is Indonesian VAT 11% or 12%?
The statutory rate is 12%, but for most goods and services an adjusted tax base produces an effective 11%. Only certain luxury goods bear the full 12%. Exports are zero-rated.
What is a PT PMA?
The Indonesian foreign-investment limited company — it permits up to 100% foreign ownership in open sectors, and requires an investment plan above IDR 10 billion per business line with paid-up capital of at least IDR 2.5 billion.
How long does setup take?
Typically four to eight weeks: notarial deed, ministry approval, OSS licensing, tax registration and banking.
Official sources
- Directorate General of Taxes (DJP) — tax
- OSS — Online Single Submission — licensing
- Ministry of Investment / BKPM
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal or tax advice; sector conditions, VAT implementation and capital requirements change. Confirm against the DJP and OSS, or with an advisor, before acting.
Structure an Indonesian company the right way.
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