A dormant foreign-owned company in Indonesia does not automatically need to run payroll simply because it remains incorporated. For a PT PMA, payroll obligations depend on whether employees, directors, or other individuals continue to receive remuneration.
What Happens If Employees Remain During the Dormant Period?
If employees remain employed during a period of inactivity, the company must continue processing their payroll even if it has no revenue.
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This includes calculating PPh 21, the Indonesian income tax withheld by employers from employee remuneration, and maintaining the records supporting the company’s payroll tax reporting. Applicable BPJS social security obligations also continue while employees remain covered.
For example, a PT PMA stops commercial activity for six months but retains two employees earning IDR 20 million (USD 1,130) each per month. The company must continue processing their salaries, PPh 21, and applicable BPJS contributions despite generating no revenue.
Employees also retain the employment rights that apply to them while their employment relationships continue.
What If a Director Remains but Receives No Remuneration?
A director’s appointment does not by itself create taxable remuneration.
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If a director receives salary, fees, allowances, honoraria, or other remuneration from the Indonesian company, the payment may be subject to PPh 21 for an Indonesian tax resident or PPh 26, the Indonesian withholding tax applicable to certain income received by non-resident taxpayers, depending on the director’s tax status and the payment involved.
If the director receives no remuneration from the company, there is no director remuneration on which PPh 21 or PPh 26 withholding arises.
What Changes When All Employees Have Been Terminated?
A PT PMA that terminates all its employees no longer has the payroll obligations arising from those employment relationships. The company must first complete the applicable termination procedures and settle the employees’ statutory entitlements.
The PT PMA itself continues to exist. It may still need to maintain accounting records and submit an annual corporate income tax return, while other tax obligations depend on transactions undertaken during the dormant period.
Does Zero Payroll Mean There Are No Monthly Tax Obligations?
A PT PMA without an active employee payroll can still have Indonesian tax reporting obligations.
Unsure which filings remain during a dormant period? Email MAP Resources Indonesia at info@mapresourcesindonesia.com
For example, a dormant company may have no employees but continue paying rent or professional fees. Those transactions can create withholding or other tax obligations even though there is no employee payroll.
The company should also distinguish between having no PPh 21 or PPh 26 payable and having no reporting requirement. Indonesian rules can still require a PPh 21/26 withholding agent to submit a monthly return when the amount withheld is nil or the applicable withholding rate is 0%, depending on the circumstances.
Manage Dormant-Period Payroll with MAP Resources Indonesia
MAP Resources Indonesia can assess which payroll obligations continue while your Indonesian company is inactive. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
