Companies operating in Indonesia must maintain bookkeeping records that support their financial statements and tax filings. The records generally need to show the company’s assets, liabilities, equity, income, expenses, and other information needed to calculate its Indonesian tax obligations.
What Accounting Records Must an Indonesian Company Maintain?
Depending on the company’s activities, these records can include general ledgers, journals, bank records, invoices, contracts, fixed-asset records, payroll information, accounts receivable and payable, and supporting documents for transactions.
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The accounting records are also used to prepare the company’s financial statements, including its balance sheet and profit and loss statement.
Entries in the accounting system may need to be supported by invoices, contracts, bank records, and other documents during a tax examination or financial audit.
What Language and Currency Must Be Used?
Indonesian tax rules generally require bookkeeping to be maintained in Bahasa Indonesia and Indonesian Rupiah (IDR).
Taxpayers can maintain bookkeeping in English and IDR under the applicable notification procedure. Certain taxpayers, including qualifying PT PMAs, can also maintain tax bookkeeping in English and US dollars (USD) if they meet the requirements and obtain the required approval.
A foreign-owned company should not assume that using USD for its management accounts automatically allows it to use USD for Indonesian tax bookkeeping.
How Long Must Accounting Records Be Kept?
Books, records, and documents used as the basis for bookkeeping and tax reporting generally need to be retained for 10 years in Indonesia.
This includes records supporting income, expenses, assets, liabilities, tax calculations, and transactions reported in tax returns.
How Does Bookkeeping Connect With Tax Reporting?
Companies generally prepare their financial statements using the applicable Indonesian Financial Accounting Standards. Where Indonesian tax treatment differs from the accounting treatment, fiscal adjustments are made to calculate taxable income.
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Bookkeeping also supports monthly and annual tax obligations. Depending on the company’s activities, the records may need to support corporate income tax, withholding taxes, payroll taxes, and VAT.
When Must Financial Statements Be Audited?
Not every Indonesian company is required to undergo a statutory financial audit, and being a foreign-owned company does not by itself make an audit mandatory.
Mandatory audits apply to specified companies, including publicly listed companies, state-owned companies, companies that collect or manage public funds, public debt issuers, and companies with assets and/or annual turnover of at least IDR 50 billion (USD 3 million). Certain regulated industries can also have separate audit requirements.
What Changes for Foreign-Owned Companies?
A foreign-owned company, or PT PMA, is generally subject to the same core Indonesian bookkeeping and tax-record requirements as other Indonesian limited liability companies.
A PT PMA may have foreign-currency transactions, shareholder funding, intercompany charges, royalties, management fees, cross-border service payments, or transactions with overseas related parties. These transactions must be recorded correctly and may also create withholding tax or transfer pricing obligations.
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Where the applicable conditions are met, related-party transactions may also require transfer pricing documentation.
PT PMAs may also have separate investment-reporting obligations, including LKPM reports. These are distinct from bookkeeping requirements, but the information reported should be supported by consistent company records.
Keep Your Bookkeeping Compliant With MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with bookkeeping, financial statements, tax reconciliation, accounting records, and audit preparation. Contact us at info@mapresourcesindonesia.com.
