A Guide to Bali’s Tax System for Businesses

Executive Summary: What’s New

The introduction of Indonesia’s CoreTax Administration System on January 1, 2025, represents the most significant digital transformation in Indonesian tax administration history. For businesses in Bali, this means streamlined digital processes, enhanced compliance requirements, and new opportunities for efficient tax management.

Key 2025 Changes:

• Implementation of the CoreTax Administration System
• New e-commerce tax regulations (PMK 37/2025) affecting online businesses
• VAT rate adjustments with preparation for 12% implementation
• Enhanced digital documentation requirements
• Strengthened compliance monitoring for foreign investors

Understanding Bali’s Position in Indonesia’s Tax Framework

Bali operates within Indonesia’s national tax system while maintaining specific regional considerations that impact business operations. Indonesia’s rapidly growing economy, strategic location, and abundant natural resources make it an attractive destination for foreign investors, with Bali serving as the premier gateway for international businesses entering the Indonesian market.

The CoreTax Revolution: Digital Transformation in Action

The Ministry of Finance (MoF) introduced Regulation No. 81 (MoF-81) to streamline and develop different tax regulations, ensuring that the new CoreTax Administration System would be effective from January 1, 2025. This digital transformation impacts every aspect of business tax compliance in Bali.

CoreTax Benefits for Bali Businesses:

• Centralized tax filing across all tax types
• Real-time document processing and verification
• Enhanced accuracy through automated calculations
• Improved transparency in tax assessments
• Streamlined communication with tax authorities

Starting January 1, 2025, electronic seals are required for all official documents, with EFIN (Electronic Filing Identification Number) required for all electronic submissions, correspondence, and account-related activities.

Corporate Income Tax: The Foundation of Business Taxes Bali

For the 2025 fiscal year, the general corporate income tax (PPh Badan) rate in Indonesia is 22%, as reduced by Law No. 6 of 2023 from the previous 25%. This reduction provides significant savings for businesses operating in Bali.

Tax Rates and Structures

Standard Corporate Tax Rates:

• Standard Rate: 22% (may be reduced in certain cases)
• 19% for IDX-listed companies with ≥ 40% public float
• Reduced rates for qualifying small enterprises with annual revenues below IDR 50 billion, a 50% reduction on the taxable income rate may apply

SME Benefits and Incentives

SME reliefs include 0.5% PP 55/2022 final tax for new entities and 50% taxable-income discount for revenue < IDR 4.8 billion. This preferential treatment makes Bali particularly attractive for startups and small businesses.

Important Limitation: A company loses the right to the preferential tax once it crosses the income threshold of 4.8 billion IDR within the calendar year, switching to Corporate Income Tax PPh25/29 starting January 1st of the following year.

Value Added Tax (VAT): Navigating the 2025 Changes

Since January 1, 2025, Indonesia’s statutory VAT rate is 12%, but most domestic transactions are still billed at an effective 11% because the taxable base (DPP) is multiplied by 11⁄12 whenever Luxury-Goods Tax (PPnBM) does not apply.

VAT Obligations for Bali Businesses

Key VAT Requirements:

• 11% VAT if yearly turnover exceeds IDR 4.8 billion
• Value Added Tax is due no later than the end of the month immediately following the end of the tax period
• Enhanced e-Faktur controls for transaction verification
• Mandatory digital documentation through CoreTax

VAT Exemptions and Special Cases

Certain essential goods and services, such as basic food products and financial services, are exempt. Businesses must carefully evaluate their service offerings to determine VAT applicability.

Revolutionary E-Commerce Tax Regulations (PMK 37/2025)

PMK 37/2025 became effective on July 14, 2025, appointing electronic trading system organizers as Income Tax collectors and mandating online marketplace platforms to withhold Article 22 Income Tax on income earned by domestic sellers through electronic transactions.

