Income Tax Treatment for Expatriates in Indonesia

On 31 October 2025, the Indonesian tax authority clarified that foreign nationals residing in Indonesia are classified as domestic tax subjects (SPDN) or foreign tax subjects (SPLN), which determines their income‑tax treatment. The classification is crucial for expatriates earning income from both Indonesian and foreign sources.

An SPDN expatriate is taxed on worldwide net income, subject to withholding under Article 21 (PPh 21) by the employer and must file an annual personal tax return. In contrast, an SPLN expatriate is taxed only on Indonesia‑sourced gross income using the rates of Article 26, with possible reduced rates under a tax‑ treaty (P3B). If the tax status changes within a year, tax withheld under Article 26 can be credited against domestic tax liability.

Accurate status determination enables expatriates and employers to avoid disputes and comply with obligations. Skilled expatriates who become SPDN enjoy a special regime: for four tax years their foreign‑source income is exempt from Indonesian tax, supporting the government’s goal to attract high‑skill talent.