Branch Profit Tax in Indonesia: Rate, Treaty Rules, and Reinvestment

Branch profit tax in Indonesia is the Article 26(4) income tax charged on a Permanent Establishment’s taxable income after Indonesian income tax. The domestic rate is 20%. A tax treaty can change that rate, while PMK 14/PMK.03/2011 can exempt the after-tax income when the entire amount is reinvested in Indonesia under the regulation’s conditions.

What laws govern branch profit tax in Indonesia in 2026?

Several rules work together. The Income Tax Law sets the tax itself, PMK 14 covers the reinvestment facility, PMK 112 governs treaty claims in 2026, and DJP rules and guidance cover the reporting process.

1. Law No. 7 of 1983 on Income Tax, as last amended by Law No. 6 of 2023. Article 17(1)(b) sets a 22% rate for resident corporate taxpayers and Permanent Establishments. Article 26(4) charges 20% on a BUT’s taxable income after income tax.
2. PMK 14/PMK.03/2011. This regulation sets the BPT reinvestment exemption. Article 5 also directs qualifying taxpayers to the rate in the applicable tax treaty. The Ministry of Finance legal database still lists PMK 14 as in force.
3. PMK 112 Tahun 2025. Effective from 31 December 2025, this regulation governs how Indonesia’s tax treaties are applied, including treaty residence, Form DGT or qualifying residence certification, anti-abuse requirements, and the conditions for claiming treaty benefits.
4. PER-11/PJ/2025. DJP uses this regulation as part of the Coretax reporting framework. The current BPT guide also points to its appendix for a BUT that has both final and non-final income.
5. DJP’s current Branch Profit Tax guide. The guide currently linked from DJP’s annual-return page is Version 20260721. It covers the BPT base, due time, reinvestment reporting, BPNR, treaty input, and SPT PPh Unifikasi. DJP’s page marks the BPT material as updated on 31 August 2026.

DJP notes that its system instructions can change as Coretax develops and tax rules change. Check the current guide again when you prepare the filing.

What is the branch profit tax rate in Indonesia in 2026?

The domestic BPT rate is 20% of the BUT’s taxable income after Indonesian income tax. Article 26(4) of the Income Tax Law provides the rate, and DJP’s current BPT guide uses the same rule.

BPT and corporate income tax use different bases. The BUT first works out the Indonesian income tax due. BPT then applies to the taxable income that remains after that tax.

A treaty can modify the domestic rate when the foreign head office qualifies for treaty benefits. The treaty claim also has to meet the 2026 requirements in PMK 112 Tahun 2025.

How do you calculate branch profit tax in Indonesia?

Start with the BUT’s fiscal taxable income, then calculate the Indonesian income tax that applies to it. The example below assumes IDR 10 billion of taxable income under the ordinary non-final corporate income tax regime, with no treaty reduction, no qualifying reinvestment exemption, and no special final-income-tax treatment affecting the calculation.

The combined result is 37.6% of the original taxable income in this example. It is an arithmetic result under the assumptions above, not a statutory combined rate and not a universal effective rate for every BUT.

The first tax layer has its own rules and fiscal adjustments. See our guide to the corporate income tax rate in Indonesia for that calculation.

What if the BUT has both final and non-final income?

The simple example above does not cover that case. DJP’s current 2026 BPT guide gives a separate computation for a BUT with income subject to final tax and income subject to non-final tax, based on the appendix to PER-11/PJ/2025.

In that situation, do not apply 22% to all commercial income. DJP’s example first works out the fiscal taxable income, then combines the final income tax due with the income tax due on the BUT’s non-final income. The after-tax amount used for BPT comes after that total tax figure.

If your BUT has both types of income, build the BPT calculation from the applicable final and non-final tax treatment rather than from the simple table above.

Does branch profit tax depend on sending profit overseas?

Actual remittance to the foreign head office is not an element of the statutory BPT base under Article 26(4). The provision taxes the BUT’s taxable income after Indonesian income tax, subject to the reinvestment exception and any applicable treaty treatment.

DJP’s current BPT guide states that BPT becomes due before the annual corporate income tax return is submitted. The due time should not come before the financial-statement date because the final taxable income must first be known.

Keeping the cash in Indonesia does not create an exemption by itself. The business needs a valid treaty position or must meet the reinvestment conditions in PMK 14.

How can a tax treaty modify or reduce branch profit tax in Indonesia?

An applicable tax treaty can change Indonesia’s domestic 20% BPT rate when the foreign head office is entitled to treaty benefits. PMK 14/PMK.03/2011 Article 5 directs the BPT rate to the rate provided by the applicable treaty.

For treaty claims in 2026, PMK 112 Tahun 2025 also applies. The regulation covers treaty residence, Form DGT or qualifying residence certification, and anti-abuse tests. Depending on the treaty and the income involved, those tests can include beneficial-owner requirements, limitation-on-benefits provisions, or a principal-purpose test.

DJP’s current BPT Coretax guide then shows the administrative step. A taxpayer using the treaty facility selects the SKD option in the BPNR workflow and enters the registered SKD WPLN receipt information for the relevant period. That screen records the claim. It does not replace the legal entitlement and documentation requirements under PMK 112.

Rates vary by treaty partner and may be affected by the treaty text, protocol, or another applicable instrument. Use the Indonesia tax treaty country list as a starting point, then confirm the treaty that applies to the head office.

For the document and Coretax side of the claim, see our guide to using tax treaties in Coretax.

