PPh 23 for Hotel and Villa Vendors: Classify Payments

Main topic: Classifying hotel and villa vendor payments before determining Article 23 withholding.

Full background: Business Tax Administration in Bali: Bookkeeping, Reporting and Document Controls.

Continue according to your needs: PPh 23 Rates: Income Classification and Exemptions and Villa Management Fee PPh 23: Rates, Withholding Base and Transaction Examples.

Support is available through our business tax consultation service.

Hotels and villas pay many vendors: cleaning services, security, pool maintenance, pest control, IT, software, advertising, consultants, event organisers, caterers and air-conditioning technicians. However, PPh 23 for hotel and villa vendors does not mean automatically withholding 2% from every service invoice.

Finance must first answer three questions: who receives the income, what service is actually supplied, and whether another income tax regime applies.

PPh 23 for Hotel and Villa Vendors: Not Every Vendor Is Subject to 2%

DJP explains that Article 23 objects include certain service fees paid to Indonesian resident taxpayers or permanent establishments. For services genuinely within Article 23, the general rate is 2% of the gross amount.

But the first step is not multiplying the invoice by 2%.

Check Who Receives the Income

The vendor’s identity can change which article needs analysing.

In practice, distinguish:

Indonesian resident corporate taxpayers;
permanent establishments;
individual taxpayers; and
overseas parties.

When an individual supplies the service, payment may fall within Article 21 according to the transaction. For an overseas recipient, analyse Article 26 and possible treaty application. Do not classify tax solely from the expense account.

Check the Service before the Rate

PMK 141/PMK.03/2015 lists other service types for Article 23, including many relevant to hotel and villa operations.

However, separate transactions such as:

services subject to Article 21 withholding;
income already subject to final income tax under separate provisions;
construction services meeting the final construction income tax provisions;
overseas payments requiring Article 26 analysis; and
land or building rental under its separate final income tax regime.

Which Hotel and Villa Vendors Commonly Need Article 23 Review?

Use this table for initial screening, not automatic tax decisions. Before withholding, finance must still check the income recipient, actual service, contract, invoice and any other income tax treatment.

Vendor transaction	Initial income tax review
Cleaning services	Generally among other services requiring Article 23 review where the recipient and transaction meet the provisions.
Security or investigation services	An other-service category requiring Article 23 review.
Pool maintenance	A maintenance service requiring Article 23 review.
Pest control	A pest eradication service requiring Article 23 review.
Labour outsourcing	Labour or expert personnel supply services. Pay particular attention to gross amount determination and supporting documents.
Software, hardware and IT maintenance	Review as services relating to software, hardware or computer systems.
Website creation or management	An other-service category requiring Article 23 review.
Agency or intermediary services	Review as intermediary or agency services.
Advertising	A service category requiring Article 23 review.
Accounting and bookkeeping	Professional services requiring Article 23 review.
Architecture and design	Professional services requiring review, taking account of the actual work.
Event organisers	An other-service category requiring Article 23 review.
Catering	Catering services with particular gross amount provisions to examine.
Air-conditioning, electrical, machinery or building maintenance	May fall within Article 23, but distinguish construction work under its separate income tax regime.

This is only a vendor tax screening matrix. Final treatment cannot be determined from a vendor name or expense account alone. Individual vendors, overseas vendors, construction services, land or building rental and certain other transactions may have different income tax treatment.

Cleaning, Security, Pools, Pest Control and Outsourcing

Hotels commonly have recurring contracts for external housekeeping, security, pool care, pest control and labour outsourcing.

PMK 141/2015 expressly lists cleaning, investigation and security, pool maintenance, pest eradication, and labour or expert personnel supply among other services.

For outsourcing, inspect invoice details. The entire payment is not necessarily the withholding base if particular components can be separated and supported by documents under the gross amount rules.

IT, Websites, Agencies, Advertising and Professional Services

Modern hospitality also uses many vendors beyond direct operations.

PMK 141/2015 includes:

software, hardware and computer system services, including maintenance and repairs;
website creation or management;
intermediary or agency services;
advertising;
accounting and bookkeeping;
legal services;
architecture;
design; and
event organisers.

Vendor tax review should therefore form part of accounts payable before payment, rather than taking place after all expenses have entered the general ledger.

