Many expatriates and foreign investors are unaware that they may need to obtain a Tax Identification Number (NPWP) in Indonesia. Having an NPWP is not just a legal obligation — it’s also an essential step toward ensuring tax compliance, which makes it easier to live, work, or run a business in Indonesia.
For expats and investors, understanding when tax obligations begin is a valuable long-term investment that helps prevent potential legal and financial risks in the future.
1) What Is an NPWP?
The NPWP (Nomor Pokok Wajib Pajak) is the official tax identification number issued by Indonesia’s Directorate General of Taxes (DJP) for any individual or entity with tax obligations in the country.
By holding an NPWP, a foreign expatriate or investor is legally recognized as a registered taxpayer within the Indonesian tax system, with the same rights and obligations as Indonesian citizens.
Beyond proving tax compliance, the NPWP is also a key administrative requirement for many essential activities, such as:
- Opening a local bank account
- Applying for a work or investor visa
- Conducting official business transactions in Indonesia
Without an NPWP, these processes may be delayed or even rejected.
2) When Are Foreigners Required to Have an NPWP?
According to Indonesia’s latest Income Tax Law (Law No. 7 of 2021), expatriates and foreign investors are considered domestic tax residents if they meet one of the following criteria:
- They stay in Indonesia for more than 183 days within a 12-month period, or
- They show an intention to reside permanently in Indonesia, proven by holding a Limited Stay Permit (ITAS), Permanent Stay Permit (ITAP), a permanent employment contract, or a long-term investment plan.
Once classified as a domestic taxpayer, the individual must register for an NPWP.
3) How to Apply for an NPWP as a Foreigner
The process of obtaining an NPWP has become simpler thanks to Indonesia’s CoreTax online system. Foreigners can apply independently or through a licensed tax consultant for faster, smoother processing.
Required documents include:
- A valid passport
- ITAS or ITAP (residence permit)
- Active Indonesian email and phone number
- Domicile address in Indonesia
4) Benefits of Having an NPWP for Foreigners
Owning an NPWP is not only about legal compliance — it also provides financial advantages for expatriates and foreign investors in Indonesia.
One key benefit is a lower Income Tax (PPh) Article 21 rate. Without an NPWP, Article 21 tax withholding can be up to 20% higher, especially for foreigners earning income from Indonesian companies.
Additionally, having an NPWP can help avoid the 11% Value Added Tax (VAT) imposed on foreign service income (Jasa Luar Negeri).
Key Takeaway
For expatriates and foreign investors, obtaining an NPWP is a smart move — it simplifies administrative processes, reduces tax burdens, and ensures smooth business operations in Indonesia.
Right Now Consulting is tax consultant in Bali who is focusing to help individuals and businesses with their Accounting and Taxation matters. Right Now Consulting provides accounting / bookkeeping, tax consultant / taxation, and company formation / incorporation / setup services (CV / PT / PT PMA).
