Banking, Money and Taxes in Indonesia

Banking for expats in Indonesia could be an exercise in patience, but once they become more accustomed to how things are done, it will become easier to navigate the financial side of life in Indonesia.

The procedures involved in the Indonesian banking system might seem a tad unconventional, particularly for those accustomed to Western banks’ digital swiftness. Nevertheless, Indonesia is steadily catching up, with mobile banking and online facilities emerging as standard features. As with everything in this vast archipelago, patience and perseverance pave the path to a smooth banking experience.

Money in Indonesia

The official currency in Indonesia is the rupiah (IDR), which is divided into 100 sen.

• Notes: 2,000 IDR; 5,000 IDR; 10,000 IDR; 20,000 IDR; 50,000 IDR and 100,000 IDR
• Coins: 100 IDR, 200 IDR, 500 IDR and 1,000 IDR

Banking in Indonesia

Many expats often wonder how to navigate the banking system in Indonesia, especially when they’re just starting. There are plenty of banks for them to choose from, both local and international. Expats can choose whether to open an account in rupiah or US dollars. Some other foreign currencies are also provided for. Savings accounts, cheque accounts, foreign exchange, debit cards and credit cards are all available in the country.

For many newcomers, understanding how to open a bank account in Indonesia can seem daunting, but the process is usually straightforward. Upon selection of the bank, an initial deposit is generally required. Once the account is open, online banking, mobile banking and a passbook, if required, are provided.

Most of the staff at international banks in Indonesia will be able to speak English. The documents required to open a bank account in Indonesia can vary but typically include proof of employment, passport and residence permit.

It’s recommended to prepare the following documents before opening an Indonesian bank account:

• Passport: Original and a photocopy of the applicant’s passport with at least six months’ validity.
• ITAS (Temporary Stay Permit Card): This permit indicates that the holder is allowed to stay in Indonesia. Both the original and a copy will be needed.
• Reference letter: A letter from the applicant’s employer or sponsor in Indonesia confirming their employment or sponsorship status.
• Proof of address: This could be a utility bill, rental agreement, or a letter from the employer confirming the residence address.

Although each bank has its own process, the following process is generally followed:

1. Selecting the bank: Research and choose a bank based on personal preferences, available services, and recommendations. Local and international banks are available, each offering various services.
2. Submitting documents: Hand over the necessary documents listed above. The bank representative might also request additional documents based on specific bank policies.
3. Verification: The bank will process and verify the submitted documents. This can take anywhere from a few hours to a few days, depending on the bank’s procedures and the completeness of the documentation provided.
4. Visiting the bank branch: While some preliminary steps might be taken online, a visit to the bank in person is typically required to finalise the account opening process.
5. Account activation: The bank account will be activated once verification is complete. The account holder will receive the banking instruments like a chequebook, debit card and access to online banking, if applicable.

It’s always prudent to check with the chosen bank beforehand to clarify any specific requirements. Given the dynamism of banking policies, being prepared can considerably simplify the account opening process.

See the Financial Services Authority of Indonesia’s website for banking procedures and regulations.

ATMs and credit cards

Indonesia’s ATM network is quite expansive, making cash withdrawals convenient. It’s worth noting that there’s often a withdrawal limit per transaction, usually set at 1,000,000 to 2,500,000 IDR, depending on the bank. Charges may apply for using an ATM outside one’s bank network.

Credit cards, notably Visa and MasterCard, are widely accepted in urban areas and tourist spots. However, it’s best to carry cash for more remote locations or smaller businesses. Also, it’s always a good practice to inform one’s bank of travel plans to avoid any unexpected account freezes.

Taxes in Indonesia

Residents of Indonesia are taxed on their worldwide income, while non-residents are only taxed on their Indonesian income. Taxes for expats can be complex, so we advise hiring a tax professional familiar with local and global tax regulations to assist. 

Due to extensive social programmes and a high tax rate, the long and short is that high-earning expats should budget to pay about one-third of their income in taxes and contributions, not counting other taxes like VAT and LST.

Reductions and contributions

Employers in Indonesia are required to contribute 2 and 4 percent of an employee's income to pension and healthcare respectively. Employees contribute 1 percent to each. Additionally, employers will contribute roughly 10 percent of the employee's salary to a social insurance scheme.

Personal income tax

Taxation in Indonesia is based on the principle of residency. Expats living and earning in Indonesia will need to understand their tax obligations, and it’s essential to file returns on time to avoid any penalties.

Expats who stay in Indonesia for more than 183 days in a 12-month period are considered tax residents of Indonesia. Income tax rates in Indonesia range from 5 to 35 percent for residents, depending on an individual’s net income. Non-residents, meaning foreigners who spend less than half of the year in Indonesia, are taxed at a flat rate of 20 percent of their Indonesian income.

Other taxes

Other than income tax, there are also additional taxes such as value-added tax (VAT) and luxury-goods sales tax that one might encounter. It’s prudent to keep abreast of these to avoid any pitfalls. VAT is a consumption tax imposed on most goods and services in Indonesia, and will usually be factored into products' prices on the shelf. From 2022, VAT has been set at 11 percent, and this is expected to rise to 12 percent from 2025.

Luxury-goods sales tax (LST) is applied to certain high-value items, including some real estate, automobiles and alcohol, among others. LST ranges from 10 percent to 125 percent, depending on the good.

For a comprehensive guide on the Indonesian taxation system, visit the Directorate General of Taxes website.