Distinguish Air-Conditioning and Building Maintenance from Construction

This area is easily misclassified.

PMK 141/2015 includes installation and servicing, repair or maintenance of machinery, equipment, electricity, water, gas, air-conditioning and buildings within Article 23 categories, with particular exceptions for providers operating within construction and meeting relevant licensing or certification provisions.

DJP’s 2026 guidance also stresses the need to distinguish maintenance within Article 23 from construction services within final income tax.

An invoice labelled building maintenance is therefore insufficient. Check the contract, actual work, provider’s business scope and applicable construction service rules.

What Is the Article 23 Service Rate?

For services genuinely within Article 23, DJP describes a rate of 2% of the gross service amount.

For a simple example, a hotel uses a domestic corporate cleaning provider. After review, the gross Article 23 base is IDR 10,000,000, excluding VAT.

PPh Article 23 = 2% × IDR 10,000,000 = IDR 200,000

This only illustrates the withholding arithmetic. Confirm the provider, service, exceptions and gross amount before applying it.

How Is the Article 23 Gross Amount Determined?

Gross amount frequently causes differences between vendor invoices and tax working papers.

For services other than catering, PMK 141/2015 allows particular payments to be excluded from the gross amount where the conditions and supporting evidence are satisfied, including:

labour suppliers’ wage or salary payments supported by contracts and payment lists;
goods or material purchases supported by purchase invoices;
third-party payments through the service provider supported by invoices and agreements; and
reimbursement of third-party costs supported by invoices or payment evidence.

Where the required evidence is unavailable, the gross amount can become the whole payment to the service provider, excluding VAT.

Catering Has a Particular Gross Basis

For catering, PMK 141/2015 defines gross amount as all income, under any name or form, paid, made available for payment or due for payment.

Do not automatically apply other vendors’ reimbursement treatment to a catering contract.

Supporting Documents Determine Reimbursement Treatment

Suppose an outsourcing vendor invoices:

worker payroll of IDR 40,000,000; and
a service fee of IDR 5,000,000.

If the payroll component meets the separation conditions and has the required evidence, the Article 23 base can differ from a situation where the vendor sends a single IDR 45,000,000 invoice without adequate supporting documents.

This makes accounts payable document quality an important part of tax compliance.

Are Hotel Services Themselves Subject to Article 23 Withholding?

A discussion of PPh 23 for hotel and villa vendors also needs to distinguish the separate question of whether customers paying for rooms or hotel services must withhold Article 23.

The answer must not be confused with tax on the hotel’s vendors.

PMK 141/2015 does not specifically list hotel services among other services. DJP’s educational article on Article 23 withholding on hotel services explains that a private company does not automatically withhold merely because it purchases hotel services.

However, PMK 141/2015 also includes other services paid from the national or regional budget (APBN or APBD). Government use of hotel services therefore requires a separate analysis.

The distinction matters: Article 23 on vendors used by a hotel differs from Article 23 on customer payments to the hotel.

Hotel and Villa Equipment Rental

Article 23 can also apply to rent and other income from using assets outside Article 4(2) final income tax.

Depending on the transaction, examples can include equipment, machinery, vehicles or certain movable assets. DJP describes 2% of the gross amount for relevant asset rental.

Land or building rental instead has a separate final income tax regime. Do not place it within Article 23 solely because the accounting account is called rental expense.

Article 23 Workflow from Vendor Invoice to Coretax

A more reliable process places tax review before vendor payment.

Use this workflow:

Receive the invoice, contract and supporting documents.
Identify the income recipient.
Identify the service or rental type.
Determine whether Article 23, Article 21, Article 26, final income tax or another category applies.
Determine the gross withholding base.
Calculate the relevant income tax.
Post the vendor and tax liabilities to the correct accounts.
Create the withholding certificate under the applicable procedures.
Match the certificate with the vendor payment.
Include the transaction in the periodic return working paper.
Review the unified periodic income tax return before submission.
Retain the BPE electronic receipt, payment evidence, invoice, contract and working papers.

DJP provides Coretax guidance for income tax withholding certificates and unified periodic returns. PER-11/PJ/2025 forms part of the reporting framework for the Core Tax Administration System; read it with PER-12/PJ/2026 for its amendments effective from 1 October 2026.

