Indonesia does not impose a single tax called an exit tax. The tax cost of leaving an Indonesian investment depends on whether the investor sells shares, sells the company’s assets, liquidates the company, or transfers ownership through an offshore structure.
What Tax Applies When a Foreign Investor Sells Shares?
When a non-resident shareholder sells shares in an unlisted Indonesian company, Indonesian domestic rules generally impose final Article 26 income tax based on an estimated net income equal to 25% of the selling price. Applying the 20% Article 26 rate produces an effective tax of 5% of the gross selling price.
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This treatment should not be applied without first checking whether a tax treaty changes Indonesia’s taxing rights. For a seller resident in a country that has a tax treaty with Indonesia, Indonesian withholding applies only if the applicable treaty allows Indonesia to tax the share sale.
What Changes When the Company Sells Its Assets?
Any gain from the asset sale can be included in the company’s taxable income and become subject to Indonesian corporate income tax. The tax treatment depends on the asset being transferred and the applicable tax rules.
VAT can also apply to taxable supplies made as part of the transaction. Land and building transfers are subject to separate tax rules and should be assessed independently rather than treated as an ordinary asset disposal.
The company must then determine how any remaining proceeds will be distributed to its foreign shareholder. This can create a separate tax question from the tax arising on the original asset sale.
What Happens When an Indonesian Company Is Liquidated?
Liquidation may be used when the investor wants to close the Indonesian company rather than transfer it to another owner.
Before remaining assets can be distributed, the company must deal with its liabilities and complete the applicable corporate, tax, employment, and licensing procedures.
The tax treatment of a liquidation distribution depends on what the shareholder receives. Under Indonesian income tax rules, the portion of a liquidation payment exceeding the shareholder’s paid-up capital or original investment can be treated as a dividend. The entire amount distributed should not automatically be treated as dividend income.
For a foreign shareholder, the portion treated as dividend income can be subject to Indonesian withholding tax, subject to any relief available under an applicable tax treaty.
Can an Offshore Share Sale Be Taxed in Indonesia?
Selling an offshore holding company does not automatically prevent Indonesia from taxing a transaction connected with an Indonesian investment.
Exiting through an offshore holding structure? Email info@mapresourcesindonesia.com to review the Indonesian tax exposure
Indonesia has rules covering certain transfers of shares in offshore companies used to hold shares in Indonesian companies. If the conditions are met, Indonesia can treat the offshore share sale as a transfer of the underlying Indonesian investment.
How Can a Tax Treaty Affect the Exit?
For a share sale, the relevant capital gains rules determine whether Indonesia has the right to tax the disposal. Different treaties can apply different conditions, including rules relating to substantial shareholdings or companies whose value mainly comes from land or other immovable property.
Treaty benefits are not automatic. Indonesia’s current treaty procedure is governed by PMK 112/2025, and qualifying non-residents generally use the current Form DGT to claim treaty benefits.
What Should Be Checked Before Repatriating Exit Proceeds?
The documents required to remit exit proceeds overseas depend on how the transaction was completed. These can include the share or asset sale agreement, evidence of tax payment or withholding, corporate approvals, accounting records, and documents showing where the funds came from.
Preparing an Indonesian business for divestment? MAP Resources Indonesia can review its tax and accounting position. Email info@mapresourcesindonesia.com
Where the Indonesian company itself is being closed, its outstanding tax filings, LKPM reporting, licensing matters, liabilities, and corporate closure procedures may also need to be completed.
Banks can request transaction and supporting documents when processing a cross-border transfer.
Plan Your Exit With MAP Resources Indonesia
MAP Resources Indonesia assists foreign investors with tax and accounting reviews, transaction preparation, tax treaty documentation, and the Indonesian compliance requirements connected with divestment and business closure. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
