Frequently Asked Questions: #taxreportingpenalties

Penalties for late or incorrect tax reporting in Indonesia can be significant and vary depending on the type of violation. Here are the key points to be aware of:

• Late submission of monthly tax returns:
  • Administrative fine of IDR 500,000 for a monthly VAT return, and IDR 100,000 for other monthly returns
• Late submission of annual tax returns:
  • For corporate taxpayers: IDR 1,000,000
  • For individual taxpayers: IDR 100,000
• Late payment or underpayment of tax:
  • Interest is no longer a flat 2% per month. Since the Job Creation Law (2020), the monthly rate is set by Ministry of Finance decree, based on the government benchmark interest rate plus an uplift of 5% to 15% per year (depending on the violation), divided by 12
  • Interest is charged for a maximum of 24 months, and part of a month counts as a full month
  • Voluntary corrections attract the lowest uplift; underpayments assessed in a tax audit attract the highest (15%)
• Objections and appeals (under the Tax Harmonization Law, 2021):
  • If an objection is rejected or only partially granted: penalty of 30% of the unpaid tax (previously 50%)
  • If a subsequent court appeal is rejected: penalty of 60% (previously 100%)
• Intentional tax evasion or fraud:
  • Criminal charges may result in fines of 2 to 4 times the unpaid tax and/or imprisonment
• Failure to register for a tax ID number (NPWP) when required:
  • The tax office can register you ex officio and assess back taxes with sanctions; intentional failure to register is a criminal offence
  • For Indonesian-resident individuals, the national ID number (NIK) now also functions as the NPWP
• Incorrect issuance of tax invoices (for VAT-registered companies):
  • Administrative fine of 1% of the tax base (DPP) for failing to issue, issuing late, or issuing incomplete tax invoices (previously 2%)

It’s important to note that:

• The Indonesian Tax Office has been increasing its enforcement efforts in recent years
• Penalties can accumulate quickly, especially for ongoing non-compliance
• Voluntary disclosure and correction of errors before an audit results in materially lower sanctions

To avoid these penalties, it’s crucial to:

• Maintain accurate financial records
• Submit tax returns on time
• Ensure all reported information is correct and complete
• Seek professional assistance if you’re unsure about your tax obligations

By staying compliant with Indonesian tax regulations, you can avoid costly penalties and maintain a good standing with the tax authorities.

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Yes. This is one of the most common — and most expensive — misunderstandings among foreign company owners in Indonesia. A registered company’s filing obligations run with its tax number, not with its level of business activity. Key points:

• Nil returns are still returns: a company with no transactions must still file “nil” (zero) tax returns. For a VAT-registered (PKP) company, the monthly VAT return is mandatory every month without exception, even with zero transactions — a position the tax office restated in January 2026 specifically for companies that have not yet started, or have stopped, business activity.

• December employee tax return is always required: the December PPh 21 return must be filed even if nil, as it doubles as the annual employee reconciliation.

• Narrow reliefs exist: the unified withholding return (PPh Unifikasi) may be skipped in a month with genuinely no transactions, and a nil PPh 25 instalment needs no separate filing.

• The cost of not filing accumulates quickly: late-filing fines are IDR 500,000 per missed monthly VAT return and IDR 100,000 per other return. A dormant VAT-registered company that files nothing for a year accrues roughly IDR 6 million in fines before any tax or interest, and unresolved defaults escalate to collection letters (STP), formal requests for explanation (SP2DK), and ultimately a tax audit.

• Investment reporting continues too: a dormant PMA usually also stops filing its quarterly LKPM investment reports — and repeated non-filing or nil-realisation reports are themselves sanction triggers under the investment regulations, escalating as far as revocation of the business licence.

• The clean route to going quiet: a company that genuinely intends to cease activity can apply for non-active taxpayer status (Wajib Pajak Nonaktif), which suspends filing obligations once granted — prospectively only, never retroactively. Alternatively, formal liquidation ends the obligations permanently.

Okusi Associates provides a zero-activity tax reporting service that keeps dormant companies fully compliant at minimal cost, covering all mandatory nil returns and LKPM filings. See also the guide to monthly tax reporting for PMA companies.

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