Reconcile Article 23 with Accounts Payable and the General Ledger

At each month-end, match at least:

the vendor invoice list;
related expense and asset accounts;
accounts payable;
the list of Article 23 transactions;
withholding certificates;
income tax liabilities;
tax payments; and
the unified periodic income tax return.

OTA vendors can raise additional issues over the commission recipient’s legal entity and tax residence. The OTA commission tax guide for hotels and villas in Bali addresses these transactions separately.

For broader hotel central tax administration, see Coretax Hotel Administration.

Mistakes to Avoid

Common causes of corrections include:

withholding 2% Article 23 from every service invoice;
not checking whether the vendor is a company or individual;
applying Article 23 to overseas vendors without Article 26 analysis;
applying Article 23 to work actually within the construction regime;
using the wrong gross amount because reimbursements lack documents;
assuming all vendor materials automatically fall outside the withholding base;
using net payment as the base without a working paper;
not distinguishing equipment rental from land or building rental;
assuming corporate hotel customers must always withhold Article 23; and
creating certificates inconsistent with invoices and the general ledger.

Conclusion

PPh 23 for hotel and villa vendors depends on the income recipient, transaction type and correct gross amount, rather than just an expense account name or the fact that a service is being paid for.

Many hospitality vendors fall within Article 23 categories, including cleaning, security, pool maintenance, outsourcing, IT, websites, agencies, advertising, professional services, event organisers, pest control and catering. Individual services, construction, overseas vendors, land or building rental and hotel services themselves may nevertheless have different treatment.

Finance should establish a vendor tax matrix and working papers connecting invoices, contracts, supporting evidence, certificates, accounts payable, the general ledger and unified periodic returns so every withholding can be traced.

Need a PPh 23 Review for Hotel or Villa Vendors in Bali?

If cleaning, security, maintenance, IT, outsourcing, agency, catering or other invoices lack consistent tax classifications, a vendor tax review can distinguish Article 23 from Article 21, Article 26, final income tax or transactions requiring different analysis.

Usman Tax provides tax reporting and accounting services for Bali hospitality businesses. A consultation can review vendor invoices, income tax working papers, general ledger reconciliations, withholding certificates and filing readiness based on actual company transactions.

Read Also: Villa Tax Reporting in Bali: A Complete Compliance Guide for Villa Owners

FAQ PPh 23 for Hotel and Villa Vendors

What is the Article 23 rate for hotel and villa vendor services?

For services genuinely within Article 23, DJP describes 2% of the gross amount. First check the service, income recipient, exceptions and withholding base.

Are all hotel or villa service payments subject to Article 23?

No. Some fall within Article 21, Article 26, final income tax or outside Article 23 service categories. Classification cannot be based only on expense account names.

Are hotel cleaning services subject to Article 23?

Cleaning services are among the other services listed in PMK 141/PMK.03/2015. If the recipient and transaction meet Article 23 conditions, review the 2% gross amount treatment.

Are hotel security services within Article 23?

PMK 141/2015 lists investigation and security services among other services. Check vendor status and contract details before withholding.

Does hotel air-conditioning maintenance fall under Article 23 or final construction tax?

Either can be relevant according to the work and provider. Particular maintenance services fall within Article 23, but work within construction meeting its provisions needs a final income tax review.

Are hotel catering services subject to Article 23?

Catering is listed in PMK 141/2015. However, where the provider is an individual, review classification because individual service payments may fall within Article 21.

Are vendor reimbursements excluded from the Article 23 base?

Not automatically. For services other than catering, particular components can be excluded if the conditions and required evidence, such as third-party invoices or payment evidence, are satisfied. Without adequate evidence, the base can be the whole provider payment excluding VAT.

Is hotel equipment rental subject to Article 23?

Rent and other income from using assets can attract Article 23 at 2% of the gross amount where not already subject to final income tax. Separate land or building rent under its own final tax regime.

Must a company paying for hotel rooms withhold Article 23?

Not automatically. PMK 141/2015 does not specifically list hotel services among other services. Payments charged to APBN or APBD have particular provisions, so government transactions require separate analysis from ordinary corporate customers.

How is Article 23 administered in Coretax?

DJP provides income tax certificates and unified periodic returns within Coretax. Finance should reconcile invoices, certificates, payments, tax liabilities, working papers and the general ledger before filing.

Sources and References

Usman Tax