In tax practice, determining taxpayer status is the first step in assessing tax obligations in Indonesia. The distinction between resident and non-resident taxpayers has direct implications for the application of income tax.
Non-resident taxpayers are individuals or business entities that conduct business or activities through a permanent establishment (PE) in Indonesia, or that earn income from Indonesia without operating through a PE. This classification governs the applicable tax treatment and distinguishes non-resident taxpayers from resident taxpayers.
Non-resident taxpayer status is assessed based on the following criteria:
1. Individuals who do not reside in Indonesia.
2. Foreign nationals who stay in Indonesia for less than 183 days within 12 months.
3. Indonesian citizens who remain outside Indonesia for over 183 days within 12 months and meet additional tiered requirements, including:
● Residing permanently outside Indonesia rather than temporarily.
● Maintaining a principal center of activities outside Indonesia, as evidenced by:
a. immediate family members residing overseas;
b. income sourced primarily from outside Indonesia;
c. membership in social, educational, or religious organizations abroad;
d. have a habitual place for carrying out daily activities outside Indonesia; and
e. are treated as a resident taxpayer of another country or jurisdiction.
By way of illustration, Doni is an Indonesian citizen who has worked in Country X since January 1, 2021, and rents an apartment there with his wife. He returns to Indonesia every three months for a week to visit family and oversee his car rental business. Over the course of a year, Doni spends 337 days in Country X and 28 days in Indonesia. Based on his daily living patterns and the fulfillment of the tiered criteria, Doni qualifies as a non-resident taxpayer.
