REGIONAL TAX IN INDONESIA

Indonesia remains one of Southeast Asia’s most attractive destinations for foreign investors, retirees, and international professionals. Strong domestic consumption, massive infrastructure development, and a rapidly growing property and F&B sector continue to draw entrepreneurs and multinational companies alike. However, beyond national taxes such as Corporate Income Tax and VAT, regional taxes and levies (local government taxes) play a critical role in determining your real cost of doing business. These obligations are often underestimated by foreign investors, yet they directly affect property ownership, hotel and restaurant operations, advertising activities, and day-to-day compliance.

Understanding Indonesia’s Regional Tax System

Indonesia applies a decentralized fiscal system. While the central government collects income tax, VAT, and customs duties, regional governments (provincial and regency/municipality levels) impose their own taxes and retributions to finance local development.

The current framework is governed mainly by:

• Law No. 1 of 2022 on Financial Relations between Central and Regional Governments (HKPD Law), which replaced the previous Regional Tax Law.
• Implementing regional regulations (Peraturan Daerah / Perda) issued by each province or city.

This means that although the types of taxes are nationally regulated, the rates, procedures, and enforcement can differ between Jakarta, Bali, Batam, Surabaya, and other regions—an important point for real estate developers, hospitality groups, and retail chains operating across multiple locations.

Disclaimer

The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.