PPh Article 26 in English: what Indonesia withholds from a non-resident

For the foreign shareholder of a PT PMA, the foreign lender, the foreign consultant — and what it does not catch: a foreigner's sale of land.

Written from the Indonesian originals · Editor-reviewed · Law as read on 2026-10-10

By the balipropertyguide.com editorial team · Published 2026-10-10 · Last reviewed 2026-10-10 · 6 min read

4 primary sources cited on this page. How we check what is on this site

Article 26, the articles a foreign owner or shareholder meets

A foreigner who owns a Bali villa through a company, lends to one, or is paid by one is usually a non-resident for Indonesian tax. Article 26 is how Indonesia taxes that person: the Indonesian payer withholds a flat percentage of the gross payment before it leaves.

Article	What it decides	Used on
Income Tax Law art. 26(1), as amended by Law 6/2023 art. 111	Payments to non-residents are withheld at 20% of the gross amount.	—
Income Tax Law art. 26(1)(a)-(h), as amended by Law 6/2023 art. 111	On: dividends; interest; royalties, rent and other income from the use of property; fees for services, work and activities; prizes; pensions; swap premiums; and gains from debt forgiveness.	—
Income Tax Law art. 26(1), as amended by Law 6/2023 art. 111	Withheld by government bodies, domestic taxpayers, event organizers, permanent establishments or other representatives of foreign companies.	—
Income Tax Law art. 26(1a), as amended by Law 6/2023 art. 111	The treaty country is the country where the foreign taxpayer that actually benefits from the income (the beneficial owner) lives or is domiciled.	—
Income Tax Law art. 26(2), as amended by Law 6/2023 art. 111	Sales of assets in Indonesia: 20% of the estimated net income.	—
Income Tax Law art. 26(4), as amended by Law 6/2023 art. 111	A branch's after-tax profit: 20%, unless reinvested in Indonesia.	—
Income Tax Law art. 26(5), as amended by Law 6/2023 art. 111	The withholding is final, except where the foreign person or company becomes a domestic taxpayer or permanent establishment, and for certain income of a permanent establishment.	—
Income Tax Law art. 32A, as amended by Law 7/2021 art. 3	Treaties: the government may make agreements with partner countries or jurisdictions on avoiding double taxation and preventing evasion, base erosion and profit shifting, exchange of information, collection assistance and other cooperation.	—

Who is a non-resident

A non-resident includes a foreign national in Indonesia for not more than 183 days in 12 months (Income Tax Law art. 2(4)(b), as amended by Law 6/2023 art. 111); a resident is an individual, Indonesian or foreign, who lives in Indonesia, is in Indonesia more than 183 days in 12 months, or is in Indonesia in a tax year intending to live there (Income Tax Law art. 2(3)(a), as amended by Law 6/2023 art. 111). The line is about presence and intention, not nationality. A non-resident who works through a fixed place in Indonesia may instead have a permanent establishment — which can be a place of management, a branch, a representative office, an office, a project, services by employees for more than 60 days in 12 months, a dependent agent, or servers used for business through the internet, among others (Income Tax Law art. 2(5), as amended by Law 6/2023 art. 111).

What is withheld, and by whom

The rate is 20% of the gross amount (Income Tax Law art. 26(1), as amended by Law 6/2023 art. 111), on dividends; interest; royalties, rent and other income from the use of property; fees for services, work and activities; prizes; pensions; swap premiums; and gains from debt forgiveness (Income Tax Law art. 26(1)(a)-(h), as amended by Law 6/2023 art. 111). The withholder is the payer: government bodies, domestic taxpayers, event organizers, permanent establishments or other representatives of foreign companies (Income Tax Law art. 26(1), as amended by Law 6/2023 art. 111).

