Whether you are a small business, a large corporation, or a business professional in Indonesia, there are accounting, tax and bookkeeping terms you must know.
Accounting, tax, and bookkeeping are such crucial parts of any business in Indonesia, and it is always a good idea to have an understanding of the basic terms. No matter if you outsource these services or your business finances are working on it by themselves.
1. Accounts Payable
An account is used to keep track of all customer sales, and the sales amounts are owed to a business.
2. Accounts Receivable
An account is used to keep track of all outstanding payments owed by a business to its suppliers, consultants, contractors, and other companies or individuals.
3. Annual Gross Income
It is the total income earned over 12 months before any taxes. The total income includes bonuses, salaries, commissions, any tips, and part-time incomes, etc.
4. Annual Tax Report
It is a report filed by an entity with the tax authority in Indonesia with information used to calculate taxes such as income tax.
In 2019, the reporting deadlines for annual personal income tax and annual corporate income tax are set on 31st March and 30th April respectively.
5. Balance Sheet
A financial statement that shows a business’s financial position at a specified time by outlining its equity, assets and liabilities.
6. Cash Flow
A process of how much money is coming into and going out of business.
7. Corporate Income Tax
A tax imposed on a legal entity or permanent establishment in Indonesia. A tax rate of 25% often applies to corporate income tax in Indonesia.
Public companies with at least 40 percent of their shares traded on the Indonesia Stock Exchange are subject to a 20% tax rate; small companies with an annual turnover of less than 50 billion IDR and 4,8 billion IDR are taxed at rates of 12,5% and 1% respectively.
Get to know more in our previous article about Corporate tax and personal income tax in Indonesia
8. Double Taxation Agreement
Treaties to avoid double taxation in associated countries.
Indonesia has signed several agreements that enable foreign companies that present the Certificate of Domicile to receive reduced tariffs of taxes.
9. Fiscal Year
A fiscal year in Indonesia is the calendar year from 1st January until 31st December.
Save our 2021 compliance calendar below and do not miss any deadlines and tax obligations in Indonesia.
10. General Ledger
A primary account record of business with double-entry bookkeeping that summarises all transactions or accounts within an entity.
11. Gross Profit
It is the net sales minus the cost of goods or services sold.
12. Income Statement
One of the most important financial statements to report a business performance such as business profitability over a specified period of time. It is also known as a profit and loss statement.
13. Individual Income Tax (Personal Income Tax)
A tax is imposed on individuals (taxpayers) according to their respective income and tax rate.
In Indonesia the progressive tax rates apply to both local and foreign tax residents based on their income:
- No more than IDR 50 million: 5%
- IDR 50 – 250 million: 15%
- IDR 250 – 500 million: 25%
- over IDR 500 million: 30%
14. Net of Tax
Also known as after-tax, the net of tax is a final amount after all taxes have been deducted from the initial amount.
15. Tax Deductions
Expenditures that can be deducted from the gross income. Tax deductions are able to reduce the amount subject to income tax and thus reduce the tax due.
16. Tax Exemption
An amount that taxpayers are allowed to subtract from their taxable income. More tax exemptions mean lower tax due.
17. Tax Identification Number (TIN)
Also known as Nomor Pokok Wajib Pajak (NPWP), which is very important for bookkeeping in Indonesia. It is a number given to every taxpayer for identification for them to carry out their tax rights and obligations.
18. Tax Liabilities
The total amount of tax due owed by an entity or an individual to the tax authority in Indonesia – an amount that a taxpayer is responsible for paying.
19. Tax Residents
An individual who stays and works in Indonesia for more than 183 days in 12 months is a tax resident who is required to pay taxes in accordance with Indonesian Tax Law.
Are you an Australian living in Indonesia? You should read our Overview of Tax Obligations for Australian Expats Living in Bali
20. Tax Return
Tax return in Indonesia is filed submitted to the tax authority, allowing taxpayers to calculate their tax liability, request tax refund, and schedule tax payment.
Continue reading: 21 Must-Know Facts about Annual Tax Return in Indonesia
21. Tax Review
A process is done by a tax consultant to make sure the tax reporting complies with the tax law in Indonesia.
22. Value-Added Tax (VAT)
It is an indirect tax imposed on the sale of most goods and services. In Indonesia, it has a flat rate of 10 percent.
23. Withholding Tax
An amount withheld by an employer on income earned by an employee and paid directly to the government. This tax also applies to other types of payments besides salary.
The rates of withholding taxes vary based on their types and kinds of recipients.
- 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
- 2% tax applies to rentals (excluding buildings and lands) and remuneration for services to residents
In case of any doubts, contact your accounting, tax, and bookkeeping advisor in Indonesia — Cekindo. We not only offer outsourcing services but face-to-face consultancies in Jakarta, Semarang, and Bali.