Foreign Purchases: PPh Duty of Establishments in Indonesia

Jakarta, 10 December 2025 – The Directorate General of Taxes’ contact centre (Kring Pajak) clarified that withholding, remittance, and reporting of income tax (PPh) on purchases of goods or services from abroad are the responsibility of the Permanent Establishment (BUT) present in Indonesia. The clarification was issued after a public query about which party must pay tax when the foreign seller has a BUT in the country.

Under Article 5 of the Indonesian Income Tax Law, income earned by a foreign head office from activities, sales, or services that are similar to those performed by its BUT in Indonesia is treated as BUT income. Consequently, the BUT must withhold, remit, and report PPh on such transactions, for example direct loans, product sales, or consulting services provided by the head office.

This rule confirms that the local entity (BUT), not the overseas parent, bears the tax obligation for related income. Companies with foreign affiliates need to ensure compliance to avoid penalties and support proper tax collection.