Foreign Director Tax in Bali: Status and Payment Types

Foreign director tax for a PT PMA in Bali is not determined solely by nationality or the director’s position. The company needs to review the individual’s tax residence, income type, work location, contractual relationship and applicable tax provisions.

A foreign director who becomes an Indonesian resident taxpayer may receive different treatment from a director who remains a nonresident. Salary, fees, benefits, expense reimbursements and shareholder distributions also need separate classification.

For a PT PMA managing hotels or villas in Bali, this review helps keep the director’s income administration separate from corporate tax obligations and company operating transactions.

How Is Foreign Director Tax for a Bali PT PMA Determined?

Begin by determining whether the director is an Indonesian resident or nonresident taxpayer for the relevant period.

Next, identify whether each payment is remuneration for employment or services, reimbursement of company expenditure, investment income or another transaction.

Minister of Finance Regulation No. 168 of 2023 provides for PPh Article 21 or Article 26 withholding on an individual’s employment, service or activity income according to the recipient category and tax status.

Do not process every payment to a foreign director under one tax category without examining its basis.

Determine the Foreign Director’s Tax Residence

Tax residence is a fundamental check before the company determines withholding on employment or service income.

Under PER-23/PJ/2025 on resident and nonresident tax status, a foreign individual may become an Indonesian resident taxpayer by residing in Indonesia, being present for more than 183 days within a twelve month period, or being present during a tax year with the intention to reside.

Review Physical Presence

The company can collect Indonesian entry and exit records, passport information, business travel records and other supporting documents to build the director’s presence history.

Article 4 of PER-23/PJ/2025 explains that presence may be intermittent and that part of a day counts as one day.

However, counting days is not sufficient in every situation because actual residence and intention to reside can also be relevant.

Review Residence and Intention to Reside

Useful evidence includes stay permits, employment agreements, accommodation records and information about the centre of personal and economic activities.

For example, a director may not yet have spent more than 183 days in Indonesia but have documents and circumstances indicating an intention to reside.

The status conclusion must reflect the overall facts and applicable rules, rather than relying only on visa validity or a job title.

PPh 21 or PPh 26 for a Foreign Director?

For employment income, the distinction between PPh 21 and PPh 26 relates to the recipient’s status and the nature of the income.

A Director Who Is an Indonesian Resident Taxpayer

If a foreign director is an Indonesian resident taxpayer and receives employment or service income within the scope of PPh 21 withholding, the company needs to determine the recipient category and appropriate calculation method.

The director’s title does not mean that every payment is calculated in the same way as a permanent employee’s income. Examine the employment relationship, regular payments, fees and other circumstances affecting classification.

A Director Who Is a Nonresident Taxpayer

If the director remains a nonresident taxpayer, review Indonesian source income under PPh 26 and consider whether a double tax agreement is applicable.

The company must not apply treaty benefits automatically because the director holds a passport from an Indonesian treaty partner.

Initial Review Matrix

The table summarises the main points to compare before determining the next steps.

Situation	Main checks	Assessment direction
The director lives and works in Bali	Tax residence and remuneration type	PPh 21 provisions if the conditions are met
The director lives outside Indonesia	Tax status, income source and work	PPh 26 and the relevant treaty, where applicable
The director receives irregular payments	Payment basis and recipient category	Classify the income before withholding
The director receives expense reimbursements	Underlying transactions and company evidence	Distinguish reimbursement from remuneration
The director is also a shareholder	Payment basis and corporate decisions	Distinguish remuneration from investment distributions

This matrix is a review tool, rather than a determination of rates or an individual’s tax position.

Payment Types That Need Review

One problem in PT PMA administration is treating every company transfer to a director as salary.

The purpose and basis of these payments can differ.

Salary, Fees and Allowances

Review contracts, remuneration decisions, payroll schedules, regular payments and withholding evidence.

The amount transferred through the bank should be traceable to gross income, relevant deductions and tax withheld.

Payments from more than one company, other income or a change of status during the year require their own review.

Company Facilities and Benefits

A director may receive accommodation, a vehicle, insurance or other benefits under company arrangements.

Do not infer the tax treatment solely from the benefit’s name. Examine its form, recipient, value and the applicable tax requirements.

Also distinguish company benefits from documented business use of operating assets.

Reimbursement of Operating Expenditure

A director may advance a business invoice through a personal account and later receive reimbursement from the company.

The accounting team should trace the invoice, payment evidence, expenditure purpose and the basis of the company’s reimbursement obligation.

Do not immediately treat all reimbursements as salary. Conversely, a reimbursement label is insufficient to prove that a payment is not personal income.

Profit Distributions to Shareholders

If the director also holds PT PMA shares, a payment may relate to the director’s capacity as a shareholder.

Distinguish a profit distribution from remuneration for work. Determining its tax treatment requires a review of recipient status, corporate documents, income character and relevant tax provisions.

A Foreign Director Working from Abroad

A PT PMA director does not necessarily perform every duty from Bali. Some corporate decisions may be made while the director is outside Indonesia.

This requires further examination of the work location, payer, income source, tax residence and any applicable treaty.

DJP’s announcement implementing Minister of Finance Regulation No. 112 of 2025 explains the DGT Form format for nonresident treaty claims, including transitional treatment for qualifying earlier documents.

Review the agreement with the relevant partner country and supporting documents before applying treaty treatment.