Impact on Bali’s Digital Economy

This regulation particularly affects Bali’s thriving e-commerce sector, including:

• Online marketplaces and platforms
• Digital service providers
• Tourism booking platforms
• Local artisan selling platforms

Compliance Requirements:

• Platform operator registration as withholding agents
• Monthly tax collection and reporting
• Enhanced seller verification processes
• Automated tax calculation systems

Regional Tax Considerations Specific to Bali

Bali implements several regional taxes that affect business operations, particularly in the hospitality and tourism sectors.

Regional Tax on Restaurants and Hotels (PB1)

In Badung Regency in Bali, the following rates apply: 10% on hospitality services such as hotels, short-term rental housing, and restaurants. This directly impacts Bali’s core tourism industry.

Recent Developments: At the end of 2023, the Badung Regency Government announced they would increase the PB1 tax to 40% in certain industries in 2024. However, this new tax rate has not yet been implemented due to backlash from business owners.

Property Tax (PBB) for Business Properties

Indonesia imposes an annual regional tax called Pajak Bumi dan Bangunan (PBB) on property owners, with rates typically ranging from 0.5% to 2% of the property’s taxable value per year.

In 2022, the Indonesian government increased the PBB rate to 0.5%, with rates calculated based on NJOP (Nilai Jual Objek Pajak) and NJKP values.

Withholding Tax Obligations

Indonesian companies become withholding agents whenever they pay specific kinds of income to vendors, contractors, or foreign parties.

Withholding Tax Process

Compliance Steps:

1. Identify the article before making payment
2. Collect supporting documents (invoices, contracts, CoR for PPh 26)
3. Withhold and pay the tax no later than the 15th of the month after payment
4. Submit the monthly return (SPT Masa) via CoreTax by the 20th
5. Issue a withholding certificate to the vendor or foreign recipient

Rates for Foreign Payments

Tax treaty benefits may apply under Double Tax Avoidance Agreements (DTA) between Indonesia and the investor’s home country, with WHT on royalties potentially reduced to as low as 10%.

Special Considerations for Foreign Investors

Foreign businesses operating in Bali through PT PMA (Foreign Investment Companies) face specific tax obligations and opportunities.

Tax Residency and Compliance

Foreign investors who reside in Indonesia for more than 183 days within a 12-month period are subject to Indonesian personal income tax, with progressive rates ranging from 5% to 35% depending on income levels.

Non-Resident Taxation: Non-residents are taxed at a flat rate of 20% on Indonesian-sourced income.

Territorial Tax Benefits

The Omnibus Law added a provision stipulating that foreigners who become domestic tax subjects can be taxed only on Indonesian-sourced income if they meet certain skill requirements, available for the first four years of residency.

Global Minimum Tax Implementation

PMK-136 took effect on January 1, 2025, implementing the Global Anti-Base Erosion (GloBE) rules in Indonesia using the OECD framework. This affects multinational enterprises operating in Bali with global revenue exceeding EUR 750 million.

Compliance Requirements

New Reporting Obligations:

• Annual GloBE Information Return (GIR)
• Enhanced transfer pricing documentation
• Country-by-country reporting requirements
• Qualified Domestic Minimum Top-up Tax (QDMTT) calculations

Essential Tax Services Bali Businesses Need

Given the complexity of the evolving tax landscape, professional tax services have become indispensable for businesses operating in Bali.

Core Tax Service Requirements

Monthly Obligations:

• VAT return preparation and submission
• Withholding tax calculations and payments
• Payroll tax management (PPh 21)
• Monthly bookkeeping and reconciliation

Annual Requirements:

• Corporate income tax return preparation
• Annual financial statement compilation
• Tax planning and optimization strategies
• Audit support and documentation

Specialized Services for Bali Businesses

Tourism Industry Support:

• Regional tax compliance (PB1)
• Foreign guest tax documentation
• Multi-currency transaction handling
• Seasonal business tax planning

E-Commerce Compliance:

• PMK 37/2025 implementation support
• Platform integration for automatic tax collection
• Cross-border transaction tax planning
• Digital documentation systems

Technology Integration and Compliance

The CoreTax system requires businesses to adapt their financial processes for digital compliance.