Payment from Indonesia to a non-resident	Withholding	Article
Dividend from a PT PMA to a foreign shareholder	20% of the gross amount	26(1)(a)
Interest on a shareholder loan to a PT PMA	20% of the gross amount	26(1)(b)
Fees for services paid to a foreign consultant	20% of the gross amount	26(1)(d)
Sale of non-land assets in Indonesia	20% of the estimated net income	26(2)
Branch profit after tax, not reinvested	20%, unless reinvested in Indonesia	26(4)

All as amended by Law 6/2023 art. 111; treaty reductions not shown. The withholding is final, except where the foreign person or company becomes a domestic taxpayer or permanent establishment, and for certain income of a permanent establishment (Income Tax Law art. 26(5), as amended by Law 6/2023 art. 111).

Treaties and the beneficial owner

The government may make agreements with partner countries or jurisdictions on avoiding double taxation and preventing evasion, base erosion and profit shifting, exchange of information, collection assistance and other cooperation (Income Tax Law art. 32A, as amended by Law 7/2021 art. 3). For article 26, the treaty country is the country where the foreign taxpayer that actually benefits from the income (the beneficial owner) lives or is domiciled (Income Tax Law art. 26(1a), as amended by Law 6/2023 art. 111) — a holding company in a third country that merely passes the dividend on is not the test. We have not read individual treaties, so no treaty rate appears on this site.

Land and buildings stay in their own regime

A non-resident’s sale of assets in Indonesia is taxed at 20% of the estimated net income, except income regulated in art. 4(2) (Income Tax Law art. 26(2), as amended by Law 6/2023 art. 111). Transfers of land and buildings are in that list (Income Tax Law art. 4(2)(d), as amended by Law 7/2021 art. 3), so on our reading a foreign seller pays the transfer tax of 2.5% (PP 34/2016 art. 2(1)(a)) rather than article 26(2). Article 4(2). Taxes on a sale.

One share sale is caught directly: a sale of shares covered by the anti-avoidance rule in article 18(3c) is withheld at 20% of the estimated net income (Income Tax Law art. 26(2a), as amended by Law 6/2023 art. 111). Selling the company that holds a villa is not the same transaction as selling the villa, and the tax follows the transaction.

Which law last wrote each article

Article	Subject	Last written by
2	Who is a taxpayer, residence, permanent establishment	Law 6/2023 art. 111
4	What income is, final-tax income, exempt income	Law 7/2021 art. 3
17	Rates	Law 7/2021 art. 3
26	Withholding on payments to non-residents	Law 6/2023 art. 111
31E	Rate cut for companies up to IDR 50bn turnover	Law 36/2008
32A	Tax treaties	Law 7/2021 art. 3

Law 36/2008 took effect on 1 January 2009 (Law 36/2008, closing article); Law 7/2021 was enacted on 29 October 2021 (Law 7/2021, signature block). There is no official consolidated text on JDIH BPK. Each article above is read in the amending law named, which reproduces it in full.

This is commentary, not tax advice. Treaty rates and the Finance Minister regulations under art. 26(3)-(4) are not on this page.

Questions on this page

What is PPh Article 26?

The withholding tax on income paid to non-residents without a permanent establishment in Indonesia: 20% of the gross amount of dividends, interest, royalties, rent, service fees and other listed income, withheld by the Indonesian payer (Income Tax Law art. 26(1), as amended by Law 6/2023).

Is the 20% reduced under a tax treaty?

The law lets the government make double-tax agreements (art. 32A) and ties the treaty country to the beneficial owner's residence (art. 26(1a)). The treaty rate depends on the treaty; we have not read the individual treaties.

I am a foreign shareholder in a PT PMA. What is withheld on my dividend?

20% of the gross dividend if you are a non-resident (art. 26(1)(a)), unless a treaty with your country of residence reduces it. If you are an Indonesian tax resident, art. 26 does not apply; see the resident rules.

Does a non-resident pay art. 26 tax when selling a Bali villa?

Art. 26(2) covers non-residents' sales of assets in Indonesia at 20% of estimated net income, but excludes income regulated in art. 4(2), which includes transfers of land and buildings. Our reading: the land-and-building transfer tax applies instead.

Sources cited on this page

Every rule above was read in the Indonesian original on 20 September 2026, not from an English summary. How we check this.