Income Tax Article 26 (PPh Pasal 26)

"Businesses whom make payments in any kind of form (salary, interest, dividend, royalty, etc.) to a foreign taxpayers (Subjek Pajak luar negeri), are obligated to withhold the income tax Article 26 over these transactions. The general tariff for this type of tax is 20%, and it may be different under the tax treaty, known as the P3B (Perjanjian Penghindaran Pajak Berganda)".

Defining The Income Tax Article 26 (PPh Pasal 26)

According to the Indonesian Law, Number 36 of year 2008, the Income Tax Article 26 is an income tax levied upon revenue received from Indonesia, by a foreign taxpayer other than permanent establishment (PE) in Indonesia. 

What determines an individual or company as a foreign taxpayer, are:

• an individual that is not residing in Indonesia, individual that is staying in Indonesia not more than 183 days within a year/12 months, and a company that is not established or located in Indonesia, that operates its business through a permanent establishment in Indonesia. 
• an individual that is not residing in Indonesia, individual that is staying in Indonesia not more than 183 days within a year/12 months, and a company that is not established or located in Indonesia, that can receive or gain an income from Indonesia not through operating a business  through a permanent establishment in Indonesia. 

Tariffs for The Income Tax Article 26

A rate of 20% (final) over the gross amount of:

• Dividend
• Interest, including premiums, discounts, incentives related to loan repayment sureties
• Royalty, rent, and other income related to the use of assets
• Incentives related to services, work, and activities
• Gifts and awards
• Pension and periodic payments
• Premium swap and other protected transactions
• Profit gain from debt relief

A rate of 20% (final) from the expected net income of

• Revenue from the sale of assets in Indonesia 
• Insurance premium, reinsurance premium paid directly or through a broker to an insurance company abroad. 

A rate of 20% (final) from the expected net income over sales or transfer of company stocks between a conduit company or special purpose company which is established or located in a country that gives tax protection that has special relations to an entity or permanent establishment set up in Indonesia.

A rate of 20% levied from a taxable income after it is deducted by the taxes, of a permanent establishment (PE) in Indonesia, unless the income is reinvested in Indonesia.

A rate based on the tax treaty, known as the Perjanjian Penghindaran Pajak Berganda (P3B), between Indonesia and other countries that are in agreement, may differ to one another. Their rates are usually a reduced rate from the usual 20% tariff, and some may have 0% rate.

Sumber:

http://www.online-pajak.com/en/tools-and-tips/income-tax-article-26-pph-pasal-26