A treaty should not be assumed to exempt all directors’ income from Indonesian tax. Directors’ fees, employment, services and other income may be governed by different provisions in the relevant agreement.

Tax Documents for the Director and PT PMA

Structured document collection makes it easier to review income and reporting obligations.

Documents to prepare include:

The director’s identity and relevant stay permit documents.
Travel records or a history of presence in Indonesia.
The director’s appointment documents.
An employment contract or other basis for remuneration.
Payroll schedules and income details.
Bank transfer evidence and company payment records.
Available tax withholding documents.
Documents for company facilities or benefits.
Operating expense reimbursement arrangements, if any.
Profit distribution documents if the director is also a shareholder.
Tax residence and treaty documents where relevant.

For internal administration, the company can create a payment matrix recording the date, income type, recipient, transaction basis, tax treatment reviewed and evidence status.

This record helps distinguish transactions already assessed from those awaiting documents.

Examples of Foreign Directors’ Situations in Bali

Director A: Living in Bali and Managing a Hotel

Director A is a foreign individual who manages a hotel and lives in Bali. The company pays monthly remuneration and provides certain benefits.

The reviewer must determine tax residence from the facts about residence and physical presence. Each remuneration and benefit component is then classified before tax is calculated.

If the director is an Indonesian resident taxpayer and the income falls within PPh 21, determine the withholding method from the recipient category and applicable provisions.

Director B: Living Abroad

Director B performs some PT PMA oversight functions from the home country and receives payments from the Indonesian company.

The company needs to review the income source, the director’s capacity, activity location, tax status and relevant treaty.

Do not determine PPh 26 or treaty benefits solely from the location of the bank account receiving the payment.

Director C: Receiving Salary and Expense Reimbursements

Director C receives regular remuneration and occasionally advances hotel operating expenditure from a personal account.

Keep the payroll and reimbursement schedules separate. Review invoices that are the company’s responsibility individually so that they are not automatically included in salary or recorded twice as expenses.

These three situations illustrate that tax decisions depend on transaction facts, rather than a single characteristic such as nationality or job title.

Errors to Avoid

During a PT PMA’s internal review, watch for the following errors:

Assuming every foreign director is automatically a nonresident taxpayer.
Determining tax residence solely from stay permit validity.
Applying one withholding category to every payment to the director.
Mixing company expenditure reimbursements with personal income.
Failing to review benefits received by the director.
Assuming treaty benefits apply without appropriate documents.
Combining shareholder transactions with employment remuneration.
Failing to match payroll, transfer evidence and withholding documents.

Minister of Finance Regulation No. 168 of 2023 replaced the earlier withholding provisions in PMK 252/PMK.03/2008. Old instructions should therefore be checked against their replacement.

Payroll procedures used for several years still need to be reviewed against the requirements relevant to the payment period.

Conclusion

Foreign director tax for a Bali PT PMA requires three main steps: determining tax residence, identifying the nature of every payment, and confirming withholding and documentation obligations.

PPh 21 and PPh 26 cannot be selected solely by nationality. Work location, recipient status, income type and possible treaty application must be assessed against the facts.

Separating remuneration, reimbursements, benefits and shareholder distributions helps the PT PMA prepare more organised accounting and tax records.

Need to Review a PT PMA Foreign Director’s Tax Position?

If you are a foreign director, business owner or PT PMA investor in Bali who needs a review of tax status and remuneration payments, Usman Tax can be a starting point for discussing tax administration and accounting needs.

Prepare the appointment documents, remuneration contract, Indonesian presence records, payment schedule and available withholding evidence so that the review’s scope can be discussed accurately.

Continue with the explanation of individual tax residence before assessing a director’s income (Indonesian) to align the evidence and next steps with the issue under review.

Read Also: Business Tax Administration in Bali: Accounting, Reporting and Document Controls

If the remuneration package includes housing, prepare documents for a foreign director’s housing benefits (Indonesian) for a review separate from salary.

If the company receives a request to explain data, follow the PT PMA SP2DK coordination process for foreign directors and investors, keeping personal and company data separate.

Prepare the relevant documents before discussing your needs through tax consultation services at Usman Tax.

FAQ Foreign Director Tax

Are All Foreign PT PMA Directors Subject to PPh 26?

No. First examine tax residence and the nature of the income. A director who becomes an Indonesian resident taxpayer may receive different treatment from a nonresident director.

Does a Foreign Director Living in Bali Automatically Become an Indonesian Resident Taxpayer?

Residing in Indonesia is one basis for resident tax status. The individual’s tax position and obligations must still be determined from the overall circumstances and applicable provisions.

Is Reimbursement of Company Expenses to a Director Always Income?

The transaction name alone cannot determine this. Examine expenditure evidence, the company’s benefit, the basis of reimbursement and the substance of the payment before classifying it.

Can a Foreign Director Use a Tax Treaty?

Treaty application depends on the partner country, recipient status, payment character and fulfilment of documentation requirements. Benefits do not apply automatically merely because the recipient is a foreign national.

Does Receiving No Salary Necessarily Mean a Director Has No Personal Tax Obligations?

No. Review possible other income or benefits, shareholder distributions, tax status and reporting obligations arising from the individual’s circumstances.

Sources and References

Determination of Resident and Nonresident Tax Status — pajak.go.id
Withholding Provisions for Individual Employment, Service and Activity Income — pajak.go.id
Implementation of the 2025 Double Tax Agreement Procedures — pajak.go.id