Annual Tax Return in Indonesia for Freelancers: An Easy Guide

When doing business in Indonesia, tax obligations become unavoidable. One of the tax obligations to fulfill is an annual tax return, and your employment status can impact your tax obligations. This article contains everything you need to know about filing the annual tax return in Indonesia as a freelancer.

What is an Indonesian Tax Return?

In Indonesia, the annual tax return is a crucial document that all taxpayers—individuals and businesses—must submit to the Directorate General of Taxes (DGT) if they earn income during the taxable year. This filing is essential to the Indonesian tax filing process, ensuring compliance with local tax regulations and obligations.

Individuals and businesses must first obtain a Tax Identification Number (NPWP) to begin the process of filing their tax returns. The NPWP serves as a unique identifier for taxpayers and is a prerequisite for engaging in various financial transactions within Indonesia.

For individuals, this includes the personal income tax Indonesia system, which categorizes income levels and determines the applicable tax rates. The annual tax return summarizes earnings and provides a means for individuals to declare deductions and tax credits, ultimately influencing the amount of tax owed or refunded.

In summary, understanding the importance of the annual tax return and navigating the Indonesian tax filing process is vital for maintaining compliance and ensuring proper tax management in Indonesia.

Are Freelancers Required to Report Their Annual Tax Returns?

Yes, freelancers in Indonesia are required to report their annual tax returns. According to the Directorate General of Taxes (DGT), all individuals and entities earning income, including freelancers, must file a tax return (Surat Pemberitahuan Tahunan or SPT) by the specified deadline, typically March 31 each year.

This requirement is essential for tax compliance and ensures that freelancers fulfill their obligations under Indonesian tax law.

What is the Document Requirement for the Annual Tax Return?

To file an annual tax return, freelancers need to prepare the following documents:

1. Tax Identification Number (NPWP): This is mandatory for all taxpayers in Indonesia.
2. Withholding Tax Slip: Obtain a withholding tax slip (1721 A1/A2) from clients if applicable.
3. Income Statement: A record of all income earned during the year, detailing sources of income and amounts.
4. Expense Documentation: Receipts or records of expenses that may be deductible.
5. Bank Statements: To support income claims and demonstrate financial activity.
6. Supporting Documents for Assets and Liabilities: Include details of any assets and debts if applicable.

How Do You Report Your Freelance Annual Tax Returns in Indonesia?

Filing your annual tax return is a crucial responsibility for freelancers in Indonesia, ensuring compliance with tax regulations and avoiding penalties. Below is a comprehensive guide on how to fill out and submit your annual tax return.

Obtain Withholding Tax Slips

Start by acquiring the necessary withholding tax slip (1721 A1/A2) from your client’s company. For private employees, the withholding tax slip is A1.

Access the DGT Website

First, complete your tax return (SPT) online via the Directorate General of Taxes (DGT) website. Ensure you have a DJP account and have activated your Electronic Filing Identification Number (EFIN). Log in using your Taxpayer Identification Number (NPWP) and password.

Select E-Filing

After logging in, navigate to the ‘Report’ section to file your tax return. Choose the ‘e-filing’ option when submitting your SPT.

Complete the Tax Form

Click ‘Create SPT’ and follow the on-screen instructions. Based on your answers, the system will automatically select the correct tax return for Indonesia form, specifically Form 1770.

This streamlines the filing process and ensures you use the appropriate documentation for your income level and tax situation.

• Form 1770 S: For freelancers earning more than IDR 60 million/year.
• Form 1770 SS: For those earning IDR 60 million/year or less.

READ MORE:

• Indonesia Implements New Regulations for Withholding Tax
• The Tax Directorate General in Indonesia: Roles and Responsibilities
• Guide on Filing Corporate Annual Tax Return (SPT) in Indonesia

Fill Out Financial Information

Accurately report your assets and debts, including land, accounts receivable, or savings. Be thorough to ensure your SPT is processed without issues.

Include Spousal Tax Information

If married, fill in your spouse’s or dependent’s details. This will help calculate your non-taxable income (PTKP). If unmarried, select ‘Not Married’ and answer the relevant questions.

Calculate Income Tax (PPh)

Review your net income, taxable income, and withholding tax amounts. Your tax return may show a zero balance if your only income is from tax-deducted sources.

Submit Your Tax Return

After verifying your details, submit your tax return. The DGT website will email you a confirmation code to confirm your submission.

Ensure your return is filed by March 31 yearly to avoid penalties. Due to the complexities of tax regulations, consider seeking advice from tax professionals like InCorp Indonesia to navigate your obligations effectively.

How InCorp Can Assist with Tax Compliance in Indonesia

Navigating the complexities of tax compliance in Indonesia has become increasingly challenging due to the ever-changing economic landscape.

At InCorp, we leverage our expertise to simplify the annual tax return process for business owners. Our locally based experts possess extensive experience assisting expatriates with their tax filings and advisory needs.

Our Services Include:

• Tax Reporting: Ensuring accurate and timely submission of your tax returns.
• Tax Consulting: Providing tailored advice to optimize your tax strategy and compliance.
• Accounting Services: Comprehensive accounting solutions to support your financial management.

Fill in the form below to simplify your tax compliance, and let our experts guide you through the process.