23 Accounting, Tax, and Bookkeeping Terms in Indonesia

Whether you operate a small business, a large corporation, or are a business professional in Indonesia, having a grasp of accounting, tax, and bookkeeping terminology is essential. These aspects form the foundation of any business in Indonesia. 

23 terms of accounting, tax, and bookkeeping

It is essential to familiarize yourself with the basic terms, regardless of whether you outsource these services or handle your business finances in-house.

1. Accounts payable

Accounts payable refer to the records maintained to track customer sales and the outstanding amounts owed to a business.

2. Accounts receivable

Accounts receivable refer to the records maintained to track outstanding payments owed by a business to its suppliers, consultants, contractors, and other entities or individuals.

3. Annual gross income

Annual gross income represents the total earnings generated for 12 months before any tax deductions. This includes bonuses, salaries, commissions, tips, part-time incomes, and other sources of revenue.

4. Annual tax report

The annual tax report is a filing submitted by an entity to the tax authority in Indonesia. It contains information used to calculate taxes, such as income tax. The deadlines for filing annual personal and corporate income taxes are March 31st and April 30th, respectively.

5. Balance sheet

A balance sheet is a financial statement that overviews a business’s financial position at a specific time. It outlines the equity, assets, and liabilities of the business.

6. Cash flow

Cash flow refers to the movement of money into and out of a business. It tracks the inflow and outflow of cash, offering insights into the liquidity and financial health of the business.

7. Corporate income tax

Corporate income tax is imposed on legal entities or permanent establishments in Indonesia. The standard tax rate for corporate income tax in Indonesia is 25%. However, public companies with at least 40% of their shares traded on the Indonesia Stock Exchange are subject to a tax rate of 20%. 

Small companies with an annual turnover of less than 50 billion IDR and 4.8 billion IDR are taxed at 12.5% and 1%, respectively.

8. Double taxation agreement

Double taxation agreements are treaties signed between countries to prevent individuals or businesses from being taxed twice on the same income. Indonesia has signed several agreements that allow foreign companies presenting the Certificate of Domicile to benefit from reduced tax tariffs.

9. Fiscal year

In Indonesia, the fiscal year corresponds to the calendar year, from January 1st to December 31st.

10. General ledger

A general ledger is the primary account record of a business that utilizes double-entry bookkeeping. It summarizes all transactions and accounts within an entity.

Continue reading: 21 Must-Know Facts about Annual Tax Return in Indonesia

11. Gross profit

Gross profit is calculated by subtracting the cost of goods or services sold from the net sales. It represents the initial profit generated before considering other expenses.

12. Income statement

The income statement, also known as the profit and loss statement, is a vital financial statement that reports a business’s performance over a specific period. It provides insights into the business’s profitability and overall financial health.

13. Individual income tax 

Individual income tax, or personal income tax, is levied on individuals based on their respective income levels and tax rates. In Indonesia, progressive tax rates apply to both local and foreign tax residents, determined by their income brackets:

• Income up to IDR 50 million: 5%
• Income between IDR 50 million and 250 million: 15%
• Income between IDR 250 million and 500 million: 25%
• Income over IDR 500 million: 30%

14. Net of tax

Net of tax, also known as after-tax, refers to the final amount obtained after deducting all applicable taxes from the initial amount.

15. Tax deductions

Tax deductions are expenses that can be subtracted from gross income. They reduce the taxable amount, thereby reducing tax liability.

16. Tax exemption

A tax exemption allows taxpayers to subtract a specific amount from their taxable income. More tax exemptions result in lower tax liability.

17. Tax Identification Number 

The Tax Identification Number (TIN), known as Nomor Pokok Wajib Pajak (NPWP), is a crucial identifier for taxpayers in Indonesia. It is assigned to individuals and entities to fulfill their tax rights and obligations.

18. Tax liabilities

Tax liabilities refer to the total amount of tax due that an entity or individual owes to the tax authority in Indonesia. It represents the tax obligation that the taxpayer is responsible for paying.

19. Tax residents

A tax resident in Indonesia is an individual who resides and works in the country for more than 183 days within 12 months. Tax residents are required to pay taxes per Indonesian tax laws.

20. Tax return

A tax return is a filing submitted to the tax authority in Indonesia. It enables taxpayers to calculate tax liability, request tax refunds, and schedule tax payments.

21. Tax review

Tax review is a process conducted by tax consultants to ensure that tax reporting complies with Indonesian tax laws.

22. Value-Added Tax 

Value-Added Tax (VAT) is an indirect tax imposed on the sale of most goods and services. In Indonesia, the VAT rate is flat at 10%.

23. Withholding tax

Withholding tax is the amount an employer withholds from an employee’s income and remits directly to the government. This tax also applies to other types of payment apart from salaries. The rates of withholding taxes vary depending on the type and recipient.

• 20% tax applies to income payments to non-resident individuals, such as interest, dividends, prizes, awards, and royalties.
• 15% tax applies to income payments to residents (taxpayers in Indonesia), such as interest, dividends, prizes, awards, and royalties.
• A 2% tax applies to rentals (excluding buildings and land) and remuneration for services to residents.

Consulting a tax, accounting, and bookkeeping advisor in Indonesia, such as InCorp Indonesia, is recommended for any uncertainties or questions. InCorp Indonesia offers outsourcing services and face-to-face consultations in Jakarta, Semarang, and Bali.

Conclusion:

Having a clear understanding of accounting, tax, and bookkeeping terms is crucial for businesses and professionals operating in Indonesia. By familiarizing themselves with these concepts, individuals can effectively navigate the financial aspects of their business, ensuring compliance with Indonesian tax laws and optimizing their financial performance.

In case of any doubts, contact InCorp Indonesia by the form below. We offer outsourcing services and face-to-face consultancies in Jakarta, Semarang, Bali, Surabaya, and Batam.