To further the development of mutual funds in Indonesia, as well as increase the role of mutual funds for bonds, including increasing bond market liquidity in Indonesia and supporting the ease of business.
Tax Subject
Article 26 Income Tax is imposed on Foreign Taxpayers excluding Permanent Establishments (BUT) in Indonesia, who received or obtained income in the form of Interest Bonds from Domestic Tax Subject, BUT, Governmental Agencies, and other Foreign Representatives.
Exempted from being the subject of Article 26 Income Tax is:
Pension Fund Taxpayers where the Ministry of Finance has ratified its establishment or development and fulfills requirements as regulated in Article 4(3) letter h Income Tax Law.
Bank Taxpayers established in Indonesia or a foreign bank branch in Indonesia.
Income in the form of Interest Bonds received and/or obtained by said taxpayers will be imposed with the general rate of income tax following the regulation in Income Tax Law.
Tax Withholder
Tax Withholding is done by:
Bonds issuer or custodian as the appointed cash settlement agent, on interests and/or bonds received by interest bearing bondholders during its maturity date, an discounts received by non-interest bearing bondholders during its maturity date
Exchange companies, dealer, or banks, as the intermediary and/or buyer, of the bonds and interests received by the bond sellers during transactions.
Tax Object
Article 26 Income Tax is imposed on interest bonds received by Foreign Taxpayers. Interest bonds is a type of compensation received or obtained by bondholders in the form of interest, ujrah/fee, profit sharing, margin, other similar income, and/or discounts.
Considered as bonds are debt securities, government bonds, and regional bonds with a maturity date of more than 12 (twelve) months issued by the government and non-government, including debt securities issued based on sharia principles (sukuk).
Included as tax objects are:
Interests from interest bearing bonds
Discounts from interest bearing bonds
Discounts from non-interest bearing bonds
Tax Basis
The imposition basis of Article 26 Income Tax on income in the form of Interest Bonds is as follows:
Interests from interest bearing bonds are the gross amount of interests following the duration of bond ownership
Discounts from interest bearing bonds are the excess of the selling price or nominal value above the purchase price of the bond, not including accrued interest
Discounts from non-interest bearing bonds are the excess of the selling price or nominal value above the bond purchase price
The bond seller is obligated to inform the bond acquisition price and acquisition date, as well as submit proof of withholding of Article 26 Income Tax from previous bond purchases to the tax withholder, where the tax withholder can then calculate interest and/or discounts, which are the basis for withholding Article 26 Income Tax.
In the case of bond acquisition price and acquisition date cannot be determined, the bond acquisition price and acquisition date are determined by prioritizing the acquisition price and acquisition date of similar bonds obtained first (First In First Out method).
Tax Rate
An income tax rate of 10% or rate following tax treaties is imposed on interest bonds income received or obtained by foreign taxpayers excluding permanent establishments.
Tax Due Date
Article 26 Income Tax on interest bonds income is payable during:
Bond interest maturity
Bond maturity
Bond sale transactions.
Withholding Tax Procedure
Article 26 Income Tax is withheld by tax withholders on income in the form of interest bonds received by foreign taxpayers excluding permanent establishments.
Tax withholder is obligated to provide proof of withholding Article 26 Income Tax to foreign taxpayers excluding permanent establishments that received or obtained interest bonds.
Tax Payment Procedure
The withholder of the Income Tax is required to pay the tax to the Post Office or a bank appointed by the Minister of Finance, no later than the 10th (tenth) day of the following month after the month the tax withholding is made.
The payment is made using a Tax Payment Slip with the tax account code 411127 and the payment code 102 for Final Income Tax on Interest Bonds.
If the tax payment due date coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the payment can be made on the next working day.
Tax Filing Procedure
The withholder and the self-paying taxpayer of Article 26 Income Tax must report the income tax withheld and paid in the monthly unified Article 26 Final Income Tax return by no later than the 20th (twentieth) day after the tax period ends.
If the filing due date of the monthly Article 26 Final Income Tax return coincides with a holiday including Saturday, Sunday, national holidays, days off for holding the General Election, or national collective leave, the filing can be made on the next working day.
Calculation Example of Article 26 Income Tax on Interest Bonds Received or Obtained by Foreign Taxpayers Excluding Permanent Establishment in Indonesia
Illustration Example
On 1 July 2023, PT ABC (issuer) issued an interest bearing bond with a nominal value of IDR10,000,000 each. The due date for said bond falls on 1 July 2028, with a fixed interest rate of 16% per year, where the due date falls on every June 30 and December 31. The initial issuance of the bond is recorded in the Indonesian Stock Exchange (BEI).
XYZ Pte. Ltd during the initial issuance bought 10 bonds with a price below the nominal value (at a discount), priced at IDR9,000,000 each. How much tax should XYZ Pte. Ltd pay concerning the interest bond?
Taxes that should be withheld by PT ABC on 31 December 2023 during the interest maturity period is as follows:
Interest = (6/12 x 16% x IDR10,000,000) x 10 bonds = IDR8,000,000
Article 26 Final Income Tax on Interest Bonds: IDR8,000,000 x 10% = IDR800,000
Legal Basis:
Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 7 Year 2021 regarding Harmonization of Tax Regulations
Government Regulations Number 9 Year 2021 on Taxation Treatment To Support Ease Of Doing Business
Government Regulations Number 91 Year 2021 on Income Tax on Income in the Form of Interest Bonds Received or Obtained by Domestic Taxpayers and Permanent Establishments
The Minister of Finance Regulations Number 85/PMK.03/2011 on Procedure For Withholding, Remittance, And Reporting Of Income Tax On Bond Rate as lastly amended by the Minister of Finance Regulations Number 07/PMK.011/2012 on Amendments on the Minister of Finance Regulations Number 85/PMK.03/2011 on Procedure For Withholding, Remittance, And Reporting Of Income Tax On Bond Rate
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