Under the Regulation PMK-35 issued by the Ministry of Finance, a permanent establishment is a fixed and permanent business location where foreign investors conduct business activities in Indonesia. The location of the permanent establishment in Indonesia can be either owned or rented by foreigners as long as the location is permitted to use for the business operations that the investors carry out under Indonesian Law.
Permanent Establishments in Indonesia that Are Subject to Tax
Permanent establishments in Indonesia are subject to tax. A taxable permanent establishment in Indonesia consists of spaces, places, installations, facilities, equipment, and machinery used by foreigners to conduct business activities.
The following items are all regarded as part of a permanent establishment that is taxable in Indonesia:
- Management location
- Representative office
- Office building
- Sales and promotion areas
- Natural resources mining and extraction
- Oil or natural gas mining and working areas
- Forestry, fishery, agriculture, animal husbandry, and plantations
- Electronic devices, computers, automated equipment that are either leased or owned for online business transactions
Business Activities in Indonesia that Are Subject to Tax
Even if foreign investors don’t have a fixed location in Indonesia for their business operations, the following business activities are deemed to have a permanent establishment in Indonesia.
As a result, these business activities are also subject to tax in Indonesia:
1. Construction, assembly, and installation projects
Construction consultation services
Integrated construction works that cover engineering or design models
Construction, assembly, or installation works carried out beyond Indonesia
Construction, assembly or installation works subcontracted to foreign or local subcontractors
2. Dependent agents in the form of individuals or entities, acting on behalf of the foreign investors for their business activities. A dependent agent is not a permanent establishment if they only perform auxiliary or preparatory activities for the foreigners.
3. The furnishing of services (services permanent establishments) that are performed for more than 60 days in a 12-month duration.
- Employees or individuals employed by foreign investors
- Subcontractors of foreign investors
- The furnishing of services is conducted within Indonesia
- Services are delivered to parties within or outside Indonesia
4. Insurance company’s agents or employees who have no domicile or establishment in Indonesia. However, this does not apply to the reinsurance business in Indonesia.
- Collect premiums in Indonesia
- Insure risks or provide insurances to individuals residing within or outside Indonesia
Tax Registration for Permanent Establishment in Indonesia
Foreign investors must obtain Nomor Pokok Wajib Pajak (NPWP) or tax registration number within one month upon the completion of their establishment incorporation and the running of their business.
Furthermore, foreign investors shall register their Pengusaha Kena Pajak (PKP) or the VAT entrepreneur status at the end of the following month upon the excess of their minimum gross turnover threshold.
How Cekindo can Assist You in Doing Business in Indonesia
Indonesia offers business owners and investors one of the most promising opportunities for global permanent establishments. When you work with Cekindo, our comprehensive solutions of a permanent establishment in Indonesia allow you to rapidly and compliantly form a company on this attractive land.
Our team of professional consultants ensures full legal compliance for your permanent establishment in Indonesia. Additionally, once your company incorporation is complete, Cekindo’s ongoing business solutions enable you to rapidly launch your workforce and get your operation running.
As Indonesia’s most trusted company establishment partner to both local and foreign investors, Cekindo gives you the support you need through each stage of your business incorporation in Indonesia.
Fill in the form below to discuss your incorporation plan with one of our experienced specialists.