System Requirements

Companies should verify that their financial software is compatible with CoreTax and enhance cybersecurity measures to protect sensitive tax data.

Implementation Checklist:

• Financial software integration with CoreTax
• Electronic filing system setup (EFIN)
• Digital signature and seal implementation
• Multi-factor authentication configuration
• Automated backup and security protocols

Training and Support

Finance and tax teams should undergo comprehensive training to navigate the new system efficiently and maintain regulatory compliance.

Penalties and Compliance Risks

Understanding the penalty structure is crucial for maintaining compliance in Bali’s tax system.

Financial Penalties

Non-compliance with tax regulations can result in severe penalties ranging from financial fines to imprisonment, with penalties for delayed tax reporting ranging from IDR 100,000 up to IDR 1,000,000.

Late filing may result in penalties of IDR 100,000 for individuals, with accuracy being crucial as errors can lead to audits or additional fines.

Criminal Liability

Failing to withhold triggers interest and fines, costs that are non-deductible under Article 9(1). Businesses must maintain strict compliance calendars to avoid these penalties.

Strategic Tax Planning for Bali Businesses

Effective tax planning goes beyond mere compliance, focusing on optimization and strategic positioning.

Annual Tax Planning

Key Strategies:

• Income deferral and acceleration planning
• Expense timing optimization
• Investment incentive utilization
• Double taxation treaty benefits
• Regional tax credit opportunities

International Tax Considerations

Cross-Border Planning:

• Transfer pricing documentation
• Thin capitalization rules compliance
• Controlled Foreign Corporation (CFC) regulations
• Anti-treaty shopping provisions
• Mutual Agreement Procedures (MAP)

Future Outlook: What to Expect

The Bali tax system will continue evolving with digitalization and international compliance requirements.

Upcoming Changes

Expected Developments:

• Further VAT rate standardization
• Enhanced digital reporting requirements
• Expanded e-commerce tax coverage
• Strengthened international tax cooperation
• Additional SME support measures

Preparation Strategies

Business Readiness:

• Regular system updates and testing
• Continuous staff training programs
• Enhanced documentation procedures
• Proactive compliance monitoring
• Strategic advisor engagement

Why Professional Tax Services Matter More Than Ever

Indonesian accountants that you can hire in-house typically lack formal education in taxation, or they may only have knowledge of specific taxes, as courses leading to tax certifications provide limited scope of knowledge.

The WBS Global Support Advantage

Professional tax services Bali businesses trust provide:

Comprehensive Expertise:

• Multi-jurisdictional tax knowledge
• Industry-specific experience
• Technology integration support
• Regulatory update monitoring
• Strategic planning capabilities

Risk Management:

• Compliance monitoring systems
• Penalty avoidance strategies
• Audit support and representation
• Documentation management
• Contingency planning

Conclusion: Navigating Success in Bali’s Tax Environment

The Bali tax system in 2025 presents both opportunities and challenges for businesses. The digital transformation through CoreTax, combined with evolving e-commerce regulations and international compliance requirements, demands sophisticated tax management approaches.

Success requires more than understanding individual tax obligations—it demands integrated strategies that align tax compliance with business objectives. Professional tax services Bali expertise ensures businesses can focus on growth while maintaining full compliance with Indonesia’s complex tax environment.

Key Takeaways:

• Digital compliance is now mandatory through CoreTax
• E-commerce businesses face new withholding obligations
• SME benefits provide significant opportunities for qualifying businesses
• Regional taxes add complexity for tourism-related businesses
• Professional support is essential for navigating compliance requirements

For businesses serious about success in Bali, investing in professional tax services isn’t just recommended it’s essential for sustainable growth in Indonesia’s dynamic market environment.