Top 8 Things to Know About Taxes for Expats in Indonesia

taxes for expats in Indonesia

If you have ever seen pictures of Indonesia, you will no doubt understand why it is a popular expat destination. With crystal clear waters and pristine beaches, gorgeous mountains, rich culture and the reputation of a fabulous lifestyle in Bali, more expats around the world are calling Indonesia home. But how a move impact your US taxes living abroad in Indonesia? We are glad you asked—here are the 8 things you need to know about taxes for expats in Indonesia!

1. How Working in Indonesia Impacts US Taxes

Americans living in Indonesia, or in any other country, must file US expat tax returns each year. The US also requires that you include all worldwide income on your expat tax return, including any income that is also subject to tax in Indonesia.

However, there are several important deductions and credits available to help offset your Indonesian income tax. The three main ways to lower your taxable income are:

  • Foreign Earned Income Exclusion (FEIE)
  • Foreign Tax Credit
  • Foreign Housing Exclusion

If you meet the residency requirements of either the Physical Presence test or Bona Fide Residence test, you can exclude up to $112,000 of your 2022 foreign earnings. The Foreign Housing Exclusion also allows you to deduct a certain amount of your living expenses, which further reduces your US tax liability. The US understands that living abroad can be more expensive than in the US and the housing exclusion can substantially lower your taxes.

The Foreign Tax Credit reduces your US taxes dollar for dollar on what you pay in taxes to Indonesia. The Foreign Tax Credit will be limited to only those Indonesian taxes that are subject to US tax. That means that any Indonesia tax on your excluded Indonesian earnings (excluded by the FEIE, the Foreign Housing Exclusion, or because of Indonesian tax rules) will not be included in the calculation of your US Foreign Tax Credit.

2. Who is a Resident of Indonesia?

You are considered a resident of Indonesia if you reside there with the intention of staying, or if you are present in the country for 183 days in any 12-month period.

3. Is Foreign Income Taxed Within Indonesia?

Residents are taxed on their worldwide income while non-residents are only taxed on their Indonesian-sourced income, including Indonesian-sourced capital gains.

4. Indonesian Income Tax Rates

Rates for residents are progressive up to 30% based on total income. Non-resident employees are taxed at a flat rate of 20%.

Earnings in IDR Rate Applicable to Income Level (%)
0- 50 million 5
20-250 million 15
250-500 million 25
Over 500 million 30

5. US – Indonesia Tax Treaty

The US and Indonesia have a tax treaty so you will avoid dual-taxation in most cases. The US-Indonesia Tax Treaty will also prevent expats from paying into two social security systems simultaneously.

6. Filing Tax Returns

Individuals whose total income exceeds certain thresholds are required to file annual tax returns, which are due March 31 each year. If your income exceeds IDR 24,300,000 (for a single individual), you will be required to file.

7. Social Security in Indonesia

The national social security system in Indonesia applies to expatriates, unless they are already covered by a similar or even better system in another country. You are not required to participate. However, if you choose to contribute, it is 2% of your gross wages.

8. Americans Living in Indonesia: Other Taxes

Capital gains are taxed at normal resident tax rates. However, if you sell locally listed shared, they are subject to a 0.1% tax on the gross proceeds. In addition, the sale of domestic real estate is subject to a 5% tax on the sale price—purchasing real estate results in a 5% tax on the transfer of the title.

Need More Advice About US Taxes Living Abroad in Indonesia?

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