Example with a hypothetical 10% treaty BPT rate

Using the earlier IDR 10 billion example, the after-tax taxable income is IDR 7.8 billion. If a valid treaty position gives a 10% BPT rate, BPT would be IDR 780 million. Together with IDR 2.2 billion of corporate income tax, the combined amount would be IDR 2.98 billion.

The 10% figure is only an illustration. Use the rate in the treaty that applies to the foreign head office and check that the treaty requirements are met.

Can reinvestment exempt a Permanent Establishment from BPT?

Yes, if the BUT meets the conditions in PMK 14/PMK.03/2011. Article 1(3) makes the amount test clear: the entire taxable income after income tax must be reinvested in Indonesia.

PMK 14 recognizes four forms of reinvestment:

1. Equity in a newly established Indonesian company, with the BUT participating as a founder or co-founder.
2. Equity in an existing Indonesian company, with the BUT becoming a shareholder.
3. Fixed assets used by the BUT for its business or activities in Indonesia.
4. Intangible assets used by the BUT for its business or activities in Indonesia.

Simply leaving the money in an Indonesian bank account does not match one of those investment forms. The business needs to test the actual investment against PMK 14.

Does partial reinvestment qualify for a partial BPT exemption?

PMK 14 does not provide a proportional BPT exemption merely because part of the after-tax taxable income is reinvested. Article 1(3) conditions the exemption on reinvestment of the entire after-tax taxable income in an eligible form.

Suppose the BUT has IDR 7.8 billion of taxable income after income tax and plans to reinvest IDR 4 billion. That plan does not meet the whole-income condition in Article 1(3). The business should not treat IDR 4 billion as automatically exempt on a proportional basis.

What conditions must a BPT reinvestment meet?

PMK 14 sets separate tests for the amount, timing, notification, business activity, and holding period.

1. Reinvest the entire after-tax taxable income. Partial reinvestment does not satisfy the Article 1(3) exemption test.
2. Complete the reinvestment by the end of the following tax year. PMK 14 sets this deadline by reference to the year in which the income was earned.
3. Notify DJP of the investment form and realization. PMK 14 creates the notification requirement. DJP’s current administrative guide maps that reporting to attachment L12-B in the annual corporate income tax return in Coretax.
4. Meet the activity and holding rules. For a new company, the company must start active business within one year after establishment, and the BUT cannot transfer the investment for at least two years after commercial production starts. Equity in an existing active Indonesian company carries a three-year holding period. Fixed and intangible assets carry a three-year holding period from acquisition.

The legal requirement comes from PMK 14. L12-B is the current DJP reporting implementation, so keep the regulation and the Coretax interface conceptually separate.

How is branch profit tax reported in Coretax in 2026?

DJP’s current BPT guide, Version 20260721, shows the administrative workflow below. These steps do not replace the substantive rules for BPT, treaty entitlement, or reinvestment relief.

1. Determine the BPT due time and tax period. DJP states that BPT becomes due before the annual corporate income tax return is submitted and should not become due before the financial-statement date. Select the BPNR tax period consistently with that due time.
2. Create a BPNR in eBupot. Select the BPT income object and enter the taxable income after tax as the tax base. If you use treaty treatment, the current guide shows the SKD facility and registered SKD WPLN receipt information.
3. Prepare SPT PPh Unifikasi. The issued BPNR is prepopulated into the return. Check the tax amount before payment and submission.
4. Report qualifying reinvestment in L12-B. DJP’s current guide uses this annual corporate return attachment for the form and realization of the reinvestment.

For the broader annual return process, see our guide to Coretax reporting for Permanent Establishments.

DJP warns that the screens and instructions can change as Coretax develops. Use the current DJP guide when you file rather than relying on an older screenshot or workflow.

What happens if BPT relief requirements are not met?

The result depends on the relief being claimed.

For reinvestment, PMK 14 states that if the relevant conditions cease to be met, the related after-tax taxable income becomes subject to Article 26(4) tax from the time that taxable income was earned. Tax sanctions can also apply under the relevant rules.

For treaty treatment, the taxpayer has to satisfy the applicable treaty and PMK 112 Tahun 2025. DJP’s BPT workflow also asks for the SKD information when the treaty facility is selected. A Coretax selection alone does not establish treaty entitlement.

Before filing, reconcile the BPT base with the corporate return and make sure the treaty or reinvestment documents support the same position.

How is BPT different from ordinary PPh Article 26?

BPT under Article 26(4) and ordinary Article 26 withholding can both involve a 20% domestic rate, but they tax different things. Mixing the two can lead to the wrong tax base and the wrong Coretax document.

For the separate withholding process, see our guide to reporting PPh 26 in Coretax.

What should a foreign business check before filing BPT?

Before you submit the BPT filing, make sure the number in Coretax can be traced back to the fiscal calculation and the documents supporting any relief.

• Reconcile the fiscal taxable income and Indonesian income tax with the annual corporate return.
• If final income is involved, use the applicable final and non-final computation rather than the simple 22% example.
• For treaty treatment, confirm the head office’s treaty residence, documentation, and PMK 112 requirements before using the treaty rate.
• For reinvestment, match the entire after-tax amount to an eligible investment and check the deadline and holding period.
• Make sure the BPNR, SPT PPh Unifikasi, annual return, L12-B, and supporting documents tell the same tax story.

If your BUT has a treaty claim, a reinvestment plan, mixed final and non-final income, or figures that do not reconcile cleanly, it is worth resolving those differences before submission. InvestinAsia’s tax compliance and reporting support can review the BPT calculation and the records behind it.