Indonesia: Tax exemption available for dividend income

A tax exemption for certain domestic and foreign dividend income, subject to certain conditions

Tax exemption available for dividend income

One of the changes to the income tax regulations (Regulation No. 18/PMK.03/2021), pursuant to changes introduced by the Omnibus Law (enacted 2 November 2020) provides a tax exemption for certain domestic and foreign dividend income, subject to certain conditions.

Domestic dividends (if certain criteria are met) are no longer subject to a withholding tax at a rate of 10%. Thus, taxpayers will receive 100% of each domestic dividend distribution. To qualify for the tax exemption, taxpayers need to:

  • Reinvest the dividends in qualifying investments in Indonesia
  • Hold each reinvestment for a minimum three years
  • Submit an annual investment realization report every year for the three years for each reinvestment

Otherwise, taxpayers will need to pay the tax on dividends on their own.

The following table summarizes these rules.

Domestic dividends

Foreign dividends

From companies listed on the Indonesia Stock Exchange

From private companies

From companies listed on foreign stock exchange

From private companies

100% tax exempt if reinvested in Indonesia

100% tax exempt if reinvested in Indonesia

100% tax exempt if reinvested in Indonesia

100% tax exempt if the amount reinvested in Indonesia is at least 30% of the company’s income after tax, proportional to the amount of the taxpayer’s  shareholding

KPMG observation

If taxpayers decide to reinvest their dividends, they need to prove that they satisfied and maintained the tax exemption requirements, such as:

  • Establishing and maintaining a record of all the dividends received beginning 1 January 2021. If the dividends are from an Indonesian-listed company, the securities company normally would send a “dividend confirmation” or something similar every time a dividend is distributed. Taxpayers can use the dividend confirmations as a reference on the amount of dividends they have received in their investment portfolio.
  • Planning ahead how taxpayers will reinvest the dividends in qualifying investments for three years. The reinvestment process must be completed no later than 31 March of the year following the year the dividends were received. Early withdrawal is not permitted but switching into another qualifying investment is allowed. Qualifying investments include many types of investments in Indonesia such as: Indonesian government and Indonesian corporate bonds, and most financial investments in banks; investment in infrastructure under a public private partnership arrangement; and investment in real sectors.
  • Submitting yearly investment realization reports electronically to the Indonesian tax authority using the e-filing account by the end of March for three consecutive years for each reinvestment. If taxpayers do not wish to reinvest their dividends in Indonesia for three years, they must pay the tax on dividends by creating an ID billing (electronic tax payment voucher) from their e-filing account. A failure to pay the tax on dividends on a timely basis will result in a late-payment penalty of 1% (approximately) per month.

Read a December 2021 report [PDF 551 KB] prepared by the KPMG member firm in Indonesia


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.