PPh 26 Withholding Tax on Foreign Payments
Complete guide to PPh 26 (Pajak Penghasilan Pasal 26) withholding tax on payments to non-residents. Learn about the 20% standard rate, tax treaty benefits, and compliance requirements for your PT PMA.
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PPh 26 Tax Rates 2025
Standard rates apply unless a tax treaty provides for reduced withholding
Standard Rate (No Treaty)
- Dividends
- Interest
- Royalties
- Technical service fees
- Management fees
- Rent and other income
Tax Treaty Rate (Typical)
- Dividends (often 10-15%)
- Interest (often 10%)
- Royalties (often 10-15%)
- Depends on specific treaty
- Certificate of Domicile required
Exempt (Certain Cases)
- Interest on government bonds
- Certain treaty provisions
- Specific exemptions may apply
- Requires proper documentation
Payments Subject to PPh 26
Types of payments to non-residents that require PPh 26 withholding
| Payment Type | Description | Standard | Treaty Rate |
|---|---|---|---|
| Dividends | Profit distributions to foreign shareholders | 20% | 10-15% |
| Interest | Loan interest paid to foreign lenders | 20% | 10% |
| Royalties | Payments for intellectual property use | 20% | 10-15% |
| Technical Fees | Fees for technical services from abroad | 20% | 10-15% |
| Management Fees | Payments for management services | 20% | Varies |
| Rental Income | Rent for assets used in Indonesia | 20% | Varies |
| Insurance Premiums | Premiums paid to foreign insurers | 20% | Varies |
| Branch Profits | Branch profit tax remittance | 20% | 10-15% |
Tax Treaty Rates by Country
Sample reduced withholding rates under Indonesia's tax treaties
| Country | Dividends | Interest | Royalties |
|---|---|---|---|
| Singapore | 10% | 10% | 15% |
| Australia | 15% | 10% | 10% |
| Netherlands | 10% | 10% | 10% |
| United Kingdom | 10% | 10% | 10% |
| United States | 15% | 10% | 10% |
| Japan | 10% | 10% | 10% |
| Germany | 10% | 10% | 10% |
| China | 10% | 10% | 10% |
Note: Actual treaty rates may vary based on specific conditions. Always verify current treaty provisions.See detailed Singapore treaty guide →
PPh 26 Compliance Process
Steps to properly withhold and report PPh 26
Obtain Certificate of Domicile
Request SKD (Surat Keterangan Domisili) or Form DGT-1 from the foreign recipient to claim treaty benefits.
Determine Applicable Rate
Check if a tax treaty exists and verify the reduced rate for the specific income type.
Withhold at Payment
Deduct PPh 26 from the gross payment at the applicable rate (standard 20% or treaty rate).
Deposit and File
Pay withheld tax via e-Billing by 10th and file SPT Masa PPh 26 by 20th of following month.
Required Documents
Documentation needed for PPh 26 compliance and treaty benefits
Form DGT-1
Certificate of Domicile for treaty benefits
Valid for 12 monthsForm DGT-2
For bank interest payments under treaty
Valid for 12 monthsBukti Potong PPh 26
Withholding tax slip for recipient
Issue per transactionSPT Masa PPh 26
Monthly tax return
File by 20th monthlyTreaty Benefits Require Proof
To apply reduced tax treaty rates, you must obtain a valid Certificate of Domicile (Form DGT-1) from the foreign recipient BEFORE making payment. Without this documentation, you must withhold at the standard 20% rate. The DGT form is valid for 12 months from the date of issuance.
Related Tax Guides
Learn more about Indonesian tax obligations
Frequently Asked Questions
Common questions about PPh 26 withholding tax
What is PPh 26 in Indonesia?
PPh 26 (Pajak Penghasilan Pasal 26) is a withholding tax on income paid to non-resident taxpayers. It applies to dividends, interest, royalties, service fees, and other income paid by Indonesian entities to foreign individuals or companies.
What is the standard PPh 26 rate?
The standard PPh 26 rate is 20% of the gross payment amount. However, this rate can be reduced if Indonesia has a tax treaty with the recipient's country of residence, typically to 10-15% depending on the income type.
How do I claim tax treaty benefits for PPh 26?
To claim reduced treaty rates, you must obtain a valid Certificate of Domicile (Form DGT-1 or SKD) from the foreign recipient before payment. This document confirms their tax residency in a treaty country and must be submitted with your tax filing.
When is PPh 26 due?
PPh 26 must be deposited to the Indonesian tax office by the 10th of the month following the payment. The monthly tax return (SPT Masa PPh 26) must be filed by the 20th of the following month.
Does Indonesia have tax treaties?
Yes, Indonesia has tax treaties with over 70 countries including Singapore, Australia, Netherlands, UK, USA, Japan, Germany, and China. These treaties typically reduce withholding rates on dividends, interest, and royalties.
What happens if I don't withhold PPh 26?
Failure to withhold PPh 26 makes the Indonesian payer liable for the tax plus penalties. The payer may face administrative penalties of 2% per month on unpaid tax, plus potential criminal sanctions for tax evasion.
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